CAYMAN ISLANDS Law and Practice Contributed by: Daniel Lee, Sophia Scott, Kimberly Robinson and James Turner, Maples Group
vice provider (CSP), and provide certain “required par - ticulars” in a timely manner. The CSP files the register details with the Cayman Islands competent author - ity (the “Competent Authority”) each month. Various administrative fines and sanctions, including restric - tion notices, apply for non-compliance. The previous regime applied only to companies, LLCs and LLPs. The BOT Act has broader scope and applies to all Cayman Islands “legal persons”, including companies, LLCs, LLPs, limited partnerships, ELPs and founda - tion companies, and any other legal person that may be prescribed (“Legal Persons”). Non-Cayman Islands entities (including those registered as foreign persons in the Cayman Islands, typically to act as the general partner of an ELP) and certain other categories (eg, certain charities and not-for-profits) are carved out. Under the BOT Act, a “beneficial owner” is an indi - vidual who (i) ultimately owns or controls (directly or indirectly) 25% or more of the shares, voting rights or partnership interests in the Legal Person; or (ii) other - wise exercises ultimate effective control over the man - agement of the Legal Person; or (iii) is identified as exercising control of the Legal Person through other means. A person operating solely in the capacity of a “professional adviser” or “professional manager” (both terms defined in the Act) will not be considered a beneficial owner. Where no natural person is identified as a “beneficial owner”, a “senior managing official” (such as a direc - tor or CEO) must be named in the entity’s beneficial ownership register. Most exemptions under the previous regime are removed or significantly restricted in favour of certain “alternative routes to compliance”, under which the Legal Person need not report beneficial owners or establish a register, but must report limited “required particulars”. Legal Persons able to apply an alternative route to compliance include those that are: (i) listed, or a sub - sidiary of a listed entity, on the Cayman Islands Stock Exchange (CSX) or an approved stock exchange; (ii) licensed under a regulatory law (note this is limited to certain Cayman Islands regulatory laws); (iii) a fund registered under the Private Funds Act (As Revised)
or the Mutual Funds Act (As Revised); or (iv) otherwise exempted by Cabinet (none currently). Entities falling outside categories (i)-(iv) above (or oth - erwise opting not to apply an alternative route to com - pliance) are considered “in-scope” and are required to establish and maintain a beneficial ownership register. The required particulars are largely unchanged from the previous regime, with two additions: the Legal Per - son must also report (i) the nationality of all beneficial owners; and (ii) the nature of the individuals or report - able legal entity’s ownership or control (whether by economic interests, voting interests, or as a senior managing official). Economic Substance Act (As Revised) The Cayman Islands has enacted economic sub - stance legislation in compliance with the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS). Where an entity conducts a “relevant activity” in a “relevant financial period”, it must (i) file an economic substance notification with the Registrar of Companies before 31 January each year, and (ii) file an economic substance return with the Depart - ment for International Tax Cooperation no later than 12 months from the last day of the entity’s financial year end. The Economic Substance Act applies economic sub - stance requirements to the following categories of geographically mobile “relevant activities” previously identified by the OECD (and adopted by the EU): • banking; • insurance; • shipping; • fund management; • financing and leasing; • headquarters; • distribution and service centres; • holding company; and • intellectual property. Automatic Exchange of Financial Account Information The Cayman Islands has signed an inter-governmental agreement to improve international tax compliance
167 CHAMBERS.COM
Powered by FlippingBook