CAYMAN ISLANDS Law and Practice Contributed by: Christie Walton, Patrick Rosenfeld and Philip Dickinson, Maples Group
partnership and holds itself out as a general partner to third parties may assume unlimited liability for the debts and obligations of the part - nership. Exempted limited partnerships are the most common type of Cayman Islands vehicle used in private equity fundraising, and investors in such funds commonly seek Cayman Islands legal opinions in respect of the limited liability nature of their partnership interest, amongst other things. 2.1.4 Disclosure Requirements Every mutual fund registered with CIMA (unless that fund is a “master fund” as defined under the Mutual Funds Act or a “limited investor fund” – see 2.3.1 Regulatory Regime ) is required to issue an offering document that must describe the equity interests in all material respects and contain such other information as is necessary to enable a prospective investor to make an informed decision as to whether or not to invest in the fund. CIMA has issued rules regarding the content of offering documents for registered mutual funds and rules regarding the content of marketing materials for registered private funds. All fund offering documents are subject to the pre-existing statutory obligations with regard to misrepresentation and the general common law duties with regard to the proper disclosure of all material matters. 2.2 Fund Investment 2.2.1 Types of Investors in Alternative Funds The Cayman Islands is a popular domicile for globally managed private equity, credit, hedge and hybrid funds due to its tax neutral status, its flexible structuring options and its established and experienced financial services sector and professional service providers. In particular, the Cayman Islands is the jurisdiction of choice for US sponsors structuring funds for US tax-
exempt investors and non-US investors. Cay - man Islands unit trusts and other vehicles are frequently used as investment vehicles for inves - tors in Asia, including China and Japan. 2.2.2 Legal Structures Used by Fund Managers Closed-ended funds (such as private equity, credit and venture capital funds) are typically structured as exempted limited partnerships. Open-ended funds (such as hedge funds) are typically structured as exempted companies and/or exempted limited partnerships. Cayman Islands unit trusts are also frequently used as investment vehicles for investors in Asia, includ - ing China and Japan and may be structured as Unless a mutual fund is “licensed”, “admin - istered” or “limited” investor fund (see 2.3.1 Regulatory Regime ) or was registered with CIMA prior to 14 November 2006, all investors investing into a fund regulated by CIMA under the Mutual Funds Act are subject to an initial minimum investment amount of KYD80,000 (or open-ended or closed-ended. 2.2.3 Restrictions on Investors Investment funds that fall within the definition of either a “mutual fund” under the Mutual Funds Act or a “private fund” under the Private Funds Act are required to be regulated by CIMA. Mutual Funds A mutual fund is any company, unit trust or part - nership (established or registered in the Cayman Islands) that issues equity interests that are redeemable at the option of the investor, the pur - pose or effect of which is the pooling of inves - tor funds with the aim of spreading investment its equivalent in another currency). 2.3 Regulatory Environment 2.3.1 Regulatory Regime
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