Chris Humphries
Clients are reminded of the following important filing dates for Financial Institutions (FIs) under the CRS and FATCA Regime and Economic Substance regime filings with the Tax Information Authority in the Cayman Islands. Additionally, clients are...
Draft legislation relating to the creation of an Exempted Limited Liability Company (“ELLC”) continues to make progress and it is anticipated that ELLCs will, in the near future, be available as an alternative legal form of vehicle for the formation of funds in the Cayman Islands.
A Cayman Islands ELLC would be similar in many respects to Delaware Limited Liability Company – an entity having separate legal personality (like a Cayman Islands exempted company), but with certain features of a Cayman Islands Exempted Limited Partnership (“ELP”) (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 freedom of contract amongst the members as to determining the internal workings of the company). At present, the Cayman Islands are not able to offer a vehicle more closely aligned with a Delaware Limited Liability Company and US fund promoters often ask whether the Cayman Islands could provide such a vehicle.
Some advantages of an ELLC would be to allow for simplified fund administration (i.e., easier tracking or calculating the value of a member’s investment in the ELLC), 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 are parallel ‘onshore’ and ‘offshore’ funds in a structure). Given the position of the Cayman Islands as a leading jurisdiction for fund formation, and that US counsel and US fund promoters have actively been asking for an ELLC solution in the Cayman Islands, we believe that such a vehicle would be attractive to the US funds industry and would enhance Cayman’s position in the fund formation market. Indeed, such a vehicle might be viewed as a premium product.
We are of the opinion that a Cayman Islands ELLC would be well suited to operating as a ‘closed ended’ fund – rather than having to look to a Cayman Islands exempted company (which can be constrained by somewhat dated concepts of share capital maintenance) or to a Cayman Islands ELP, which lacks separate legal personality.
Read more on the proposal of the new law to permit the formation of a new type of vehicle in the Cayman Islands – a Cayman Islands limited liability company here.
