The Cayman Islands have a modern Companies Law based on previous English statutes but with significant additional features to provide the choice and flexibility of vehicle required by international business. There are three basic types of company capable of registration: the ordinary company, the ordinary non-resident company and the exempted company.
TYPES OF COMPANIES
Ordinary Companies
The company must have at least one shareholder of record and at least one director. An annual general meeting must be held once each year.
The company may carry on business from the moment of issue of its certificate of incorporation. It may (but is no longer required to) have a common seal and has corporate legal personality and perpetual succession.
Ordinary Non-Resident Companies
The provisions are the same as for ordinary companies save that the company must be designated a non-resident company by certificate issued by the Financial Secretary provided that he is of opinion that it does not, and does not intend to, carry on business within the Islands. Ordinary non-resident companies may now convert to exempted companies.
Exempted Companies
Exempted companies are the usual "offshore" vehicle. An exempted company is incorporated in the same way as an ordinary company, except that a limited duration company must have two shareholders of record and has maximum life of 30 years.
An exempted company must have at least one director and must hold a directors' meeting in the Cayman Islands at least once each year. These can be held by proxy or alternate appointments. Otherwise the requirements are essentially the same as in the case of an ordinary company except for the exemptions and privileges listed below:-
- an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies or the Immigration Board;
- an exempted company's register of members is not open to inspection;
- an exempted company does not have to hold an annual general meeting;
- an exempted company may issue no par value, negotiable or bearer shares;
- an exempted company may obtain an undertaking against the imposition of any future taxation; such undertakings are usually given for 20 years in the first instance;
- an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
- an exempted company may register as a limited duration company.
In January of each year an exempted company must file a declaration that it has complied with certain provisions of the Companies Law.
An exempted company may not carry on business in the Cayman Islands except in furtherance of its business abroad; may not make any invitation to the public in the Cayman Islands to subscribe for any of its shares or debentures; and it may not own land in the Cayman Islands unless given specific permission by the Financial Secretary.
INCORPORATION PROCEDURE
The usual corporate vehicle is the company limited by shares although the Companies Law also permits the incorporation of a company limited by guarantee (with or without share capital), an unlimited company or a hybrid company limited by shares or guarantee but with a class of shares or guarantee with unlimited liability.
Registration formalities consist of the filing with the Registrar of Companies of a Memorandum of Association which must contain the following information
- the name of the Company;
- the address of its registered office;
- its objects which may be unrestricted;
- a declaration that the liability of the members is limited (if the company is limited); and
- the amount of the authorised capital and the amount of each share (or where no par value shares are used, the number of shares) into which the capital is divided.
Incorporation will be completed upon subscription to the Memorandum of Association by one or more persons. The company may commence carrying on business from the date of incorporation as set out in the certificate of incorporation. Pre-incorporation contracts may be ratified.
The name of the company must contain the word "Limited" or "Ltd." if the company is to be registered as an ordinary limited company, but need not if it is to be an exempted limited company. The name of an exempted limited duration company must end with "LDC" or "Limited Duration Company". The name may not resemble closely that of a company already registered or contain certain words such as "Royal" or "Imperial", or the words "bank" or "insurance" or derivatives unless appropriately licensed.
A company limited by shares may, and a company limited by guarantee and an unlimited company must, register with its Memorandum of Association Articles of Association signed by the subscribers and prescribing regulations for the company.
Where no Articles are registered Table A in the Schedule to the Companies Law comprises the regulations of the company. It is possible to register limited articles amending Table A as may be required. Where Articles are not registered with the Memorandum of Association, they may be adopted at a later stage.
Incorporation and registration usually takes a day although in cases of extreme urgency, this can be accelerated or, as an alternative, a shelf company can be purchased.
POWERS OF COMPANIES
Unless the Memorandum expressly restricts the company to the objects stated, it has the power to carry out any legal object. It also has the power to exercise all the functions of a natural person irrespective of corporate benefit. No act of or disposition to or by a company is invalid merely because the company had no relevant power or capacity, but this does not preclude injunctive relief prior to the act or disposition or a subsequent action against the relevant directors or officers for loss arising out of their unauthorised act.
SHARE CAPITAL
The law does not specify any minimum issued or paid-up capital except that to complete the incorporation formalities the Memorandum of Association must be subscribed by one or more persons. Each subscriber must agree to subscribe for one or more shares of any one denomination. Shares need not be paid up on issue, except that in the case of an exempted company issuing bearer shares, such shares must be fully paid on issue.
Shares may be of any par value and the par value may be expressed in any one or more currencies including ECU. Any company limited by shares may, if authorised by its Articles, issue fractional shares.
Payment for shares may be in cash or in kind, or shares may be issued in consideration of services performed for the company.
The share capital may be divided into such classes of shares with such rights as to voting, participating in profits and return of capital, as the company may be authorised to issue by its Articles of Association. The nominal or par value of a share can be expressed in an amount which is a fraction or a percentage of the lowest available unit of the currency in which the share capital of the company is expressed.
Dividends and distributions may be paid out of the share premium account (paid in or contributed surplus), subject to the company being solvent.
A company may redeem or purchase its own shares. Payment of the redemption or purchase price may, with some limitations, be made out of the proceeds of a fresh issue of shares, profit, share premium account, capital redemption reserve or, subject to the company being solvent, out of share capital.
An ordinary company may only have registered shares. An exempted company may have either registered or bearer shares or a combination of both registered and bearer shares.
LOAN CAPITAL
There are few requirements in the law relating to loan capital, debentures or charges. Mortgages of land must be registered; and chattel bills of sale should be recorded. The Companies Law provides that limited companies shall keep at their registered office a register of mortgages and charges specifically affecting the property of the company with full details of any such mortgage or charge. The register is open to inspection by members of the company and its creditors.
OFFERING DOCUMENTS
Exempted companies may not invite subscriptions for shares or bonds from the public in the Cayman Islands. The general rules of fraud, misrepresentation, contract, tort and fiduciary responsibility also apply. A regulated mutual fund must file with the Monetary Authority an offering document (and any amendments thereto) which properly describes the securities being offered and supplies such other information as is necessary to enable an investor to make an informed decision whether or not to invest.
SHAREHOLDERS
A company need have only one member of record unless it is a limited duration company where at least two members of record are required. In any case, only one beneficial owner is required. Neither the law nor generally the Articles of Association place any restriction on the nationality or place of residence of the shareholders of the company.
An ordinary company must maintain a register of its members which register shall be kept at the registered office of the company and shall be open to inspection by any person. An ordinary company must, in addition, file a list of its shareholders and their shareholdings with the Registrar of Companies in January in each year. An ordinary resident company must also file a similar list with the Immigration Board indicating the shares beneficially owned by Caymanians.
An exempted company must maintain a register of its members but this may be held outside the Cayman Islands and is not open to inspection by third parties.
The list and the register will only reveal the names of the registered shareholders. The Articles of Association usually provide that the company will only recognise such registered shareholders as the members of the company and that no notice will be taken of any trust or nominee arrangement notwithstanding that the company has notice of it.
The provisions relating to meetings of a company are usually contained in the Articles of Association. Table A of the Companies Law provides that a general meeting of the shareholders of a company shall be held once in every calendar year at such place and time as the directors may appoint. This general meeting is known as the annual general meeting. Table A further provides that any other general meeting shall be known as an extraordinary general meeting. All business transacted at an extraordinary general meeting and all except strict routine business (report and election of directors, report and remuneration of auditors and consideration of balance sheet) transacted at the annual general meeting is known as special business and must be specified in the notice of the meeting.
The law contains no provisions relating to the procedure to be followed at a general meeting but, again, Table A provides that the Chairman of the Board of Directors shall be Chairman of the meetings and that the Chairman of the meeting shall have a casting vote.
Meetings of a class of shareholders are subjected, in most cases, by the Articles of Association to the rules governing extraordinary general meetings.
It is normal to provide in the Articles that attendance at meetings may be by proxy and that the proxy need not be a member of the company.
The Companies Law provides that minutes of all resolutions and proceedings of general meetings of the company shall be kept in writing but there is no provision setting out where the minute book is to be kept.
DIRECTORS
There is no requirement that any of the directors be resident in the Cayman Islands. A company must maintain a register of the directors and officers and notify the Registrar of its contents for the time being. This provision applies both to ordinary and exempted companies. The directors of an exempted company must hold a directors' meeting in the Cayman Islands at least once a year, although this can be held by proxy or alternate appointments.
A limited duration company may provide that its management is vested in its members, but with power to delegate such management to a board of directors.
Provisions relating to the number of directors, shareholding qualifications, period of office, meetings and powers, etc., are usually contained in the Articles of Association. Table A provides a shareholding qualification of one share for each director but provides no maximum or minimum number of directors. However, such a shareholding qualification is usually specifically excluded by the Articles of Association.
The provisions relating to meetings are normally wide; the directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit. The proceedings at such meetings must be minuted and such minutes maintained with the company's records.
It is possible to provide that meetings may be held by conference telephone and that a resolution signed by all or a specified number of the directors shall be as effective as if such resolution were passed at a duly convened meeting of the directors. Further, for convenience, alternate directors may be appointed, or the Articles can provide that a director may appoint a proxy to attend and vote at a meeting in his stead.
Directors are under a duty to act in good faith and in the best interests of the company in question. In certain circumstances, these obligations can extend to creditors of the Company. Personal liability can result from failure to meet the required standards.
AUDITORS
The Companies Law requires that every company shall cause to be kept such proper books of account as are necessary to give a true and fair view of the state of the company's affairs and explain its transactions.
There is no statutory requirement that such accounts be audited nor is there any requirement for the filing of annual accounts with any Government organisation. It is normal to provide in the Articles of Association that the company may appoint auditors and have its accounts audited.
Where a company, whether ordinary or exempted, is in possession of a bank or trust licence under the Banks and Trust Companies Law, or an insurer's licence (other than as an approved external insurer) under the Insurance Law, or a companies management licence under the Companies Management Law, or a mutual fund administrators licence or is a regulated mutual fund under the Mutual Fund Law, then such company must have its accounts audited annually and must file a set of such audited accounts each year with the Monetary Authority.
1l. ADMINISTRATION
An ordinary company must maintain a register of members, a register of mortgages and charges and a register of its directors and officers and each such register must be kept at its registered office. The first must be kept available for public inspection, the second for inspection by creditors and members and a copy of the third must be filed with the Registrar of Companies and updated within 30 days of any change. The latter two provisions apply also to an exempted company.
An ordinary company must file a list of shareholders and their shareholdings in January of each year and a similar return must be filed by an ordinary resident company with the Immigration Board under the Local Companies (Control) Law with the addition of a statement as to which shares are beneficially owned by persons of Caymanian status.
An exempted company merely files a declaration that the operations of the company have, in the previous year, been carried on in compliance with certain provisions of the Companies Law.
REGISTERED OFFICE
Every company must maintain a registered office in the Cayman Islands, and upon any change of location the Registrar of Companies must be notified. The change in location can be effected by a resolution of the directors.
A company will normally keep its common seal at its registered office. The law provides that a company may have one or more duplicate seals for use outside the Cayman Islands, which seals may, but need not, in addition to the name of the company carry the name of the territory where each is to be used. A company may execute deeds without affixing the seal if the instrument is expressed to be a deed.
COSTS
CI $ (CI$1 = US$1.20)
Ordinary Resident Company
Incorporation fee:-
Minimum fee (authorised capital not exceeding CI$42,000) $ 150
Maximum fee (authorised capital exceeding CI$42,000) $ 250
Annual fee payable in January each year:-
Minimum fee (authorised capital not exceeding CI$42,000) $ 150
Maximum capital (authorised capital exceeding CI$42,000) $ 250
Ordinary Non-Resident Company
Incorporation fee:-
Minimum fee (authorised capital exceeding CI$42,000 but not exceeding CI$42,000)
$ 350
Maximum fee (authorised capital exceeding CI$42,000 $ 492
Annual fee payable in January each year:-
Minimum fee (authorised capital not exceeding CI$42,000) $ 350
Maximum (authorised capital exceeding CI$42,000) $ 492
Exempted Company
Incorporation fee:-
Minimum fee (authorised capital not exceeding CI$42,000) (plus $200 if a limited duration company) $ 410
Median fee (authorised capital exceeding CI$42,000 but not exceeding CI$1,700,000) (plus $200 if a limited duration company)
$ 574
Maximum fee (authorised capital exceeding CI$1,700,000) $ 1,435
Annual fee payable in January each year:-
Minimum fee (authorised capital not exceeding CI$42,000) $ 410
Median fee (authorised capital not exceeding CI$1,700 000)
$ 574
Maximum fee (authorised capital exceeding CI$1,700,000) $ 1,435
Note: This memorandum is intended to provide only general information for the clients and professional contacts of Maples and Calder/Maples and Calder Asia. It does not purport to be comprehensive or to render legal advice. The information provided was correct in August 1997.
