One of the questions we receive regularly from our clients (existing and potential) is whether they can set up an LLC in Cayman.
“Hi, my name is Jim and I’d like an LLC please”. This is a natural question for clients in North America as LLCs seem to be the preferred vehicle of choice for almost any purpose and so why should there be any other choice? For example, the vast majority of funds set up in the United States are LLCs, incorporated in Delaware, and every client is familiar with them and how they work.
We often find that the overlay of having the straight company concept in Cayman leads to some confusion. Cayman does not currently have the LLC concept and sticks to the regime of a company based on English Law. “We have them, why don’t you?” is what we typically hear. Traditionally, our long legacy as a British colony (you can imagine how a Scotsman writing this may grumble) has caused us to follow English Law (yes, Scottish Law is better, Donoghue –v– Stevenson, anyone, anyone...?).
However, it is not often that Cayman lawyers receive brand new playthings from the Cayman government, however this past Christmas, we had reason to break out the bubbly. Legislation was published for consultation which will introduce the concept of LLCs into Cayman Law. We’re not sure yet as to when the legislation will be passed and brought into force, so we will have a new plaything, we’re just not able to play with it... yet. We are though tooling up so that we can get going with this concept once it is actually released.
So, what difference will it make?
Well, we’ll have a different answer to the standard question and we’ll be able to say “why yes, you can have an LLC”. We’ll also be able to take the attractive concepts of a Cayman company – flexibility, ability to structure it to achieve a client’s objective – and marry that with even more flexibility equivalent to a Delaware LLC. Private equity for example will likely benefit greatly and limited partnerships could be replaced by a corporate structure with more flexibility than we could have now.
In a nutshell, a Cayman LLC will:
- be a body corporate formed for any (lawful) purpose,
- require at least one member,
- have a registered office in Cayman,
- require an LLC agreement similar to Delaware LLCs and which doesn’t have to be filed with any authorities, and
- have registers (of members, of managers) required to be kept so that Cayman continues to comply with its OECD and other international obligations in relation to exchange of information.
...the list goes on.
The legislation will likely be tweaked as a result of public consultation. However, at this point, we are excited about our new toy and considerable interest has been generated as a result of the consultation exercise both within Cayman and around the globe. Suffice to say for the moment, that this is a major step forward which will continue to push Cayman’s dominance in the investment funds market. For a while yet, we’ll all just have to exercise some patience...
Of course if you want to discuss more or simply share your excitement about this new legislation, then you can always contact me or your usual Harneys contact directly.
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