It is proposed that a new law (the “Law”) be enacted, to permit the formation of a new type of vehicle in the Cayman Islands – a Cayman Islands limited liability company (an "LLC").
An LLC will be similar in many respects to a Delaware limited liability company. It would be an entity with separate legal personality (like a Cayman Islands exempted company), but with certain features akin to a Cayman Islands exempted limited partnership (in the sense that such a company would not be limited by shares nor by guarantee but rather by reference to members' capital accounts and capital commitments, with substantial freedom of contract amongst the members as to determining the internal workings of the LLC).
Some potential advantages of an LLC in the funds context would be to allow for simplified and more flexible fund administration (e.g. easier tracking or calculation of the value of a member's investment in the LLC), more flexible corporate governance concepts, and possibly a closer matching of the legal framework applicable between the "onshore" and "offshore" investors (e.g. where there is a parallel "onshore" Delaware limited liability company as a feeder or master fund and an "offshore" Cayman fund in the structure). Where a closed ended fund requires separate legal personality (i.e. as opposed to being structured as an exempted limited partnership), a Cayman Islands exempted company can be cumbersome in the operation of capital call and default mechanisms – an LLC may be ideally suited to such a scenario.
Fund promoters often prefer to have a Delaware limited liability company registered as a foreign company in Cayman, in order for the Delaware limited liability company to be able to act as the sole general partner of a Cayman Islands exempted limited partnership. Offering a Cayman LLC solution might better suit promoters' needs in this respect (and might also enable the Cayman LLC to provide an alternative solution for promoters and their onshore counsel to consider, for the general partner role to their onshore partnerships).
The following is a summary of this new structure.
KEY FEATURES
The new LLC law includes the following salient features:
- an LLC will be a body corporate with limited liability;
- an LLC may be formed for any lawful business, purpose or activity;
- an LLC will require at least one member;
- registration is effected by payment of a fee and filing a certificate of formation;
- an LLC will have the ability to be member managed or managed by a manager or managers.
- members are free to agree amongst themselves the internal workings of the LLC, with appropriate minimum safeguards;
- the law seeks to take into account existing Cayman Islands laws and considerations, including preserving the rules of equity and common law and addressing minimum statutory duties in the context of members and managers; and
- exempted companies may merge into LLCs, and foreign LLCs may merge or migrate into Cayman.
View our guidance note on Limited Liability Companies here.
This publication is for general guidance and is not intended to be a substitute for specific legal advice. Specialist advice should be sought about specific circumstances.
If you would like further information please contact:
Chris Humphries
Managing Director
Tel:(+1 345) 814 7911
chris.humphries@stuartslaw.com