CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga
Quoted Eurobond Exemption – CSX The quoted Eurobond exemption is an exemp - tion from the obligation to withhold income tax from certain (UK) source payments. In order to qualify for the quoted eurobond exemption, the debt must, among other things, be listed on a recognised stock exchange. Since March 2004, the Official List of the CSX has been a “recog - nised stock exchange” by His Majesty’s Revenue & Customs. Typically, SPEs involving UK-source payments take advantage of this exemption and list debt securities on the CSX. Debt securities can be efficiently and promptly listed on the CSX given the CSX’s familiarity with securitisation structures. The CSX is an affiliate member of the International Organization of Securities Commissions. The CSX has a listed market value in excess of USD884 billion. Mitigation of Counterparty Risk and Availability of Service Providers The focus in the Cayman Islands on financial services means that there are a wide range of well-staffed, high-quality law firms, accountan - cy firms, insurance companies, banks and both captive and third-party service providers able to provide professional advice and services to both Cayman Islands-domiciled special purpose enti - ties and their sponsors and advisers. Market participants can mitigate their own inter - nal counterparty risk by engaging and instruct - ing different service providers across transac - tions and product groups. Tax Neutrality See 7. Tax Laws and Issues .
In respect of a CFO transaction involving either receivables governed by the laws of the Cayman Islands or equity interests of Cayman Islands funds, the true sale and asset transfer analy- sis may require consideration of the Exempted Limited Partnership Act (2021 Revision) and the Limited Liability Companies Act (2023 Revision), each as amended. In the case of a securitisation involving an orphan trust established in the Cay - man Islands, the Trusts Act (2021 Revision), as There are a number of reasons why the Cayman Islands are attractive in the context of incorpo - rating special purpose entities. Flexible and Well-Established Legal System The sophisticated and well-established common law legal system in the Cayman Islands has been used extensively for the establishment of SPEs for securitisations. amended, will likely be applicable. 1.4 Special Purpose Entity (SPE) Jurisdiction The Cayman Islands has its own company, trust, partnership and related laws that allow a high degree of flexibility for establishing special pur - pose entities, invariably driven by user inputs. Because of their structure, securitisation special purpose entities that are not insurance securiti - sation vehicles are generally not required to be registered or licensed by the Cayman Islands Monetary Authority (CIMA) under any regulatory law. The Cayman Islands are seen as a creditor- friendly jurisdiction, with no Chapter 11 or equivalent procedures that might frustrate the enforcement of security arrangements.
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