CAYMAN ISLANDS Law and Practice Contributed by: Adam Johnson, Appleby
3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Ad valorem stamp duty is payable on debentures and legal or equitable mortgages, or on charges of immov - able or movable property within the Cayman Islands (subject to certain exceptions that are at the discretion of the Minister of Finance). In the case of a debenture or a legal or equitable mort - gage, or a charge of immovable property within the Cayman Islands, where the sum secured does not exceed KYD300,000, duty is 1% of the sum secured; where the sum secured is more than KYD300,000 (whether initially or after a further advance), duty is 1.5% of the sum secured. In the case of a legal or equitable mortgage, or a charge of movable property within the Cayman Islands, duty is 1.5% of the sum secured (subject to a maximum charge of KYD500 where the security instrument is granted by a Cayman Islands exempted company, a Cayman Islands ordinary non-resident company, a Cayman Islands exempted trust or a body corpo - rate incorporated outside of the Cayman Islands, or where the security is over shares in a Cayman Islands exempted company or a Cayman Islands ordinary non-resident company). Where the amount of money to be advanced on the security of any property by way of mortgage is unlim - ited, the security is to be available for such an amount as the ad valorem duty paid thereon extends to cov - er. If any advance is made in excess of the amount covered by that duty, the original instrument may be stamped-up with the additional ad valorem duty required to cover the total amount then to be secured. A mechanism exists through which “double duty” on separate security instruments that secure the same debt can be avoided. In such cases, the ad valorem duty may be paid on the primary security instrument, and the other security instruments can be expressed to be “collateral”, “auxiliary”, “additional” or “substi - tuted”, and attract a fixed rate of duty at KYD50. Most other instruments and documents are subject to a fixed rate of stamp duty in comparatively nomi - nal amounts. Registrable instruments (such as legal
charges over real estate) are also subject to relatively immaterial registration fees. A release of mortgage over immovable property attracts a fixed rate of duty at KYD50. It is customary for stamp duty and registration fees to be paid by the borrower. 3.5 Legal Requirements Before an Entity Can Give Valid Security There are no legal rules or requirements that must be complied with before an entity can give valid security. Such entities must, however, be empowered to do so/not restricted from doing so by their constitutional documents. Often only board approval is necessary, although the entity’s constitutional documents should be checked for any further requirements or approvals. It would be prudent to obtain shareholder approval in any case where an entity is guaranteeing or pledging assets as security for another party’s liabilities. 3.6 Formalities When a Borrower Is in Default The priority of enforcement options applicable to security interests, and the typical range of time need - ed to successfully enforce a security interest, would depend upon the type of security interest in question. In terms of legal charges registered against Cayman Islands real estate, the security is enforceable pursu - ant to its terms in conjunction with the provisions of the Registered Land Act (Revised). The Registered Land Act (Revised) provides a statu - tory power of sale by public auction, power to lease and power to appoint receivers. Commonly, a legal charge will vary and extend the statutory provisions to give the lender wider powers. To the extent the powers contained in the legal charge vary or are in addition to those created by the Registered Land Act (Revised), they may not be acted on without an order of the court. Proposals to reform mortgage enforcement have been passed, but have not yet been implemented or full framework published (expected by way of secondary legislation).
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