CAYMAN ISLANDS Law and Practice Contributed by: Christie Walton, Patrick Rosenfeld and Philip Dickinson, Maples Group
to the nature of the private fund and the type of assets it holds. If no custodian is appointed, a private fund must appoint an administrator or another independent third party or (subject to disclosing and managing any conflicts) the operator or investment manager/adviser to verify that the private fund holds title to its assets, and to maintain a record of those assets. A private fund is required to monitor the cash flows, to ensure that all cash has been booked in cash accounts opened in the name, or for the account, of the private fund and to ensure that all payments made by investors in respect of investment interests have been received. A private fund that regularly trades securities, or holds them on a consistent basis, is required to maintain a record of the identification codes of In 2023, CIMA issued new Rules on Corporate Governance and Internal Controls (the “Rules”) which created new regulatory obligations for CIMA-registered funds, including a requirement to establish, implement and maintain a corpo - rate governance framework and adequate and effective internal controls. The new obligations do not appear to impact current operating prac - tices in a material manner and there is flexibility in how and when the arrangements are imple - mented. CIMA expressly recognises that each fund’s corporate governance framework and internal controls should reflect its size, com - plexity and structure, as well as the nature of its business and risk profile (by reference to, for example, assets under management, number of investors, complexity of the structure, nature of investment strategy, or nature of the operations). the securities in question. Corporate Governance
CIMA expressly contemplates that it is possible for a fund to rely on arrangements in place with its investment manager and other service pro - viders to ensure compliance with these regula - tory obligations. There is also a requirement for the “operator” or “governing body” of the fund (being the board of directors where the fund is a company, the general partner where the fund is a partnership and the manager (or equivalent) where the fund is a limited liability company and, in each case, needing to be comprised of at least two suitable natural persons) to hold at least one meeting annually in order to, amongst other things, confirm the continued adequacy of the corporate governance framework and to review and monitor the fund’s activities and strategy, any conflicts of interest, financial statements and the activities and functions of service providers. 2.5 Fund Finance The Cayman Islands is a leading fund finance jurisdiction where both Cayman Islands and non- Cayman Islands security packages are respect - ed and recognised. Financing counterparties recognise the Cayman Islands as a “creditor- friendly” jurisdiction and are very familiar with, and comfortable lending to, all forms of Cayman Islands funds vehicles. Subscription line facili - ties secured on investors’ capital commitments, NAV-based facilities with downstream collateral (eg, over the equity interest in holding vehicles), and leveraged finance facilities secured by the relevant target group’s assets are very common and well-established products in the Cayman market. There are no restrictions, issues or require - ments imposed by Cayman Islands legislation, and Cayman Islands vehicles are able to access the full range of debt finance options seen in the market. Restrictions or requirements in rela - tion to borrowing may, however, be contained
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