Corporations And Companies

For ease of reference we have divided the following information into two parts. The first section provides a comprehensive summary of the subject matter, Corporations and Companies and the second section entitled "Memo- Incorporation Of Companies In The Cayman Islands," simply provides a brief overview, in memo format, of the subject matter.

Definition
The words "corporation" and "company" are synonymous for the purposes of Cayman Islands law and may be defined as "an entity invested by law with most of the powers and responsibilities of a natural person".

A company constitutes a distinct legal person, subject to legal duties and entitled to legal rights separate from those of its members and is distinct from a partnership, which is based on the law of agency. The Limited Duration Company or LDC (see below) is a new concept in the United States and the Cayman Islands, but has existed in Civil law jurisdictions for a long time. In the United States, this form of entity (whether incorporated there or abroad) is generally treated as a partnership (a "conduit") for tax purposes, while still possessing various corporate attributes, including limited shareholder liability. This tax treatment has given rise to significant new planning opportunities. The Islands' introduction of an LDC (similar to a Limited Liability Company or LLC in the United States) has created additional flexibility by permitting an LDC to be formed in a common law jurisdiction having tax neutral offshore characteristics.

Uses
Companies incorporated in the Islands may be used for a number of different purposes, some of which are:-

(a)Banking Trust and Finance Companies
These can undertake any kind of banking, finance and trust business, and profits may be accumulated free of tax in the Cayman Islands. The euro-dollar markets are a lucrative source of business for Cayman banks. Loans made to and fees received from persons doing business in countries where tax is imposed are often subject to a withholding tax in the debtor's country. This liability can sometimes be eliminated or substantially reduced by arrangements made through a third entity entitled to the benefit of a double taxation agreement with the debtor's country. Sometimes loans require the borrower to make payments such as will yield the lender a specified rate of interest after deduction of any applicable tax. Euro-dollar loans often carry such a condition.

(b) Leasing Companies
Leasing of capital equipment is a popular method of financing, because properly structured, the rental is fully deductible for tax purposes. The other side of the coin, of course, is that rent is fully taxed in the recipient's hands. If no withholding tax is levied by the country in which the payer operates, the Cayman Islands are an ideal location to set up and operate a leasing company. Most, if not all, countries imposing income tax do, however, charge tax on rental paid to non-residents. The consequences may be minimized by leasing arrangements made between a Cayman company, a second company incorporated in a country having a favorable tax treaty network (say the United Kingdom or Holland) and the ultimate lessee. Availability of capital allowances (depreciation), presence or absence of withholding tax and availability of a favorable tax treaty will influence arrangements which are made in each particular case. Under double taxation agreements, rents in respect of personal property are often treated as royalties and withholding taxes are often eliminated under those agreements.

(c) Captive Insurance Companies
There is reasonably comprehensive legislation regulating the activities of insurance companies operating in or from within the Islands. Captive insurance companies properly organized and administered may insure or reinsure risks of a parent or related company in a high tax country. Premium income can be accumulated free of tax in the Islands.

(d) Investment or Holding Companies
These can be used for holding money or land, to make investments either directly or indirectly in conjunction with the use of another offshore company having favorable double taxation treaty provisions with the country in which the investment is being made.

(e) Trading Companies
These can undertake virtually any kind of operation, trading or otherwise; for example, the provision of technical or management services, purchase and sale of raw materials, distribution of finished goods or acting as commission agents. These companies are important to persons who may wish to do business in a jurisdiction which is not friendly with the country in which they live or are established.

(f) Shipping Companies
George Town, Grand Cayman, is a British port of registry. Registration of ships is effected under the Merchant Shipping Law of the Cayman Islands and various orders under the United Kingdom Merchant Shipping Acts applicable to the Cayman Islands. Ships may either be operated directly, or chartered to another company which is the operator, depending on the tax treatment of the earnings by countries with whom the operator deals. Ownership may also be influenced by capital allowances or depreciation which may be available to the owner (e.g. it may be advantageous for an owner in a high tax country to own a ship and so obtain the depreciation write-offs, and to lease the ship to a Caymanian company which operates it at a profit).

(g) Patent and Trademark Holding Companies
Companies can be used to hold patents and trademarks and to carry out licensing arrangements.

(h)Mutual Funds and Other Investment Vehicles
The Cayman Islands Companies Law allows the creation of various investment vehicles without over-regulation.

Types of Companies

For various purposes including the calculation of registration fees payable on incorporation and annually, companies are classified as Ordinary Companies, Ordinary Non-Resident Companies, Exempted Companies, Exempted Limited Duration Companies and Foreign Companies and may be limited by shares or by guarantee or unlimited.

1. Ordinary Companies
An Ordinary Company is any Cayman company which is not an Ordinary Non-Resident Company, an Exempted Company or an Exempted Limited Duration Company. It may, on obtaining the necessary licenses, carry on business in the Islands.

2. Ordinary Non-Resident Companies
An Ordinary Non-Resident Company is a Cayman company with perpetual succession which does not intend to carry on business in the Islands and, in respect of which the Financial Secretary has issued a certificate designating it to be a nonjresident or, in the case of an existing company, one which was designated non-resident under the Exchange Control Law prior to its repeal.

3. Exempted Companies
An Exempted Company is a Cayman company with perpetual succession which may not operate in the Islands except in furtherance of its business carried on outside of the Islands and, for this purpose, it may effect and conclude contracts in the Islands and exercise in the Islands all of its powers necessary for carrying on its business outside the Islands. For example, it may maintain and operate bank accounts in the Islands. An Exempted Company is not subject to certain provisions of The Companies Law, and there are certain provisions peculiar to it. In particular:-

(a) The register of members need not be kept at the registered office and is not open to inspection by the public nor is it necessary to file an annual return of members, though the directors must file annually (in January) a declaration that the company has complied with the relevant provisions of The Companies Law.
(b) Shares may have a par value or no par value, but a company cannot have both types of shares.
(c) Bearer shares (only if fully paid) may be issued, but any company with the power to issue bearer shares cannot own land in the Islands.
(d) At least one meeting of the board of directors must be held each year in the Cayman Islands. (Meetings can be attended by proxies or alternates.)
(e) The name need not include the word "Limited" or the abbreviation "Ltd." and the words or letters used in other countries to designate limited liability (e.g. Inc., B.V., N.V., S.A. and Corporation) may be used. Unless it is a Limited Duration Company, LDC may not be used.
(f) No annual general meeting need be held.
(g) It must not make any invitation to the public in the Islands to subscribe for any of its shares or debentures.
(h) It can obtain an exemption from future Caymanian taxes under the Tax Concessions Law for a specific period, the present practice being for twenty years.The exemption takes the form of an undertaking from the Governor-in- Council and applies to any tax which may in the future be levied on profits, gains, income or appreciations. The undertaking also states that neither the above taxes nor any tax in the nature of estate duty or inheritance tax will be payable on the shares, debentures or obligations of the company in question.
(i) It can, if it meets certain requirements, be de-registered in the Islands and register by way of continuation in another qualifying jurisdiction.
(j) It can be incorporated as or changed into an Exempted Limited Duration Company.

4. Exempted Limited Duration Companies
An Exempted Limited Duration Company is an Exempted company with a limited duration of thirty years or less with certain specific provisions applicable to it. These are:-

(a) It must have at least two members.

(b)Its name must include "Limited Duration Company" or "LDC".

(c) Its Articles of Association may provide:-

i. that the transfer of any share or other interest of a member requires a unanimous resolution of
all other members; and

ii. that the management of the company is vested in the members in proportion to their share or other owner-ship interests in which case the members will be considered directors but with power to delegate the management to a board of directors.

(d) It is deemed to commence voluntary winding up:-

i. unless otherwise provided in its Memorandum, within ninety days of death, insanity, bankruptcy, dissolution, withdrawal, retirement or resignation of a member, or the redemption, repurchase or cancellation of all of a member's shares or the occurrence of an event which terminates the membership of a member unless at least two members remain who unanimously resolve to continue the company within the ninety day period, or
ii. if so provided by its Articles, on the termination of a period or the happening of an event.

Properly structured, these can qualify to be treated as a partnership for United States Tax purposes.

5. Limited Life Companies
Where a company with a fixed life is required, but the maximum thirty years of a limited duration company ("LDC") is inappropriate, what is often called a limited life company can be formed. It differs from an LDC in that:-
(a) it need only have one member;
(b) there is no statutory limitation on its duration; and
(c) it may not use the words "limited duration company" or the abbreviation "LDC" in its name.

It may include in its Articles of Association any of the four partnership elements, at least two of which the United States Internal Revenue Service requires for tax transparency. These are:-

(a) management and control is reserved to the members (it should be noted that this element is not available to an exempted company - other than an LDC - since exempted companies must have directors);

(b) issue of two or more classes of shares carrying either limited or unlimited liability;

(c) restriction on transfers of shares; and

(d) mandatory commencement of winding-up and dissolution when the fixed period expires or a specified event happens.

The United States Internal Revenue Service may not treat a company with only one member as a partnership.

6. Foreign Companies
Any company incorporated outside the Islands which establishes a place of business in the Islands or commences carrying on business in the Islands must deliver to the Registrar for registration:-

(a) a copy certified and authenticated under the public seal of the country, city or place under the laws of which the company was incorporated of its Charter, By-laws, Memorandum and Articles of Association or other instrument constituting or defining its constitution and, if the instruments are not in the English language, certified translations of them;

(b) a list of its directors and officers, their addresses and nationalities;

(c) the name and address of a person resident in the Islands who is authorized to accept service of notices and documents on the company's behalf.

Every foreign company must exhibit at its place of business in the Islands and state on all letterheads, notices, bills, advertisements and other publications, its name and country of incorporation and that the liability of the members is limited, if such is the case.

(1) Companies Limited by Shares
A company limited by shares is one in which the liability of its members is limited by the amount subscribed as share capital. This is the type most commonly used for commercial and investment purposes and its members are commonly called "shareholders". The ability to issue different classes of shares allows great flexibility in particular in the allocation of voting rights (eg. one class may have more votes per share than another), the right to elect directors or the right to dividends. The existence of an asset (the shares) also gives the holder something to hypothecate to secure personal borrowings as companies cannot give financial assistance to its members without adverse tax consequences in many jurisdictions.

(2) Companies Limited by Guarantee
These may be formed with or without a share capital. Every guarantee member agrees to pay a sum fixed by the Memorandum of Association if the company is wound up and is insolvent.

Guarantee companies without a share capital are often used for member's clubs, e.g. golf or tennis clubs. Membership normally ceases on death or resignation. It is possible to provide for transferability of members' rights, e.g. in time share resorts, but this is more easily dealt with by issuing shares. Where such a company has more than one class of member, the Memorandum of Association may provide that in a winding up the liability of the members of a particular class will be unlimited.

Where a guarantee company has a share capital, not all members need be shareholders and not all shareholders need be members. Guarantee companies with a share capital can be used:-

(a) for owning and operating time share resorts; and
(b) as an alternative to a trust, with a trustee as shareholder, having administrative and voting powers, and the beneficiaries being members, and having income and capital rights.

(3)Unlimited Companies
An unlimited company is one in which the liability of its members is not limited by the amount subscribed as share capital or the amount of their guarantees. For liability purposes, the liability of members of an unlimited company is the same as that of partners in a partnership, but the company remains a separate legal entity.

Any of the above companies will be further classified as Ordinary, Ordinary NonjResident, Exempted or Exempted Limited Duration, or may be limited life companies.

Formation of a Company
A company may be formed by one or more persons (two for an LDC) executing the Memorandum and Articles of Association and registering those documents with the Registrar of Companies. The initial subscriber is not necessarily the beneficial owner of the shares in a company limited by shares but may become a shareholder for and on behalf of others who wish to remain anonymous. The Memorandum and Articles, when registered, bind the company and its members to the same extent as if each member had subscribed his name and affixed his seal to them and as if there were in them contained on the part of the member or subscriber, his heirs, executors and administrators a covenant to observe all the conditions of the Memorandum and Articles.

Memorandum of Association
This document sets out, among other things, the purposes and objects of the company, i.e. the activities which the company may pursue. Historically, a company was unable to undertake any activity which it was not empowered to do by this document, but recent amendments to the Companies Law have effectively abolished the concept of ultra vires unless and save to the extent that it is specifically stated that the company is restricted from doing any particular business. Memoranda of Association are normally all encompassing allowing the company to do anything which an individual of full age and mental capacity can do. The document must be signed by each subscriber in the presence of, and be attested by, at least one witness.

The Memorandum must make provision for the following matters:

1. the name of the company;

2. the registered office;

3. the objects, purposes or powers of the company (a company may do anything an individual is able to do);

4. unless it is an unlimited company, a statement of limitation of the liability of the members or, if such is the case, that in a winding up the liability of members holding shares of a particular class will be unlimited;

5. the share capital of the company if limited by shares and the limit of liability of members if limited by guarantee.

Names cannot be reserved and certain words may not be used in the name without the Registrar's consent. These words include "Royal", "Imperial", "Empire", "Municipal", "Chartered" and "Co-operative". In addition:-

(a) the words "Bank" or "Trust" may not be used unless the company in question is licensed under the Banks & Trust Companies Law;

(b) the words "insurance", "assurance", "indemnity", "guarantee", "underwriting", "reinsurance", "surety" or "casualty" or any derivative, in any language, may not be used unless the company is licensed under the Insurance Law;

(c) no name may contain the words "building society".

A company may change its name by special resolution.

Articles of Association
This document regulates the manner in which the affairs of the company will be managed and determines in what manner the powers of the company will be exercised. These are commonly known as by laws in jurisdictions such as United States and Panama. This document must be stamped as though it were a deed, even though the persons affixing their signatures to it (called the subscribers) do not execute it as such. The signatures of the subscribers must be attested by at least one witness.

Certificate of Incorporation
On registration with the Registrar of Companies and payment of the necessary fees, the company obtains a Certificate of Incorporation which is the equivalent of a birth certificate. The issue of this certificate brings the company into existence and enables it to commence business (subject to obtaining the necessary licenses if it proposes to carry on business locally). It should be noted that a contract entered into on behalf of a company before its incorporation does not bind it although it may afterwards ratify it and thereby accept it, but the person who purported to sign it on the company's behalf will be personally liable until the company ratifies it.

Share Capital
A company limited by shares may have fractional shares and its share capital may be divided into different classes of shares such as:-

(a) ordinary shares, voting or non-voting;

(b) cumulative preference shares, voting or non-voting;

(c) non-cumulative preference shares, voting or non-voting;

(d)redeemable ordinary or preference shares, cumulative or non-cumulative and voting or non-voting (subject to restrictions);

(e) deferred shares;

(f) no-par-value shares (Exempted Companies only).

There is no requirement in Cayman law for shares to be fully paid up on issue except for shares issued to bearer, but the holder of registered shares is liable to be called upon to pay all unpaid amounts on his shares. A company is permitted to have an authorized capital in any amount or currency which the incorporators may wish but need not issue more than one registered share which can be paid in full or in part, or one bearer share which must be paid in full.

Share Certificates (registered shares)
A share certificate is a document issued by a company limited by shares stating that the person named in it is registered as the holder of the specified number of shares of a certain class (if more than one class of shares has been issued) and that the shares have been paid for in full or up to a certain amount.

Share Warrants (Exempted Companies only)
An Exempted company which is so authorized by its Articles may issue fully paid share warrants under its common seal. The warrant (or bearer share certificate) certifies that the bearer is entitled to the shares represented by it which are transferable by delivery. Warrants are negotiable instruments so that any person who purchases a share warrant or advances his money on the security of it will be entitled to it free from all defects in the title of the person who delivered it to him provided he was unaware of the defects (if any) at the date of delivery.

Appointment of Directors and Officers
It is usual for the subscribers to the Memorandum of Association to appoint the first directors of the company. The subscribers may appoint themselves or persons of their own choosing as directors who, in turn, appoint the officers of the company. It is usual to have at least two or three directors and a secretary. It is possible, however, to have one person who is the sole director and officer of the company, if the Articles so provide.

Public Issues
There are only three statutory requirements in the Companies Law concerning public issues.

(1) Section 34(3)
Every prospectus relating to the issue of the shares must contain particulars of the discount allowed on the issue of the shares or of so much of that discount as had not been written off at the date of the issue of the prospectus.
(2) Section 194
An exempted company not quoted on the Cayman Islands Stock Exchange may not make any invitation to the public in the Islands to subscribe for any of its securities.
(3) Section 206
Every foreign company must in every prospectus inviting subscriptions for its shares or debentures in the Islands state the country in which it is incorporated.

Duties of Directors
Directors manage the affairs of the company subject to the overall control of the members. "They are commercial men managing a trading concern for the benefit of themselves and all other shareholders in it". Sir George Jessell in Forest of Dean Coal Mining Co. (1878) 10 Ch.D. Directors are special agents of the company, that is, they have the powers vested in them by the Memorandum and Articles of Association. In most cases, the directors are empowered to manage the business of the company and to exercise all powers and do all acts and things which the company is permitted to do and which are not by law or by the Articles required to be done by the company in general meeting.

Meetings
Company meetings fall into two broad categories, and by specific statutory enactment may be held by only one person:-

1. Directors' Meetings
These are meetings of the directors at which policy and management decisions are made.

2. Members' Meetings
These may be:-

i. General Meetings
These are meetings of all of the members entitled to attend meetings and vote. Resolutions passed at General Meetings are binding on all members of the company. Every company incorporated in the Cayman Islands (other than an Exempted Company) must have at least one General Meeting per year.

ii. Class Meetings
These meetings are held to pass resolutions which will bind the members of the class concerned and may not be attended by persons who are not members of the particular class.

(a) Statutory Meetings
Every company in Cayman (other than an Exempted Company) is required by law to have one General Meeting per year (known as the "Annual General Meeting"). The business of an Annual General Meeting is usually to:-

i. receive and consider the accounts and balance sheet of the company, if any;
ii. elect directors in place of those retiring;
iii. elect auditors, if applicable; and
iv. declare a dividend if any.

(b)Extraordinary General Meetings
All meetings other than the Annual General Meeting of the members are called "Extraordinary General Meetings".

Resolutions
A company in General Meeting makes decisions which are voted on and reduced to writing (i.e. recorded in minutes which are signed by the Chairman). These decisions are called resolutions.

Types of Resolutions
There are two kinds of resolutions provided for in law and certain acts of the company may not be done without the passing of a particular type of resolution:-

1. Ordinary Resolutions
An Ordinary Resolution is not defined in The Companies Law of the Cayman Islands. It is a resolution of which due notice has been given and passed by a simple majority of members who are entitled to attend and vote and are present at the meeting, either in person or by proxy.

2. Special Resolutions
A resolution passed by a company as a Special Resolution must be passed by not less than two-thirds (or such greater proportion as is required by the Articles) of such members of the company for the time being as are entitled according to the Articles of Association of the company to vote, in person or by proxy, at any General Meeting of which notice specifying the intention to propose the resolution has been duly given.

In both cases in computing a majority when a poll is demanded, the number of votes to which each member is entitled under the company's Articles of Association is counted rather than the number of members.

In the event of an equality of votes, the Articles of Association usually provide that the Chairman will have a second or casting vote. If there is no such provision, on an equality of votes the proposed resolution will fail.

Methods of Making Contracts
A company may enter into binding agreements by having an individual (who is usually a director or officer, but may be any other person) execute documents on behalf of the company under the authority of a resolution of its board of directors. (A company may, through an authorized officer or agent, contract orally, but clearly it is preferable that contracts be reduced to writing).

Companies Doing Business Abroad
A company which finds it necessary to do business abroad may appoint an attorney to act on behalf of the company. A properly authorized attorney is competent under his seal to bind the company and any document so signed by the attorney will have the same effect as if it were executed as such by the company.

Seal
A company may if authorized by its Articles, but need not, have a seal. A company if authorized by its Articles may cause a duplicate of its common seal to be adopted for use in such places as are authorized. A duplicate seal need not have the name of every territory, district or place where it is to be used shown on it.

Authentication of Documents
A ny document which needs to be authenticated may be signed by a director and/or secretary or other officer of the company.

1. Annual
All companies in the Cayman Islands having a capital divided into shares (but not companies limited by guarantee having no share capital, nor unlimited companies) must file an annual return. Ordinary Companies and Ordinary Non-Resident Companies must set out inter alia the names of directors, officers and members, and changes in membership since the date of the last return. Exempted Companies have to file an annual return in the form of a declaration which does not require any of the above information but states inter alia that the operations of the company since the last return (or since registration) have been mainly outside the Islands. Printed forms for annual returns may be obtained from the Registrar of Companies. Foreign companies are exempted from this requirement; they simply pay the annual fee to the Government.

2. Other
(a) All Caymanian companies must send to the Registrar a list of directors and officers, their addresses and occupations and notify him of any changes within fifteen days of the appointment or change; foreign companies are allowed twenty one days.

(b) A copy of all special resolutions must be sent to the Registrar within fifteen days of their being passed.

(c) Notice of any resolution passed for winding up a company voluntarily must be published in the Gazette.

Registers
All companies are required to keep the following statutory registers:-

(a) Members;
(b) Directors and officers; and
(c) Charges (Mortgages).

Licenses for Ordinary Companies
Licenses required by ordinary companies to carry on business in the Islands are dealt with in Chapter XI.

Accounts and Audit
By Section 58, every company must keep proper books of account with respect to:-

(a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place;

(b) all sales and purchases of goods by the company; and

(c) the assets and liabilities of the company.

These requirements are not met unless the company keeps such books as are necessary to give a true and fair view of the state of its affairs to explain its transactions.
There are no statutory requirements in the Companies Law for accounts to be audited. Other legislation requires the following to prepare annual audited accounts:-

(a) banks and trust companies;

(b) companies licensed under the Insurance Law;

(c) regulated mutual funds and all mutual fund administrators; and

(d) licensed company managers.

Winding Up
A company may cease to exist by being put into liquidation. Liquidation (or winding-up) may either be voluntary (by resolution of the members) or compulsory (under order of the Court). In both cases, a liquidator is appointed; it is usual to appoint an accountant to act as liquidator.

Striking Off
If the Registrar of Companies has reason to believe that a Company is not carrying on business, or has ceased to operate, he may strike it from the register, and it is then deemed to be dissolved. He will in practice strike off a company if so requested by the directors. When a company is struck off, all its assets, if any, vest in the Financial Secretary of the Cayman Islands. Members or creditors may within certain time limits apply to the Grand Court to restore the company to the register, in which case the assets are usually revested in the company.

Transfers by Continuation
In certain circumstances, corporations incorporated under the laws of other jurisdictions may be transferred to the Cayman Islands "by continuation" allowing it to obtain the benefits of incorporation in the Islands without losing its established identity (including its incorporation date) or having to transfer its assets or liabilities to a new entity.

Fees
The fees payable to the Registrar of Companies on formation and annually vary depending on the type of company.

Types of Companies
Companies are classified by The Companies Law as Ordinary, Ordinary Non-Resident, Exempted and Foreign. As these notes are intended to assist clients proposing to incorporate companies under Cayman Islands law, no further reference is made to the registration of Foreign companies incorporated elsewhere and information will be provided on request.

Ordinary Non-Resident and Exempted companies are the two types of companies normally incorporated by non-residents to carry on offshore business. If it is proposed to carry on business locally, for example, developing land or retailing goods, then an Ordinary company should be incorporated.

1. Ordinary Non-Resident Company
An Ordinary Non-Resident company is a Cayman company which does not intend to carry on business in the Islands and in respect of which the Financial Secretary has issued a certificate under the Local Companies (Control) Law designating it to be a non-resident.

2. Exempted Company
An Exempted company is a Cayman company which may not trade in the Islands with any person, firm or corporation except in furtherance of its business carried on outside of the Islands and, for this purpose, it may effect and conclude contracts in the Islands and exercise in the Islands all of its powers necessary for the carrying on of its business outside of the Islands. For example, it may maintain and operate bank accounts in the Islands, in any currency.

An Exempted company is not subject to certain provisions of The Companies Law, and there are certain provisions peculiar to it. In particular:

(a) the register of members (shareholders) need not be kept at the registered office of the company (and may even be kept outside the Cayman Islands), and is not open to inspection by the public;

(b) the company is not required to file an annual return of members (shareholders) with the Registrar of Companies, though the directors must file annually (in January of each year) a declaration that the company has complied with certain provisions of The Companies Law;

(c)shares may have a par value or no par value but a company cannot have both types of shares;

(d) bearer (negotiable) shares (only if fully paid) may be issued, and represented by warrants (certificates) which are transferable by delivery;

(e) a company which has actually issued bearer shares cannot hold land in the Islands; and "hold land" covers a very wide range of interests in, to or over immoveable property, whether direct or indirect;

(f) at least one meeting of the board of directors must be held each year in the Cayman Islands;

(g) the name need not include the word "Limited" or the abbreviation "Ltd." and the words or letters used in other countries to designate limited liability (e.g. Inc., B.V., N.V., S.A. or Corporation) may be used;

(h) no annual general meeting of members (shareholders) need be held;

(i) the company is prohibited from making any invitation to the public in the Islands to subscribe for any of its shares or debentures; and

(j) the company can obtain an exemption from future Caymanian taxes under the Tax Concessions Law for a specific period, the present practice being for twenty years. The exemption takes the form of an undertaking from the Governor-in-Council and applies to any tax which may in the future be levied on profits, gains, income or appreciations. The undertaking also states that neither the above taxes nor any tax in the nature of estate duty or inheritance tax shall be payable on the shares, debentures or obligations of the company in question.

3. Ordinary Company
An Ordinary company is any Cayman company which is not an Ordinary Non-Resident company or an Exempted company. An Ordinary company may carry on business in the Islands as a "local" company within the meaning of the Local Companies (Control) Law if it:

(a) is either Caymanian controlled, i.e. the percentage of Caymanian directors and the percentage of shares beneficially owned by persons possessing Caymanian status are not less than 60% in each case, or has been granted a licence under the Local Companies (Control) Law (present practice being for twelve years); and

(b) has been granted a licence under the Trade and Business Licensing Law.

Formation of a Corporation
Registration: A corporation may be formed by as few as one person or entity (the subscriber) affixing his signature to the Memorandum and Articles of Association and the registration of those documents with the Registrar of Companies on payment of a prescribed fee. The subscriber is not necessarily the beneficial owner of the shares in the company but may become a shareholder for and on behalf of others who wish to remain anonymous.

Name: A name cannot be reserved, and certain words may not be used without the Registrar's consent, including "Royal", "Imperial", "Empire", "Municipal", "Chartered" and "Co-operative", or without the company being specially licensed, e.g. "Bank", "Trust", "Insurance", "Guarantee", "Casualty", etc.

Except in the case of an Exempted company, the name of every company formed with limited liability must have "Limited" or "Ltd." as the last word.

Registered Office: Every company must have a registered office in the Islands. This is the only information provided to the public by the Registrar on request.

Share Capital: A company may have an authorised capital in any amount or currency and which may be divided into different classes of shares, but need not issue more than one share.

Directors and Officers: There is no requirement to have more than one director. A company must have a secretary, and other officers may be appointed.

Nationality: Shareholders, officers and directors of any company may be of any nationality, but foreign nationality will have a bearing on the licensing of Ordinary companies to carry on local business as set out above.

Annual Requirements
Meetings: Every company (other than an Exempted company) is required by law to have at least one general meeting of members (shareholders) per year, the "annual general meeting". The directors of Exempted companies are required to hold at least one meeting each year in the Cayman Islands (which can be attended by proxies or alternates) but, subject to this requirement, both directors' and shareholders' meetings may be held anywhere in the world. By statute, a "meeting" may be held by one person.

Returns: Companies having a capital divided into shares must file a return with the Registrar of Companies annually, in January. Returns for Ordinary and Ordinary Non-Resident companies include names and addresses of registered directors, officers and shareholders who are usually nominees of the beneficial owner; returns for Exempted companies do not include this information.

Fees: Every company must pay to the Registrar of Companies in January of each year an annual fee, the amount of which is dependent upon the type of company and amount of the authorized capital (see Schedule I). Failure to pay promptly renders a company liable to be struck from the register and, if struck off, all its assets vest in the Cayman Islands Government unless or until the Grand Court orders that the company be restored (a very time-consuming and costly procedure).