CAYMAN ISLANDS Law and Practice Contributed by: Daniel Lee, Sophia Scott, Kimberly Robinson and James Turner, Maples Group
visors and founder. Accordingly, it has capacity to sue and be sued and to hold property. Uniquely, it is possible for a foundation company not to have any members, provided that its constitution so permits and it continues to have one or more supervisors. A foundation company may be formed for any lawful object, which need not be beneficial to other persons and must be limited by shares or by guarantee with or without share capital. It is a highly flexible vehicle and can, if so desired, include features of a common law trust within a corporate framework. Foundation companies are typically used for wealth management, estate planning and asset protection, and are often incorporated as companies limited by guarantee to avoid the need for probate. A company limited by guarantee has members rather than shareholders, whose liability is typically limited to USD1, and can hold property, sue and be sued. Com - panies limited by guarantee are rarely incorporated for commercial purposes, and are more typically used for Unlike the vehicles described above, a trust does not have separate legal personality and so a trust itself cannot hold property in its own name. Rather, legal title to property held upon the terms of the trust is vested in the trustees of the trust and it is the trustees who enter into transactions in that capacity and who can sue and be sued. The primary legislation is the Trusts Act (2021 Revision) (the “Trusts Act”), which incorporates conflict of laws provisions (the “Trusts (Foreign Element”) Provisions”) particularly relevant in instances where a trust has been established by a settlor domiciled outside the Cayman Islands in a jurisdiction that does not permit testamentary free - dom. Trusts can be established for various objectives, such as wealth management, estate planning, philanthropic endeavours (Charitable Trusts) and employee incen - tivisation schemes, much like foundation companies. Cayman permits the establishment of non-charitable purposes trusts created pursuant to the Cayman Islands Special Trusts (Alternative Regime) Act 1997 (known as STAR Trusts), the purposes of which may non-profit or club scenarios. Trusts (Including Unit Trusts)
be to benefit or carry out, as the case may be, a mix - ture of persons and purposes so long as they are law - ful and not contrary to public policy. It is also possible to establish a trust for use as an investment vehicle. Such a structure would usually take the form of a unit trust under which the inves - tors (the unitholders) contribute assets to the trustee to be managed and invested in accordance with the terms set out in the trust deed and any accompanying contractual documents. 3.2 Incorporation Process It is necessary to engage a licensed corporate servic - es provider to assist with the incorporation process. Exempted/Ordinary Resident/Ordinary Non- Resident Companies/Other Companies To incorporate a company, the corporate services pro - vider prepares and files the memorandum and arti - cles of association with the Registrar of Companies, together with the appropriate filing fees. For exempted companies only, a statement confirming that the com - pany’s operations will be conducted mainly outside the Cayman Islands is also required. The initial sub - scriber shareholder is typically an affiliate of the cor - porate services provider and will transfer the subscrib - er share after incorporation or it will automatically be repurchased following the issuance of further shares. Once the Registrar has processed the documents, the company is deemed incorporated and a Certificate of Incorporation is issued. Exempted Limited Partnerships To register a Cayman Islands partnership as an ELP, the corporate services provider, on behalf of its gen - eral partner, must submit to the Registrar of Exempted Limited Partnerships in the Cayman Islands a state - ment setting out certain prescribed information and pay the appropriate filing fees. A Certificate of Reg - istration issued by the Registrar of ELP is conclusive evidence that the requirements of the ELP Act have been complied with in respect of the formation and registration of an exempted limited partnership. Limited Liability Companies To form and register an LLC, a registration statement must be submitted by the corporate services provid -
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