CAYMAN ISLANDS Trends and Developments Contributed by: Simon Raftopoulos and Benjamin Woolf, Appleby
• To comply with certain requirements set out in the Private Funds Act relating to valuations, title verifi- cation and cash monitoring. • To keep a record of the identification codes of any securities traded or held by the fund. • To keep the fund’s assets segregated and account- ed for separately from the assets of any other person. • To update CIMA within 21 days of becoming aware of any material changes to any information pro- vided to CIMA at registration. • To comply with the anti-money laundering regula- tions, including the appointment of anti-money laundering officers. • To comply with FATCA/CRS notification, due dili- gence and reporting obligations. • To comply with CIMA’s various rules and state- ments of guidance, in particular, the Governance Rule which requires the private fund to hold at least one annual meeting of the operator of the fund. • To appoint a contact person to take advantage of the alternative route to compliance or maintain a register of beneficial owners pursuant to the Cay- man Islands Beneficial Ownership Regime (see further in “Updates and Trends” below). Collateral and Guarantee Support There are Cayman Islands entities operating at all lev- els of a given corporate structure across bank loan financing transactions, whether as borrowers, parent companies, holding companies, affiliates or subsidi- aries. Regardless of their position within the organi- sational structure, Cayman Islands entities are often required to provide security as collateral or guarantees for the transaction, and it is in this context that Cay- man Islands legal considerations will most frequently arise in an international bank financing. There are no statutory or other limitations that arise as a matter of Cayman Islands law; however, particular restrictions or limitations on borrowing or providing security or guarantees may be set out in an entity’s constitutional documents. In the context of the provision of guarantees, the issue of corporate benefit for the entity in question must be taken into account. Due consideration and confirma- tion of corporate benefit (ie, that the provision of the guarantee is in the best interests of the entity) should
be clearly addressed in the authorising resolutions of the Cayman Islands guarantor, particularly in the case of subsidiaries providing upstream guarantees. Subject to any licensing or residency restrictions that may apply to a regulated entity, no authorisations or consents are required from any government authori- ties in the Cayman Islands in connection with the granting of a guarantee and there is no requirement that any document be filed in order to ensure its legal- ity, validity and enforceability. The most common categories of assets pledged to secure bank loan financings are: • interests in a Cayman Islands entity (eg, shares in an exempted company, limited partnership interests of an exempted limited partnership, and interests in a limited liability company); • contractual rights under various contracts gov- erned by Cayman Islands law (eg, for a capital call financing, an assignment of call rights under the partnership agreement of a Cayman Islands exempted limited partnership); • movable assets registered in the Cayman Islands (eg, ships and aircraft); and • Cayman Islands bank accounts. The most common methods of creating or attaching a security interest under Cayman Islands law include: • an equitable share mortgage over shares in a Cay- man Islands exempted company; • a charge over a Cayman Islands exempted limited partnership or limited liability company interests; • an assignment of rights (by way of security) under various Cayman Islands law-governed contracts (eg, for a capital call financing, the assignment of call rights under the partnership agreement of a Cayman Islands exempted limited partnership will grant security over the rights of a partnership and its general partner to call for capital from its inves- tors); • mortgages over ships or aircraft, where the aircraft or vessel is registered in the Cayman Islands; • all asset debenture (fixed and floating charge) over the assets of a Cayman Islands company; and • a charge over a Cayman Islands bank account.
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