CAYMAN ISLANDS Law and Practice Contributed by: Sailaja Alla, Matt Mulry, Maree Martin and James Mossetto, Appleby
An “equity interest” means a share in a company, a unit in a unit trust, an interest in a partnership or any other representation of an interest that carries an entitlement to participate in profits or gains of such entity, and which is redeemable or repurchasable at the option of the investor. Therefore, to trigger the MFA, an investment vehicle will need to permit investors to withdraw/redeem at their option, and there must be a pooling of investor funds. Broadly speaking, there are four categories of mutual funds under the MFA: • limited investor funds; • registered funds; • administered funds; and • licensed funds (also known as “retail funds”). An additional subcategory is that of master funds. A master fund must have one or more regulated feed - er funds (ie, one of the four categories listed above) either directly or through an intermediary entity estab - lished to invest in it. Limited investor funds A limited investor fund is a mutual fund with the fol - lowing characteristics: • the equity interests are held by no more than 15 investors; and • the majority, in number, of the investors are capa - ble of appointing or removing the operator of the fund (ie, the directors of a company, the trustee of a unit trust or the general partner of a limited partnership). Limited investor funds are not required to have a pre - scribed minimum initial investment amount, nor is there any requirement to have an offering document or to file one with CIMA, though limited investor funds are required to register with CIMA by: • filing a certified copy of an extract of the constitu - tional documents which specify that a majority of the investors, in number, are capable of appointing or removing the operator of the fund;
• filing such other information in the prescribed form as CIMA may require; and • paying the prescribed initial and annual registration fee. All limited investor funds must have their audited finan - cial statements prepared or signed off by an approved Cayman Islands auditor and filed with CIMA within six months of their financial year end. Registered funds Registered funds are the most common form of mutu - al funds in the Cayman Islands. For a registered mutu - al fund, the initial minimum subscription per investor must be at least USD100,000 (or equivalent) or the equity interests must be listed on an approved stock exchange (including an over-the-counter market). A registered mutual fund is not required to be licensed. Instead, it is only required to register with CIMA, which involves the filing of its offering document and certain prescribed details relating to the offering of its equity interests with CIMA. Fees are payable to CIMA on registration and annually thereafter. All registered mutual funds must appoint an admin - istrator, and must have their audited financial state - ments prepared or signed off by an approved Cayman Islands auditor and filed with CIMA within six months of their financial year end, along with an annual return A mutual fund will be an administered mutual fund if its principal office in the Cayman Islands is provided by a Cayman Islands licensed mutual fund administrator. No minimum initial investment amount is prescribed. The registration process for an administered mutual fund is the same as that for a registered mutual fund, except that it must file an additional form with CIMA that is signed by the Cayman Islands-licensed mutual fund administrator. Licensed funds (also known as “retail funds”) Licensed mutual funds are the rarest form of mutual funds regulated under the MFA. in prescribed form. Administered funds
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