CAYMAN ISLANDS Law and Practice Contributed by: Simon Thomas, Richard Spencer, Alexandra Clynes and Sayak Bhattacharya, Campbells
tor confidence. Tech, fintech, and blockchain start-ups dominate IPO pipelines. The IPO process for Cayman entities typically takes 6–18 months, influenced by factors such as market conditions, regulatory alignment, and corporate preparedness. Cayman entities are frequently used as list- ing vehicles for IPOs on major exchanges (eg, NYSE, NASDAQ, Hong Kong). The Cayman Islands Stock Exchange (CSX) is less common for start-ups, as most target larger international markets. 6.3 Pre-IPO Liquidity The rarity of immediate IPOs has created a tan - gible market need for secondary market trading in the Cayman Islands. Mechanisms such as tender offers, private auctions, company buy - backs, and trust structures are frequently used to provide liquidity for early investors, employ - ees, and founders while maintaining control over ownership structures. These programmes are particularly relevant for companies at later funding stages or those experiencing delays in traditional exit events. Existing memorandum and articles of asso - ciation often impose pre-emption rights, board approval requirements, or outright transfer pro - hibitions, necessitating amendments to enable structured liquidity. Private company shares also lack transparent pricing mechanisms, leading to disputes over fair value. It is also necessary to balance founder/employee liquidity needs with investor protections (eg, anti-dilution rights, liq - uidation preferences). Company-facilitated tender offers are a valua - ble tool for providing liquidity to employees and early investors while maintaining control over
ownership structures. They serve as an interim solution when traditional exits like IPOs or trade sales are delayed, addressing stakeholder needs without compromising long-term strategic goals. However, careful planning around pricing, gov - ernance approvals, regulatory compliance, and funding sources is essential to ensure successful implementation.
7. Regulation 7.1 Securities Offerings
A Cayman Islands venture capital fund will be regulated as a private fund with the Cayman Islands Monetary Authority in accordance with the Private Funds Act. Exemptions for “propri- etary money” (eg, employee investments) apply only if participation is strictly limited to direct employees. Offering documents or marketing materials must contain prescribed language. It is not commonplace to offer a venture capital fund’s shares/interests to the general public in the Cayman Islands and typically most inves - tors/employees will be based outside of the Cay - man Islands and therefore subject to the laws of those jurisdictions. Shares/interests may be offered to Cayman Islands-exempted companies and exempted limited partnerships, but certain types of promo - tional activity in the Cayman Islands will require regulatory oversight. Legal advice should be sought in each case. Structuring for multiple stakeholders may include the establishment of a segregated port - folio company, which allows compartmentalisa - tion of assets/liabilities across investor groups. This is ideal for multi-strategy funds or employ -
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