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The Cayman Islands Government has on 7 February 2020 passed the Private Funds Act, 2020 and the Mutual Funds (Amendment) Act, 2020.
The Private Funds Act 2020
The Cayman Islands Government has on 7 February 2020 passed the Private Funds Act, 2020 the Private Funds (Savings and Transitional Provisions) Regulations 2020 (together, the "PF Act").
The PF Act provides for the registration of certain closed-ended funds (termed "private funds") with the Cayman Islands Monetary Authority ("CIMA"). The main provisions of the PF Act, including what constitutes a private fund, are summarised in the update we published regarding the draft Private Funds Bill, 2020 and the draft Mutual Funds (Amendment) Bill, 2020.
The PF Act commenced on 7 February 2020 (the "Commencement Date").
Under the PF Act:
- All relevant funds have a six-month transitional period in which to register with CIMA, ending on 7 August 2020;
- All private funds launched after 7 February 2020 will need to register with CIMA;
- No registration fee will be payable upon the initial registration of a transitional private fund but an annual fee will be payable in January of each following year;
- Audited annual accounts for the first full financial year following the date of registration will need to be filed with CIMA. For funds with a year end of 31 December this will likely mean that accounts for the year ending 31 December 2021; and
- Audited annual accounts must be approved by a Cayman Islands-based audited.
Mutual Funds (Amendment) Act, 2020
Further to the passing of the PF Act, the Cayman Islands Government has also on 7 February 2020 passed the Mutual Funds (Amendment) Act, 2020 which amends the Mutual Funds Act (2020 Revision) (the "MFA").
Existing funds previously exempt under section 4(4) of the MFA (those with 15 or fewer investors) (“Section 4(4) Funds”) will need to comply with the registration requirements by 7 August 2020. New Section 4(4) Funds that start carrying on business after the Commencement Date will need to comply with the registration requirements with immediate effect.
Existing Section 4(4) Funds will need to review the current make-up of their boards or other governing bodies to determine if they satisfy the “four-eyes” principle requiring at least two natural persons in management roles.
Directors of Section 4(4) Funds not already registered with CIMA will need to register prior to 7 August 2020. This is an online process and Stuarts Walker Hersant Humphries can assist with this process if need be.
CIMA has not yet published the registration form for Section 4(4) Funds, but it is expected to be similar to the form currently filed for mutual funds registered under section 4(3) of the MFA. A Section 4(4) Fund will not be required to file an offering document (or any amendments) with CIMA. A prescribed fee will also be payable on registration and in January of each year thereafter.
Stuarts will be making contact with all clients in relation to the requirements under this new law.
Please get in touch with your usual contact at Stuarts Walker Hersant Humphries if you have any questions related to either the PF Act or the MFA.