New Playthings for Cayman – LLCs

One of the questions we receive regularly from our clients (existing and potential) is whether they can set up an LLC in Cayman. “Hi, my name is Jim and I’d like an LLC please”. This is a natural question for clients in North America as LLCs seem to be the preferred vehicle of choice for almost any purpose and so why should there be any other choice? For example, the vast majority of funds set up in the United States are LLCs, incorporated in Delaware, and every client is familiar with them and how they work.

We often find that the overlay of having the straight company concept in Cayman leads to some confusion. Cayman does not currently have the LLC concept and sticks to the regime of a company based on English Law. “We have them, why don’t you?” is what we typically hear. Traditionally, our long legacy as a British colony (you can imagine how a Scotsman writing this may grumble) has caused us to follow English Law (yes, Scottish Law is better, Donoghue –v– Stevenson, anyone, anyone…?).

However. It is not often that Cayman lawyers receive brand new playthings from the Cayman government, however this past Christmas, we had reason to break out the bubbly. Legislation was published for consultation which will introduce the concept of LLCs into Cayman Law. We’re not sure yet as to when the legislation will be passed and brought into force, so we will have a new plaything, we’re just not able to play with it… yet. We are though tooling up so that we can get going with this concept once it is actually released. Read more about this on our website.

So, what difference will it make?

Well, we’ll have a different answer to the standard question and we’ll be able to say “why yes, you can have an LLC”. We’ll also be able to take the attractive concepts of a Cayman company – flexibility, ability to structure it to achieve a client’s objective – and marry that with even more flexibility equivalent to a Delaware LLC. Private equity for example will likely benefit greatly and limited partnerships could be replaced by a corporate structure with more flexibility than we could have now.

In a nutshell, a Cayman LLC will:

  • be a body corporate formed for any (lawful) purpose,
  • require at least one member,
  • have a registered office in Cayman,
  • require an LLC agreement similar to Delaware LLCs and which doesn’t have to be filed with any authorities, and
  • have registers (of members, of managers) required to be kept so that Cayman continues to comply with its OECD and other international obligations in relation to exchange of information.

… the list goes on.

The legislation will likely be tweaked as a result of public consultation. However, at this point, we are excited about our new toy and considerable interest has been generated as a result of the consultation exercise both within Cayman and around the globe. Suffice to say for the moment, that this is a major step forward which will continue to push Cayman’s dominance in the investment funds market. For a while yet, we’ll all just have to exercise some patience…

Of course if you want to discuss more or simply share your excitement about this new legislation, then you can always contact me or your usual Harneys contact directly.

Andrew Morehouse
Andrew Morehouse joined Harneys in the Cayman Islands in July 2013, and was one of the founding editors of the Offshore Funds Blog, which he contributed to until his retirement in 2016.

4 comments

    1. From the various governmental committees we sit on, we are aware that the adoption of LLC legislation is something that the BVI is actively considering. As soon as a firm position is adopted on this front, we will let our readers know.

  1. I believe (from experience) that Americans are going to have to learn to diversify their expertise. Yes! Given the tax and legal regulations prevalent in the USA, LLCs are all the “rage”. But I would hope that other countries and jurisdictions would implement their own “corporate venues”…. not just emulating what Americans want or need. The FATCA has taken care of that. The USA is always the only country that often walks backwards from the rest of the world financial marketplace….with no indication that entities such a LLCs offer any advantages if registered in Cayman or BVI. If Cayman legislation is forth coming why on earth do they have to emulate Delaware?…are Cayman legislators astute enough to put forth their own corporate vehicles….That is what being an independent nation really means! There so many different types of investment vehicles in the global financial marketplace and all. for one reason or another, are successful as envisioned.

    1. I completely agree that each individual nation should put forth their own investment vehicles and we all should not emulate one country in particular. Cayman has had alternatives to the LLC model for its entire history in the financial services market. We can already offer corporate vehicles, partnerships and unit trusts, all of which have proved popular over the years with the various users of the jurisdiction. Rather than emulating the US and ditching everything we currently have, we are “merely” adding an extra vehicle to our current armoury and this is already attracting interest from many areas other than the US. I don’t expect that our existing vehicles will go into decline. Instead I see this as a natural development of the jurisdiction in servicing its current users and also attracting new users across the globe.

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