Voluntary liquidations generally

As the conclusion of 2018 approaches, clients should give some thought to whether or not they have Cayman entities which they wish to liquidate prior to the end of 2018 for, among other things, the purpose of avoiding annual government registration fees due in January 2019. A voluntary liquidator of a Cayman company or exempted limited partnership (ELP) is required to hold the final general meeting for that company or file the final dissolution notice for that ELP on or before 31 January 2019.

View Full PDF

Voluntary liquidations – Funds registered with CIMA

Investment Funds which are registered with the Cayman Islands Monetary Authority (CIMA) should commence voluntary liquidation and submit documents to CIMA in order to have those Funds’ status change from “active” to “license under liquidation” by Monday, 31 December 2018 if they are to avoid their annual fees payable to CIMA for 2019. It is also important for investment funds registered with CIMA to give some thought to CIMA’s requirement for a final “stub” audit for the period of 2018 in respect of which the Fund operated before going into liquidation. CIMA may be reluctant to grant a partial year audit waiver for a liquidating Fund.

As an alternative to voluntary liquidation, some investment fund managers might be considering a wind down of one or more CIMA registered funds prior to the end 2018 and wish to de-register from CIMA or at least go into the status of “licence under termination” with CIMA in order to avoid or reduce annual registration fees payable to CIMA for 2019. If not already started, we recommend that action be taken now to begin this process.

New Enforcement Powers for CIMA to impose Administrative Fines on Cayman Islands’ Regulated Funds and Investment Managers are now in Force.

Introduction

The Monetary Authority (Amendment) Law, 2016 (the “Amendment Law“) which was enacted near the end of 2016 but only came into force on 15th December 2017 gives the Cayman Islands Monetary Authority (“CIMA“) the power to impose administrative fines for non-compliance on entities and individuals who are subject to Cayman Islands regulatory laws (e.g. the Mutual Funds Law, the Securities Investment Business Law, and the Directors Registration and Licensing Law) and/or the Anti-Money Laundering Regulations, 2017 (“AML Regulations“).

View Full PDF

Persons Affected

CIMA’s new powers to impose administrative fines for breach of, or non-compliance with, regulatory laws and/or the AML Regulations will cover, among others:

1. 1. investment funds registered with CIMA;
   2. investment management/advisory companies registered with CIMA (including those registered as an “Excluded Person” under the Securities Investment Business Law);
   3. individuals who are Directors of entities covered under i. and ii. above (irrespective of whether or not the Director is resident in the Cayman Islands) and are registered with CIMA.

Types of Fines

For a breach prescribed as minor, the fine will be CI$5,000 (approx. US$6,000). For a breach prescribed as minor, CIMA also has the power to impose one or more continuing fines of CI$5,000 each for a fine already imposed for the breach (the “initial fine”) at intervals it decides, until the earliest of the following to happen:

(a) the breach stops or is remedied;

(b) payment of the initial fine and all continuing fines imposed for the breach; or

(c) the total of the initial fine and all continuing fines for the breach reaches CI$20,000 (approx. US$24,000).

For a breach prescribed as serious, the fine is a single fine not exceeding: (a) CI$50,000 (approx. US$61,000) for an individual; or (b) $100,000 (approx. US$122,000) for a body corporate. For a breach prescribed as very serious, the fine is a single fine not exceeding: (a) CI$100,000 (approx.US$122,000) for an individual; or (b) CI$1,000,000 (approx. US$1,220,000) for a body
corporate.

CIMA will have six (6) months from becoming aware of a minor breach, or having received information from which the fact of the breach can be reasonably inferred, to impose a fine. There is a two (2) year time limit in respect of the imposition of fines for serious or very serious breaches.

Fines may be imposed even if the relevant breach is not a criminal offence. If a breach is also an offence, the imposition by CIMA of a fine will not preclude separate prosecution for that offence (or be limited by the penalty stipulated for that offence). Equally, any prosecution will not preclude the imposition of administrative fines or penalties.

The Monetary Authority (Administrative Fines) Regulations 2017, which also came into force on 15th December 2017 sets out, among other things, rules and guidance regarding the amount of fines, different categories of breaches, the criteria for exercising fine  discretions, including procedures of imposing fines, appeals, payment and enforcement.

The Cayman Islands has been removed from the European Union’s list of non-cooperative jurisdictions for tax purposes.

The Cayman Islands Government and other stakeholders in the jurisdiction’s financial services industry welcomed the news announced on 6th October 2020. The EU’s decision is recognition of the Cayman Islands’ sustained efforts to meet EU regulatory requirements on tax transparency, and continuing its focus on expanding the regulatory framework for investment funds, and extending the scope of anti-money laundering regulation.

Since 2018 the Cayman Islands has introduced a large number of legislative measures (including amendments to the Mutual Funds Law and a new Private Funds Law to implement new rules for the registration and regulation of investment funds) to meet EU demands on tax matters.

The Cayman Islands was placed on the list of non-cooperative jurisdictions for tax purposes in February 2020. The removal comes as part of the first review of the list since February 2020.

Annual Fees Deferred

As of 26 March, the Cayman Islands Government has deferred the obligation to pay annual fees for all companies (including limited liability companies (LLCs) and foundation companies) and exempted liability partnerships (ELPs) until 30 June 2020.

The annual return filing deadline for these entities has also been extended to 30 June 2020. Penalties for late payment or late filing of annual returns will apply as of 1 July 2020.

View Full PDF

Deferral of Economic Substance Notifications

As a result of the annual return extension for companies, the deadline for Economic Substance Notification (ESN) filings is now 30 June 2020. Please be aware that a ESN submission is required to be made to the Companies Registry before companies can file an annual return successfully.

Extension of Filing Deadlines by CIMA

The Cayman Islands Monetary Authority (CIMA) has also extended a number of filing deadlines in accordance with the table attached hereto.

For specific advice on making filings and submissions to the Companies Registry and/or CIMA, please contact your usual Loeb Smith attorney or any of:

E: gary.smith@loebsmith.com
E: vivian.huang@loebsmith.com
E: yun.sheng@loebsmith.com
E: elizabeth.kenny@loebsmith.com
E: santiago.carvajal@loebsmith.com
E: benjamin.wrench@loebsmith.com

View Full PDF

By way of an update on our recent publication (which can be found here) that the Financial Action Task Force (FATF) had determined that the Cayman Islands has substantively fulfilled its action plan, and following completion of a recent on-site visit by the FATF, the Cayman Islands has now been de-listed from the FATF so-called “Grey list”.

View Full PDF

The FATF plenary congratulated the Cayman Islands for its significant progress in addressing the strategic AML/CFT deficiencies previously identified during its mutual evaluations. The Cayman Islands will no longer be subject to the FATF’s increased monitoring process.

With its removal from the FATF’s Grey list there is an expectation that the Cayman Islands will be de-listed from the EU’s AML / CFT List shortly.

The Cayman Islands has continued to be the premier offshore jurisdiction for, among other things, structuring investment funds and special purpose vehicles notwithstanding its inclusion on each of the FATF Grey list and the EU’s AML/CFT List. One of the key reasons for this is that the jurisdiction operates a business friendly and well-regulated financial system underpinned not only by a belief in proportionate, risk-based regulation and a conviction to integrity and transparency, but also by the belief that appropriate regulation and international cooperation drive commercial success.

The removal of the Cayman Islands from the Grey list will hopefully serve to underscore the jurisdiction’s drive to adopt the highest international standards and industry best practices.

With the coming into effect of the Virtual Asset (Service Providers) Act, 2020 (the “VASP Act”), the Cayman Islands Monetary Authority (“CIMA”) announced that the regulatory framework for the VASP Act would be implemented in two phases. Phase one focuses on anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) compliance, supervision and enforcement, and other key areas of risk. CIMA announced that under phase one, entities engaged in or wishing to engage in virtual asset services must be registered with CIMA under the VASP Act. Entities engaged in or wishing to engage in virtual asset services, already subject to CIMA’s supervision under another regulatory law, must notify (in the case of CIMA licensees) or register with CIMA (in the case of entities registered with CIMA e.g. under the Securities Investment Business Act) under the VASP Act. Phase two will include a licensing and virtual asset issuance approval process that will begin when the appropriate clauses and aspects of the VASP Act come into effect.

View Full PDF

See the following links for further details of the regulatory regime in the Cayman Islands for token issuers, providers of custody services for digital assets, crypto exchanges, and other providers of virtual asset services.
Game changer- Introduction of the regulation of Virtual Assets in the Cayman Islands (Part I)
Game changer-Licensing requirements for Virtual Assets in the Cayman Islands (Part II)

Job Description

Loeb Smith Attorneys is a dynamic, fast growing Cayman Islands law firm with an enviable international client base and a proven record of providing creative and insightful legal advice and solutions to, among other, investment funds, listed companies, blockchain technology companies. We work with our clients, other law firms and advisers and with each other to efficiently maximize our clients’ commercial advantage whilst minimizing their legal risk.

We are seeking a bright, hardworking Corporate Attorney to join our Corporate Group.

The successful applicant will be working principally on:

1. the formation and launch of investment funds including hedge funds, PE funds, tokenised funds, and cryptocurrency funds; and
2. advising on the acquisition and disposal of fintech and blockchain technology companies.

Basic Requirements

The successful applicant will receive in-depth training and support to acquire the necessary technical know-how and skills to provide the high quality advice and service delivery that our clients expect from our lawyers and legal professionals and must:

1. have a minimum of 5 years’ PQE working in a corporate team undertaking high quality corporate work particularly focused on cross border M&A, private equity transactions, or IPOs;
2. have strong academic record, be fluent in English, and qualified to practice law in a British commonwealth jurisdiction;
3. be a good team player with strong interpersonal skills, strong work ethic, excellent attention to detail, time management and very good organizational skills.

Salary and Benefits

The successful candidate will receive a very competitive salary and benefits package including a performance related bonus scheme, health insurance, and pension.

The Cayman Islands was removed from the FATF Grey list in October last year (see related publication here (Cayman Islands removed from FATF Grey list – Loeb Smith)), which was then followed by the UK on 5 December 2023 which removed the Cayman Islands from the UK list of high-risk countries for AML and CTF purposes pursuant to the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 2) Regulations 2023.

View Full PDF

The European Union followed suit a week later on 12 December 2023 when the EU Commission passed the Commission Delegated Regulation (EU) 2024/163 (the “Regulation”) amending Delegated Regulation (EU) 2016/1675 as regards the deletion of the Cayman Islands and Jordan from the table in point I of the Annex, i.e. the EU list of high-risk third countries. The Regulation was finally published on the Official Journal of the European Union on 18 January 2024 (the full copy can be viewed at the following link: Delegated regulation – EU – 2024/163 – EN – EUR-Lex (europa.eu)) and, accordingly, it will become effective 20 days after publication on 7 February 2024.

The Regulation becoming effective in February 2024 means that the Cayman Islands will be removed from the EU list of high-risk third countries and represents the latest of a number of steps towards recognizing the Cayman Islands’ steady progress in the implementation and enforcement of internationally assessed and accepted AML/CTF measures. It is also highly significant for the Cayman Islands’ international reputation, and of particular importance in the structured finance sector as the Cayman Islands will again be a permissible jurisdiction for the establishment of securitisation special purpose entities (or ‘SSPEs’) for the purposes of Article 4 of the EU Securitisation Regulation.

By way of an update on our recent publication (which can be found here) that the Financial Action Task Force (FATF) had determined that the Cayman Islands has substantively fulfilled its action plan, and following completion of a recent on-site visit by the FATF, the Cayman Islands has now been de-listed from the FATF so-called “Grey list”.

View Full PDF

The FATF plenary congratulated the Cayman Islands for its significant progress in addressing the strategic AML/CFT deficiencies previously identified during its mutual evaluations. The Cayman Islands will no longer be subject to the FATF’s increased monitoring process.

With its removal from the FATF’s Grey list there is an expectation that the Cayman Islands will be de-listed from the EU’s AML / CFT List shortly.

The Cayman Islands has continued to be the premier offshore jurisdiction for, among other things, structuring investment funds and special purpose vehicles notwithstanding its inclusion on each of the FATF Grey list and the EU’s AML/CFT List. One of the key reasons for this is that the jurisdiction operates a business friendly and well-regulated financial system underpinned not only by a belief in proportionate, risk-based regulation and a conviction to integrity and transparency, but also by the belief that appropriate regulation and international cooperation drive commercial success.

The removal of the Cayman Islands from the Grey list will hopefully serve to underscore the jurisdiction’s drive to adopt the highest international standards and industry best practices.