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?
So I was sitting at a presentation in Rio de Janeiro (tough life, I know) recently. The topic was regulation in offshore funds and I had finished my remarks on how awesome the Cayman Islands are and why everyone should set up funds there. I’ll be honest and say that I was now looking forward to that evening’s caipirinhas by the pool.
I had talked about FATCA and AIFMD as part of my section of the presentation. However the next session had many more acronyms, including OECD CRS. This acronym stuck out as a sore thumb mainly as it is the next reporting requirement to be implemented in the Cayman Islands and the British Virgin Islands.
So, your fund is up and running, your portfolio performance is in the upper quartile for your asset group, you’re attracting more and more interest. Your own marketing (or your newly appointed marketing team) is beginning to gain traction and you are now at the stage where you are bringing in more investors. In fact, you have a closing in just over two weeks which will significantly bump up your asset under management figure. Is it time to break out the next bottle of Cristal (or whatever your preferred choice is – Highland Park single malt is always a popular choice of your average Cayman attorney and we’re always happy to help celebrate your success)?
Whilst you’re basking in the slight glow of your success, you stop and think. Wait. Is there a Cayman regulatory issue I have to deal with? Wasn’t there a magical number set out in the offering memorandum that I have to think about?
Why we are celebrating Cayman’s new “opt-in” regime for funds
For those of us sitting on the Western side of the Atlantic Ocean, Europe tends to seem quite far away, somewhat off in the distance and (depending on whether you have to connect through certain airports on the East Coast) sometimes difficult to access.
However, some of you may actually be interested in providing access to your Cayman products for investors based in the European Union. After the financial crisis in 2008, the EU decided to introduce the Alternative Investment Fund Managers Directive (AIFMD). As is typical of EU legislation, this is a very dry piece of drafting but the effect is that Cayman funds have to meet certain regulatory requirements before EU investors are able to gain access to them.