This advisory\u00a0has been prepared as a summary of the law as at April 2017 and is for general guidance only.\u00a0 It is not intended to be, nor should it be used for, a substitute for specific legal advice on any particular transaction or set of circumstances.<\/p>\n
New legislation has been enacted in the Cayman Islands to require certain Cayman Islands companies (including LLCs) to implement beneficial ownership registers (“UBO<\/strong> Registers<\/strong>“) and requiring the Minister charged with responsibility for Financial Services, or a person designated by him (the “Competent Authority<\/strong>“) to establish a search platform enabling the information contained in the UBO Registers to be searched (the \u201cPlatform<\/strong>\u201d).\u00a0 The date of implementation is yet to be appointed by Cabinet but is expected to be on or around 26 June 2017 to coincide with the Fourth EU Anti-Money Laundering Directive, which also requires centralised beneficial ownership registers to be implemented by EU member states.<\/p>\n The new regime codifies the agreement made between the governments of the Cayman Islands and the United Kingdom by way of an Exchange of Notes in April 2016 for the provision and exchange of certain information relating to beneficial ownership of certain entities (the “Regime<\/strong>“).<\/p>\n The entities that must comply with the Regime are companies incorporated or registered by continuation under the Companies Law (being exempted companies, limited liability companies, ordinary companies and special economic zone companies) excluding those that are out of scope (“In-Scope Entities<\/strong>“).<\/p>\n The following is a broad summary of companies that are “out of scope”:<\/p>\n An \u201capproved person\u201d is a person who is either (i) regulated, registered or holding a licence in the Cayman Islands under a regulatory law (as listed above), (ii) listed on an approved stock exchange (including the Cayman Islands Stock Exchange), (iii) regulated in a jurisdiction that appears in Schedule 3 to the Money Laundering Regulations or (iv) is a subsidiary thereof. \u00a0(To be a subsidiary, in general terms, requires the out of scope entity to hold 75% of the interests or voting rights or the right to appoint or remove a majority of directors or managers of the subsidiary).\u00a0 For example, a special purpose vehicle or a private equity fund managed by a US SEC registered investment manager would be exempt.<\/p>\n Foreign companies or foreign LLCs and partnership vehicles, whether or not registered in the Cayman Islands, are not required to report under the Regime.<\/p>\n “Beneficial ownership\u201d under the Regime is ascertained in a different manner to that contained in standard anti-money laundering regulations.<\/p>\n A beneficial owner:<\/p>\n Each “relevant legal entity” also has to be identified.\u00a0 A “relevant legal entity” is any Cayman Islands company or foreign company incorporated, formed or registered in the Cayman Islands that would meet the \u201cspecified conditions\u201d set out at (a) \u2013 (c) above if it were an individual.<\/p>\n However, a “relevant legal entity” is only registrable if (i) it directly<\/em> holds an interest in an In-Scope Entity or meets one or more of the specified conditions directly in respect of that In-Scope Entity, and (ii) through it, any beneficial owner or relevant legal entity indirectly owns an interest in that In-Scope Entity.<\/p>\n Each Cayman Islands company has to ensure that details of any beneficial owner(s) and any registrable relevant legal entity(s) (together \u201cregistrable persons<\/strong>\u201d) are entered in the company\u2019s UBO Register and the Platform.\u00a0\u00a0 If a company does not have any registrable persons, then a nil return should be entered in the company\u2019s UBO Register and on the Platform.<\/p>\n The information required to be contained in the UBO Register and on the Platform is:<\/p>\n A company is also required to keep the UBO Register up to date if it becomes aware of a change with respect to registrable persons.<\/p>\n All Cayman Islands companies will need to determine whether they are In-Scope Entities.\u00a0 Out of scope entities should take steps to document that they are outside the Regime.<\/p>\n In-Scope Entities are required to take reasonable<\/em> steps to identify:<\/p>\n Accordingly, In-Scope Entities should commence taking the necessary steps to identify, obtain and hold the information required about their beneficial owners and relevant legal entities.<\/p>\n Specifically, In-Scope Entities should contact any person(s) they know or have reasonable cause to believe is a beneficial owner or relevant legal entity under the Regime, requesting the required information.\u00a0 Such persons are required to respond to such requests within one month, and failure to do so may be a criminal offence.<\/p>\n Similarly, those individuals or legal entities which are aware that they are registrable persons in relation to a company but, inter alia, have no reason to believe they have been entered in such company\u2019s UBO Register are under a pro-active obligation to disclose their details to the In-Scope Entity within one month, and failure to do so may be a criminal offence.<\/p>\n For the purpose of identifying individuals who are beneficial owners and relevant legal entities, a company is entitled to rely, without further enquiry, on the response of a person (or legal entity, in the case of relevant legal entities) to a notice in writing sent in good faith by the company, unless the company has reason to believe that the response is misleading or false.<\/p>\n If an In-Scope Entity is unable to maintain and keep its UBO Register up to date due to the failure of registrable person(s) to provide required information, the In-Scope Entity must issue a restrictions notice to such person(s).\u00a0 A restrictions notice in respect of any interest, among other things, makes any transfer of (or agreement to transfer) such interest void and prohibits payment of sums due from the company in respect of such interest.\u00a0 A person to whom a restrictions notice has been issued may apply to the Court for the restriction imposed to be set aside.\u00a0 Companies and other persons including directors and officers may be subject to robust penalties including fines and imprisonment for breach of the Regime.<\/p>\n The registered office service provider for each Cayman Islands company should contact the company with regard to the requirements of the Regime.<\/p>\n If Campbells Corporate Services Limited provides registered office services to a Cayman Islands company, it will contact the company with regard to assisting the company to meet the requirements of the Regime.<\/p>\nKey Points Summary<\/strong><\/h2>\n
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Entities affected<\/strong><\/h2>\n
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Mechanics to identify beneficial owners and relevant legal entities<\/strong><\/h2>\n
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Content of the UBO Register<\/strong><\/h2>\n
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Action by Cayman Islands companies <\/strong><\/h2>\n
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Consequences of non-compliance<\/strong><\/h2>\n
Practical steps<\/strong><\/h2>\n
Further information<\/strong><\/h2>\n