Being listed in the Global Financial Centres Index, Cayman Islands has become a leading choice of jurisdiction magnetizing investors around the world. Cayman Exempted Company places among the most common investment vehicles.
You must submit the annual returns to maintain your company’s good standing. Failing compliance will cost you a significant amount of time and money.
In this article, we will explain the requirements for Cayman Islands annual returns filing in detail.
1. Cayman exempted companies registered as investment funds
Cayman Islands has attracted thousands of regulated open-ended funds (mutual funds) and close-ended funds (private funds). Strikingly, US investors occupy the largest proportion. The reasons for this popularity are the island’s tax neutrality, its proximity to the US, tailored legislation for investment funds, and up-to-date regulatory regime.
Open-ended funds mainly choose exempted companies for the business structure. So, what might be the reasons?
Under Cayman law, an exempted company is defined as a company conducting the majority of its business activities outside the Cayman territory. The entity is ideal for entrepreneurs who are desired to engage their businesses “offshore”. For any activities carried out within the island, the company must obtain a license from relevant authorities.
By its nature, Cayman Islands exempted company is the corporate pick of vehicles for investors who want to start a fund business. An exempted company that wishes to operate as an investment fund must follow the regulations set out in Cayman Private Fund Act or Mutual Fund Act besides the Companies Act.
…and more great things why exempted companies should be opted for investment business:
Substantial degree of flexibility
The regulated entity requires only one shareholder and no minimum capital. Moreover, the exempted company’s shares are redeemable and re-purchasable, which is a good fit for mutual funds.
Investor limited liability
The Cayman exempted company has a separate legal personality. The company acts as a natural person with the legal separation between itself and the owners. This means that you are free from the company’s debts and obligations.
Registration of an investment fund under exempted company
The Cayman Islands Monetary Authority (CIMA) regulates the registration and regulatory compliances of Cayman exempted companies under investment purposes. The law is based upon English common law. All legislations were revised in 2021.
The registration procedures are similar for an open-ended fund and a close-ended fund registered under an exempted company. Below are the key requirements:
Articles of Association of the registered exempted company;
Constitutional document (The Memorandum of Association);
Application form;
Chart of the fund structure;
An offering document or summary of terms of marketing materials, if any;
A consent letter to confirm the approval of the administrator and auditor of the fund, if any.
To maintain the registration of the investment vehicle, you must ensure your company complies with the requirements defined by Cayman law. The submission of Cayman annual returns is one of the most-concerned matters. Let’s move on to the details in the next section.
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