There comes a time in a registered Cayman fund’s life when it needs to de-register from the Cayman Islands Monetary Authority (CIMA).
This could be early on, if the fund launches but never carries on business, or much later on the fund’s winding up. It could also be anytime in between if the fund is no longer carrying on business as a regulated mutual fund, merges with another fund or transfers to another jurisdiction. A fund can also choose to de-register if it no longer meets the definition of a mutual fund, because it has become a single investor fund or a closed—ended fund, or it has become an exempted mutual fund, where the fund’s shares are held by not more than 15 investors, a majority of whom are capable of appointing or removing the directors of the fund.
CIMA recently issued an updated and expanded rule and regulatory procedure (Rule), setting out their requirements for de-registering a regulated fund / master fund, which vary depending on the reason for de-registration. Under the new Rule, a fund must apply to de-register from CIMA on the earlier of 21 days from the date the fund ceases to carry on business or before 31 December of the year the fund ceases to carry on business. Funds which have never carried on business, for example because they did not raise as much funding as expected or needed to be financially viable, must apply to de-register within 21 days of the date of a resolution of the directors acknowledging those facts.
In each case, there are various core requirements which apply - the fund must be in good standing with CIMA having paid all fees due and submitted all filings required, it must submit the original licence or registration certificate issued by CIMA, pay a fee (currently c.US$730) and submit a certified copy of a resolution of the directors confirming the date the fund will cease or has ceased to carry on business as a fund in or from the Cayman Islands. Further documents are then required under the new Rule depending on the reason for de-registering.
Unless a fund qualifies for an audit waiver, it also has to provide audited accounts from the last financial year end. Before CIMA issued its revised Rule, market practice was to apply for a part-year audit waiver, however CIMA has indicated that it will limit waivers after 1 October 2015 when the new Rule comes into effect. Funds which apply to de-register before 1 October 2015 will however still be able to ask for a part-year audit waiver under the old procedure, if they also pay a waiver fee of c.US$610 to CIMA.
So if you’re a manager of a fund that’s stopped business but you haven’t quite got round to de-registering it, and you’d rather spend a few thousand dollars on something other than a part-year audit, you may want to act quickly and apply to de-register the fund before 1 October 2015.