The Cayman Islands is a group of three islands situated in the Caribbean Sea, between Cuba and Central America. The total land area is 262 sq. km. The majority of 41,934 inhabitants (July 2003 est.) live on the island Grand Cayman, with 1,200 people on Cayman Brac and only 120 on Little Cayman. George Town on Grand Cayman is the capital and business and financial centre of the Cayman Islands and is the seat of government.
English is the official language. The Cayman Islands have a literacy factor of 98%.
The islands were discovered by Christopher Columbus in May 1503. He named them "Las Tortugas" due to abundance of sea turtles. Later on Sir Francis Drake visited the islands and re-named them the Cayman Islands after the local word for crocodiles. In 1655 the Cayman Islands officially became part of the British Empire and were administered as a dependency of Jamaica. King George III granted the Cayman Islands freedom from taxation after the courageous rescue of ten merchant vessels of the Royal fleet which ran aground in rough seas in 1794. When Jamaica became independent in 1962, the Cayman Islands chose to remain a British Crown Colony. Under the Constitution established in 1972, the Cayman Islands are a British Dependent Territory.
The political system of the Cayman Islands is based on the British Westminster Model with Queen Elizabeth II as titular Head of State, represented in the islands by a Governor appointed by the Queen for a term of 4 years. The Governor presides over the Executive Council, which consists of three official members appointed by the Governor and four members elected by the Legislative Assembly. The legal power is vested in the unicameral Legislative Assembly (18 seats, three appointed members from the Executive Council and 15 elected by popular vote; members serve four-year terms). The judicial power is represented by the Summary Court, Grand Court, Cayman Islands Court of Appeal. Final appeals are made to the Privy Council in England. The UK also remains responsible for the territory's external affairs, defence, internal security and the administration of the courts.
The economy of the Cayman Islands is highly dependent on the tourist industry, which generates about 70% of the GDP, and the financial services sector, regulated by the independent Cayman Monetary Authority. About 90% of the islands' food and consumer goods are imported. The Cayman Islands enjoy the highest standard of living in the Caribbean. The Cayman Islands Dollar is pegged to the U.S. Dollar at CI$1.00=US$1.20.
BVI Law is based on the English Common Law, rules of equity and on local statutes. Principal corporate legislation is the Cayman Islands Companies Law of 1961 (as amended) based on the English Companies Act of 1948. Other significant laws include the Banks and Trust Companies Law, 1995, the Mutual Funds Law, 1993, the Trust Law (1996 Revision), the Insurance Law, 1993. The Islands are not a party to any tax treaty. The Cayman Islands are a leading member of the CFATF (Caribbean Financial Action Task Force) and has Mutual Legal Assistance Treaties with the US and UK.
Under the Companies Law there are a few company types available in the Cayman Islands: Ordinary Resident Company, Ordinary Non-Resident Company, Exempted Company, Exempted Limited Duration Company and Foreign Company.
The most common type of company for the international trade and investment is Exempted Company. A company may apply to be registered as exempted if its objects are to be carried out mainly outside the Islands. There are very few restrictions on the activities of an exempted company, and namely it may not:
- carry on business with any person resident in the Islands;
- own any interest in real property in the Caymans, other than the lease of an office;
- carry on banking or trust business, insurance or reinsurance business, insurance brokerage or agency, company management business or mutual funds business, unless appropriately licensed under the legislation.
However, an exempted company may engage in all of the following activities without breaching these restrictions: a) effect and conclude contracts in the Islands; b ) maintain bank accounts with the Cayman banks; c) make or maintain professional contacts with solicitors, barristers, accountants, bookkeepers, trust companies, administration companies, investment advisors or other similar persons carrying on business within the Cayman Islands; d) hold meetings of its directors or members; e) hold a lease of property for use as an office from which to communicate with members.
Income by an exempted company is free from any tax in the Islands. This includes all dividends, interests, rents, royalties, compensations, capital gains realised with respect to any share, debt obligation or other securities, and any other amounts paid to the company. An exempted company is entitled to apply under Section 6 of the Tax Concessions Law (1995 Revision) for a certificate confirming that no law enacted in the Islands after the date of its incorporation and imposing any tax shall apply to the company or its operations. Such certificate is usually issued for twenty years.
The Companies Law requires that every exempted company has a Registered Office and a Registered Agent in the Islands.
To incorporate an exempted company, a Memorandum and Articles of Association of a proposed company must be signed by one or more natural or juridical persons, acting as Subscribers, and submitted to the Registrar of Companies together with the relevant registration fee and a declaration made by a proposed director of the company that the operations of the company will be conducted outside the Islands.
The Memorandum establishes the basic structure of the company including the name, the purposes for which the company is formed, authorized capital, details on the shares which may be issued including their par value, denomination, classes and the rights attached, and any other matters which affect the basic existence of the company.
The Articles of Association are essentially the by-laws of the company which govern relations between the various members of the company. They deal with the procedures for calling meetings of shareholders, passing resolutions and transferring shares including any restrictions which may apply.
Once the original M&AA are filed and the proper fees paid, the Registrar of Companies will issue a Certificate of Incorporation, which specifies the name of the company, the date on which it was incorporated, and its Company Number. The Certificate of Incorporation constitutes evidence of the company's legal existence. The M&AA can be changed after incorporation by passing director(s') or shareholder(s') resolutions.
The name of the company may be in any language and may end in the word "Limited," "Corporation," "Incorporated," "Societe Anonyme" or "Sociedad Anonima," or their abbreviations "Ltd.," "Corp.," "Inc.," or "S.A.", but this requirement is not obligatory for exempted companies. The words assurance, asset management, bank, building society, charter, co-operative, fund management, insurance, loan, municipal, reinsurance, royal, saving(s), trust, trustee or any word conveying a similar meaning, cannot be used except with the approval in writing of the Registrar. Moreover, any name identical to that of a company already existing or suggesting the patronage of Her Majesty or that of a member of the Royal Family, or a connection with Her Majesty's Government or a department thereof, or with a municipality or other local authority, cannot be used.
The fee to incorporate a company with capital up to USD 50,000 is USD 573; for an exempt company with capital of USD 50,000- USD 1 million, the fee is USD 805; for an exempt company with capital of USD 1 million - 2 million, the fee is USD 1,690 and for an exempt company with capital exceeding USD 2 million, the fee is USD 2,400.
Standard authorised capital of an exempted company consists of USD 50,000 divided into 50,000 shares with a par value of USD 1.00 each, which ensures payment of the minimum registration and annual fee (USD 573). The shares can be divided into such number of classes and series as the directors can determine by their resolution. The directors are duly empowered to issue shares as registered shares or to the bearer, shares of no par value, preference shares, redeemable shares and shares with or without voting rights. The minimum issued share capital is one share of no par value or one share of par value.
Bearer shares are permitted, but the Companies (Amendment) Custody of Bearer Shares Law 2001 provides for a licensed Custodian in the Cayman Islands to hold bearer shares to the order of the beneficial owner.
An exempted company may have one or more shareholders, individuals or corporations of any nationality or residence. Shareholders need not disclose their identity to the Registrar of Companies. However details of shareholders and beneficial owners including certified copies of their passports and professional and bank references must be provided to the registered agent in the Cayman Islands.
The day to day management of companies is undertaken by the directors. The initial directors are elected by the subscribers to the Memorandum of Association, and thereafter these are elected by the Shareholders. The minimum number of directors is one. They may be natural persons or bodies corporate of any nationality and need not reside in the Cayman Islands.
Details of directors including certified copies of their passports and professional and bank references must be provided to the registered agent in the Cayman Islands. The Register of Directors is not a public documents, although it must be filed with the Registrar of Companies and maintained at the registered office.
Procedure of convening meetings of directors are governed by the provisions of the Articles of Association, and it should be noted that the previously existing requirement to hold directors’ meetings within the I slands has been abolished.
An exempt company is not required to file any financial reports or tax returns in the Cayman Islands. However all companies are required to keep financial records reflecting the financial position of the company. The books of account can be kept in any manner in any part of the world.
The Cayman exempted companies are required to submit to the Registrar in January of each year an annual return confirming that the Memorandum and Articles of Association have not been changed, that the company had no operations within the Islands and that the provisions of the Companies Law have been complied with, together with the appropriate annual fees, which are based on the amount of the share capital and are the same as incorporation fees.
Penalties for late payment of annual fees are as follows:
- Up to 31 st March – nil;
- Between 1 April – 30 June – 33.33% of the annual fee
- Between 1 July – 30 September – 66.67% of the annual fee
- Between 1 October – 31 December – 100% of the annual fee
If the company fails to pay the annual fees and file its annual return within 1 year of its due date, it will be struck off the Register and any assets held by the company will vest in the Cayman Islands government.
An ordinary resident company is usually formed for the purposes of carrying on local business.
An ordinary non-resident company is subject to the same rules as a resident company, but under the terms of the Local Companies (Control) Law 1995, must not conduct any business within the islands. This type of company is also suitable for carrying out international trade and investments. However it slightly differs from the exempted company, and namely:
- Bearer shares are not permitted for non-resident companies
- Its annual list of the shareholders must be provided to the Registrar and will be available for public inspection. Thus confidentiality can only be guaranteed through the use of the nominee shareholders.
- Annual shareholders’ meetings must be held every year, and within 21 day following the meeting, the company must make up a list of its shareholders which is to be filed with the Registrar in January each year.
- Non-resident companies may not obtain a Certificate of Tax Exemption, which is available only to exempt companies.
Limited duration exempted companies are like exempted companies except that its Memorandum of Association must limit the life of the company to 30 years or less and it must at all times have not fewer than two members. Management of LDC may be carried out by the shareholders or may be delegated to a board of directors.
Foreign companies are companies incorporated outside the Cayman Islands which establish a place of business in the Cayman Islands. A company may also transfer its domicile to the Cayman Islands 'by way of continuance'. The reverse process is also possible.
Public records of any company incorporated in the Cayman Islands include only the type of company and location of its registered office. No other information is required to be made public for exempted companies, but ordinary companies are required to make their register of shareholders available for public inspection.
It should be noted that details, passport copies and professional and bank references for directors, shareholders and beneficial owners are required to be submitted to the Registered Agent of the Company, and the Register of Directors shall be filed with the Registrar of Companies, though it is also not available to public.
The Confidentiality Relationships Preservation Law makes it a criminal offense for a professional to disclose any confidential information regarding the customer without his consent in writing. However the confidentiality laws of the Islands do not apply to money laundering and activities which would be judged criminal in the Cayman Islands.