CAYMAN ISLANDS Law and Practice Contributed by: Daniel Lee, Sophia Scott, Kimberly Robinson and James Turner, Maples Group
2.2 Procedure to Obtain Approval and Sanctions for Non-Compliance Local Operating Business To the extent a Local Company is unable to procure the required 60% local participation, it must apply to the Board for an LCCA licence. The application must be submitted together with supporting due diligence documents and evidence that the Local Company sought local participation (eg, copies of published advertisements in the Cayman Islands newspapers). The Local Company must also disclose any responses received from Caymanians. The Board must consider, among other things, the existing local business in the Cayman Islands and the benefit to the Cayman Islands and Caymanians. The application process generally takes approximately three to six months. An LCCA licence may be issued for up to 12 years and may be subject to such terms and conditions as the Board sees fit. A Local Company holding an LCCA licence must file a return of shareholdings as at 31 December with the Board in January annually. Once expired, the licence cannot be renewed. Any Local Company with less than 60% local par - ticipation that does not hold an LCCA licence and is not otherwise exempted or licensed to operate in the Cayman Islands under another law, commits an offence and is liable (i) on summary conviction to a fine of KYD200 (USD243.90) and (ii) on conviction on indictment to a fine of KYD1,000 (USD1,219.51), in each case, for each day the offence continues. 2.3 Commitments Required From Foreign Investors In respect of Local Companies, the Board does not condition approval on commitments from foreign investors. However, subject to any general direc - tions from the Cabinet of the Cayman Islands, the Board may have regard to certain matters (such as the advantage or disadvantage resulting from the applicant carrying on business in the Cayman Islands) when deciding whether to grant a licence. 2.4 Right to Appeal To the extent a Local Company is dissatisfied with a decision of the Board, it may, within 28 days of the communication of the decision (or such longer period as the Appeals Tribunal may allow), appeal
to the Appeals Tribunal established under the TBLA. Any notice of appeal must specify the decision being appealed, the Board’s reasons and the grounds of appeal. The Appeals Tribunal may then decide wheth - er to allow the appeal and fix a hearing date. The Appeals Tribunal’s decision will be communicated to the appellant and the Board within 28 days of the hearing. A further appeal may be made to the Grand Court from a decision of the Appeals Tribunal on a point of law only. 3. Corporate Vehicles 3.1 Most Common Forms of Legal Entity The Cayman Islands has several types of corporate vehicles or legal structures available for conducting business in or outside of the Cayman Islands. Com - mon types of entities are outlined below. Exempted Companies Exempted companies are incorporated under the Companies Act and are the most common form of Cayman Islands vehicle used when carrying on busi - ness mainly outside of the Islands. They offer a flexible and tax-efficient structure for companies to operate in the global market. The main constitutional documents are its memorandum and articles of association that set out the rules for the governance and operation of the company. The issued share capital can be entirely nominal (for example, a single share) and sharehold - er liability is typically limited to amounts unpaid on shares. There are no restrictions on the number of directors or shareholders. Ordinary Non-Resident and Ordinary Resident Companies Ordinary companies are incorporated under the Com - panies Act but, unlike exempted companies, are sub - ject to the LCCA and must comply with local licensing, reporting and disclosure obligations in the Cayman Islands. Ordinary non-resident companies cannot engage in business activities within the Cayman Islands. Ordi - nary resident companies may conduct business local - ly. Both must file a list of shareholders annually with
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