In 2017 the Cayman Islands’ Foundation Companies Act (as Revised) (the “Act”) came into force. The Act permits a new type of company which bolsters the jurisdiction’s offering of versatile special purpose vehicles which has potential application in a wide range of structures and scenarios. The foundation company (the “Foundation Company”) and the Act sits within the framework of the Companies Act (as revised) (the “Companies Act”) and whilst a Foundation Company bears many of the characteristics of a traditional limited liability company it also blends in certain attributes of a trust or civil law foundation. This note gives an overview of the key role of the founder of a Foundation Company.
A Foundation Company’s management will be carried out by its directors. In addition, the Act states that its constitution may give rights, powers and other duties to members, directors, supervisors, founders (the “Founder”) or others relating to:
- admitting, appointing or removing members, supervisors and directors;
- making and amending any bylaws;
- the supervision of the Foundation Company’s management and operations;
- enforcing duties;
- general meetings and voting on resolutions;
- altering the constitution; and
- winding up and disposing of surplus assets.
The Articles of Association
Certain powers of the Founder are set out in the articles of association of the Foundation Company (the “Articles”) and whilst these can be amended to suit the needs of the Foundation Company these are set out below.
The Articles will name the founder and state that such person has the power to:
- authorise the admission of the Members, or to restrict or prohibit the admission of Members;
- appoint or remove Directors;
- call for reports, accounts, information and explanations from the Directors;
- appoint or remove supervisors, and settle their powers and duties;
- designate beneficiaries, give directions as to their benefits, grant them enforceable rights, and to revoke or vary the same;
- cause the Company to be wound up; and
- adopt, revoke or vary bylaws.
The Articles also typically state that: The Founder will also have the right to receive notice of, and attend and vote at, general meetings of the Company.
The Founder’s powers are free of any duty, and may be exercised for the Founder’s own benefit.
The Founder may by notice to the Company revocably or irrevocably terminate or restrict any or all of the Founder’s powers and if the termination or restriction is expressed to be irrevocable, it may not be altered or revoked, directly or through an alteration of these Articles.
The Founder’s powers are not assignable and, except as permitted by these Articles or required by law, may not be exercised by any other person on behalf of the Founder.
Upon the Founder’s death the Founder’s powers shall terminate.
An exercise of a Founder’s power does not cease to be effective by reason only that the Founder subsequently dies or ceases to have the power.