The Limited Liability Companies Bill, 2015 (LLC Bill) was approved by the Legislative Assembly of the Cayman Islands on 6 May 2016. Once enacted, it will allow the formation and registration of limited liability companies (LLCs) in the jurisdiction.

The LLC Bill, which introduces a Cayman Islands LLC as a new type of entity, is based on the Delaware LLC concept, combined with certain aspects of a Cayman Islands Exempted Company and Limited Partnership. The Cayman Islands LLC will allow clients who are familiar with Delaware LLCs to utilize a similar flexible structure based in the Cayman Islands, which does not have the constraints of share capital.

Cayman Islands LLCs are required to maintain a registered office in the Cayman Islands with at least one registered member.

The availability of Cayman Islands LLCs is likely to position the jurisdiction favourably for offshore investment funds; it is expected to be particularly attractive to the private equity industry, family offices and stakeholders looking for a flexible corporate structure, or structure that has similar characteristics of a Delaware LLC.

Reportedly Cayman's Minister of Financial Services, Commerce and Environment Wayne Panton told the Legislative Assembly that "given the position of the Cayman Islands as a leading jurisdiction for investment fund formation, an LLC will increase the versatility and attractiveness of our financial services products and has created a significant buzz in the market place and gives our industry a new product to frame a marketing push around."

The LLC Bill was developed due to industry demand and will allow the Cayman Islands to offer a new investment vehicle in addition to the existing and popular, Exempted Company, Exempted Limited Partnership and Unit Trust Structure.

General characteristics of LLCs vs Corporations:

Corporation

Limited Liability Company
The most common form of business entity. Owners of an LLC are referred to as members.
Shareholders are liable for the obligations of the corporation to the extent of their capital contribution. Liability is limited to the extent of their capital contribution.
Is taxed as a separate legal entity, and can be incorporated in any state, federal district or territory, irrespective of the place from where it is managed or where its operations are conducted. Depending on the initial choice of structure, an LLC may be taxed as a disregarding entity, a partnership or a corporation.
Is required to maintain a ledger detailing how the company reached important decisions, voting records of shareholders and directors. LLCs are required to submit annual state reports but aren't required to hold annual shareholder meetings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.