Besides being a tourist attraction, the Cayman Islands remains one hotspot for going offshore worldwide. If you’re taking an interest in this beautiful and full of opportunities island, this is the right article!
We will cover all the key features of incorporating an exempted company in the Cayman Islands as well as the application process that you will encounter.
The Cayman Islands – a hotspot for offshore seekers
The Cayman Islands, located in the Caribbean basin, is home to one of the world’s leading offshore jurisdictions. The flexibility of the Cayman Islands’ “Companies Law” is one of the reasons for its popularity.
Because of its stable government and status as a British overseas territory and economy, the Cayman Islands is an ideal location for offshore investors.
The majority of offshore companies in the Cayman Islands are formed for the purpose of holding or international trading.
Aside from Cayman LLC, foreign investors usually form a Cayman Exempted Company. In the following section, we’ll learn more about this type of structure.
Introduction to the Cayman Islands Exempted Company
Exempted Companies are the most common type of offshore company in the Cayman Islands, offering key features that most foreign investors seek. But what is it exactly, and how does it help your business?
Definition
According to the Companies Law 2020 (Revision), an exempted company does most of its business outside of the islands.
In legal form, an exempted company is a distinct legal personality capable of carrying out all of the functions of a full-capacity natural person, regardless of corporate benefit, and with perpetual succession.
Restrictions
An exempted company may not trade in the Cayman Islands with any person, firm, or corporation unless it has a license to do so under any applicable law.
Registering an exempted company also means that you cannot own land in the Cayman Islands without the Financial Secretary’s permission.
Constitutions of the Exempted Company in the Cayman Islands
A company constitution is a legal document that defines how a company can operate as well as the rights and obligations of its members.
An exempted company’s constitution is comprised of two documents: the memorandum of association and the articles of association (Articles).
The Memorandum of association
The Memorandum has to include the following information:
- The name of the company
- Names of initial subscribers
- The company’s purpose
- The registered office address
- Declaration of limited liability for shareholders
- Authorized share capital (in any currency)
Articles of association
The Articles of Association include internal rules and regulations:
- Shares information: issuance, types, how they are transferred, repurchased, or redeemed
- Meetings of shareholders
- Voting rights of shareholders
- Appointment of officers and directors as well as their powers, meetings, compensation
- Payments of dividends
- Winding-up
Important Note
Copies of the Memorandum and the Articles of Association (the M&A) must be available upon request of all the shareholders.
Registered office
An exempted company must have a local premise, also known as a registered office, in the Cayman Islands, which is provided by a service provider authorized in the islands.
Each company must notify the Registrar of its registered office and publish it in a public notice.
If you want to change your registered office address, you must file a formal resolution with the Registrar and provide a certified copy of the new address within 30 days of the resolution being passed.
Directors
An exempted company must have at least one director who is not required to be a Cayman Islands resident and can reside in any country.
The shareholders appoint the first directors. Following that, directors are normally appointed and/or removed in accordance with the provisions of the Articles.
The directors are typically in charge of the company’s management, which includes the following responsibilities:
- Act for the benefit of the members and the company as a whole;
- Act with proper intent and fairness;
- Do not abuse director power;
- Not to use the position as director to earn illicit profits;
- Avoid internal and external conflicts; and
- Run the business with skill and care.
In the event of a breach of duty, the directors may be held personally accountable to the company.
Share capital
This refers to the maximum amount of stock that your exempted company may issue, which can be increased by a shareholder’s ordinary resolution.
There are no thin capitalization rules in Cayman, and there is no requirement for an exempted company to have more than one shareholder or to issue more than one share.
The Articles allow an exempted company to issue fractional shares, enabling the share capital to be divided into classes with varying rights.
Dividends
An exempted company may pay dividends out of profits or its share premium account, without shareholder consent.
Dividends are typically paid following a resolution passed by the board of directors, either in writing or at a board meeting.
Incorporating an Exempted Company in the Cayman Islands
Registers
To establish an exempted company, owners must keep the following registers:
- Register of directors
This includes the names and addresses of company directors, as well as the date of their appointment, removal, or resignation. The register of directors must be filed with the Registrar for inspection.
- Register of members
The document contains information about company shareholders and the specifics of their shares.
An exempted company that is not licensed to do business in the Cayman Islands may keep its membership registered outside of the Cayman Islands.
- Register of BOs
Most exempted companies are required to keep a register of beneficial owners (BOs) at their registered office address.
Incorporation procedures
To start an exempted company, you must submit to the Registrar signed constitutional documents (i.e., Memorandum of Association and Articles).
You must also file a declaration stating that your business will be conducted outside of the Cayman Islands.
Normally, it will take 3-5 business days for you to register an exempted company.
Post-registration & related matters
Accounting
An exempted company must keep proper accounting records that clearly show its income, expenses, assets, and liabilities.
Although the records are not compulsory to be kept within the Cayman Islands, you must ensure that they’re available upon request from the government or tax authorities.
There is also no requirement for audits or auditors to be appointed.
Annual filing
Every year in January, the company must file a return with the Registrar to indicate whether or not there have been any changes to the M&A.
The annual filing should include information on all operations and activities that were operated outside of the islands.
Furthermore, the company must pay an annual renewal fee for the following year in January.
Taxation
The Cayman Islands is one of the most popular countries without taxes.
Cayman-exempted companies are not subject to income, withholding, or capital gains taxes.
Furthermore, shareholders are exempt from paying taxes on their shares or dividends received from those shares, and they are not subject to estate or inheritance taxes.
Global rules and reports
As a US resident seeking new business opportunities across the border, you’ll need to pay attention to certain rules and standards that may affect your Cayman company.
The following rules and standards may apply to your exempted company in the Cayman Islands:
- Controlled Foreign Corporation (CFC) rules
- Economic Substance (ES) rules
- FATCA report
- FBAR filing
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See how BBCIncorp can help!
With a fully online incorporation process at BBCIncorp, you can now easily register your own exempted company in the Cayman Islands.
- Starting from US$2699, only 24 hours and your exempted company is ready to kick off.
- We streamline the entity formation process, with minimum compliance risks and issues.
- Various banking options and add-on services to suit your business’s needs after registration.
Learn more about our Cayman Exempted Company Formation or send us your questions at service@bbcincorp.com!
Disclaimer: While BBCIncorp strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact BBCIncorp’s customer services for advice on your specific cases.
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