CAYMAN ISLANDS Law and Practice Contributed by: Christie Walton, Patrick Rosenfeld and Philip Dickinson, Maples Group
in the constitutional and organisational docu - ments of the Cayman Islands vehicle(s). These are discussed and negotiated by the sponsor and investors at launch, and/or with the finance provider at the outset of a new borrowing trans - action, in the usual way. Cayman Islands vehicles may be subject to, and may grant a wide range of, security packages that will vary depending on the deal type, other jurisdictions involved, and normal deal consider - ations and requirements. Cayman Islands vehi - cles are able to enter into both Cayman Islands and non-Cayman Islands security packages and documentation. All such arrangements will typically be recognised by the Cayman Islands courts, provided they are valid and enforceable under the laws of the relevant non-Cayman Islands legal system(s). As noted above, sub - scription line facilities secured on investors’ capital commitments are particularly prevalent, and the use of NAV-based facilities is also grow - ing in line with broader trends in the fund finance market. The Cayman Islands is also well-suited to deploying bankruptcy-remote structures, and there are well-established methods for imple - menting such structures across a range of com - monly used Cayman Islands entities. There are no significant issues in relation to fund finance transactions from a Cayman Islands legal perspective. As with any jurisdiction or deal, transaction participants should pay close attention to constitutional and organisational documents at the outset to ensure they are in a suitable form for the type of borrowing transac - tion and security package contemplated. 2.6 Tax Regime The Cayman Islands tax system is predomi - nantly based on indirect taxes, with government revenues being derived from the imposition of
fees on the financial services industry, customs duties, work permit fees and tourist accommo - dation charges. Under existing legislation, the government of the Cayman Islands does not impose any form of direct tax on profits, income, gains or appreciations, nor by way of withhold - ing in whole or in part on the payment of divi - dends or other distributions of income or capital by investment funds established in the Cayman Islands. The Cayman Islands is not party to any double tax treaties with any country that are applicable to any payments made to or by investment funds established in the Cayman Islands. The Cayman Islands entered into a Model 1B (ie, non-reciprocal) inter-governmental agreement to improve international tax compliance and the automatic exchange of information with the USA in 2013 (the “Cayman/US IGA”). A Cayman Islands financial institution shall be treated as complying with, and not subject to withholding under, Section 1471 of the US Code, so long as it complies with its obligations under the Cay - man/US IGA and those contained in the Cayman Islands implementing legislation. The Cayman Islands became a signatory to the Multilateral Competent Authority Agreement to implement the OECD Standard for Automatic Exchange of Financial Account Information – Common Reporting Standard (CRS) with effect from January 2016. Cayman Islands regulations have been issued to give effect to the Cayman/US IGA and CRS (collectively, the “AEOI Regulations”). Pursuant to the AEOI Regulations, the Cayman Islands Tax Information Authority has also published guid - ance notes on the application of the Cayman/US
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