CAYMAN ISLANDS Trends and Developments Contributed by: Simon Thomas, Richard Spencer, Alexandra Clynes and Sayak Bhattacharya, Campbells
The Cayman Islands maintained its dominance as a global epicentre for venture capital (VC) and private equity activity in 2024, leveraging its tax- neutral regime, adaptive regulatory framework, and innovative fund structures. With 17,292 pri - vate funds registered under the Private Funds Act by the end of the final quarter of 2024 and a 4.8% year-over-year growth in closed-end vehicles, the jurisdiction solidified its position as the preferred offshore hub for cross-border VC strategies. This article examines the eco - system’s evolution through regulatory reforms, sectoral shifts, and structural innovations, while addressing persistent challenges and emerging opportunities. Regulatory Landscape: Balancing New rules and guidance formed part of a series of changes introduced by the Cayman Islands Monetary Authority (CIMA) in late 2023, designed to modernise its approach and ensure that various rules and statements of guidance are applied consistently across the various regu - lated sectors. Transparency and Flexibility CIMA regulatory measures The Rule – Corporate Governance for Regulated Entities, and the Rule and Statement of Guid - ance – Internal Controls for Regulated Entities, both become effective in October 2023. These measures, which outline the regulator’s mini - mum expectations, followed CIMA’s previous updates, including guidance on governance, outsourcing, cybersecurity and record retention. Looking into the detail of the framework for cor - porate governance and internal controls, the regime previously in place for mutual funds was extended to private funds, in addition to certain new provisions. All regulated funds are required to implement and maintain a framework for cor -
porate governance and internal controls. CIMA states that this framework must be proportionate to the size, complexity, nature of business and the risk appetite of the regulated entity. Operators of regulated funds in the Cayman Islands, as the governing body, have ultimate responsibility for compliance and should be fully aware of their obligations. In addition to the company directors, managers of an LLC and the trustee of a unit trust, operators now include general partners of private funds established as partnerships. In many cases, regulated private funds will already be broadly in compliance with these measures, given the strong culture of corporate governance that exists in the Cayman Islands. Where a regulated entity believes any rules are not applicable, based on the proportionate approach outlined above, it is the responsibility of the entity to demonstrate to CIMA why that is the case, if required. The guidance confirmed that service providers or group-wide functions for internal controls or corporate governance frameworks can be relied upon to meet obligations; however, funds may be required to demonstrate the effectiveness of these arrangements. Operators of a regulated fund are also responsible for requesting appro - priate information from any service providers or advisers, to be satisfied the fund is operating in compliance with all laws and regulations. In addition to the prescribed duties of opera - tors and extensive obligations regarding con - flicts of interests, the CIMA guidance provides a useful reminder of the minimum expected requirements for board meetings. Operators of a regulated fund should meet at least once a year, although this should be more frequent if
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