The Cayman Islands Limited Liability Company (LLC) law was recently enacted in July of 2016 to protect shareholders by creating limited liability companies called “The Limited Liability Companies Law” (LLC). This law was modeled after Delaware’s similar law in the United States.
The Cayman LLC is a cross between a partnership and an offshore corporation creating a different legal entity. The biggest advantage is that the LLC provides limited liability protection for its members. Unlike a corporation with corporate shares, a LLC resembles a partnership where its members own a share of the total assets.
Background
The Cayman Islands is a three island country on the Caribbean Sea near Cuba. Its three islands are: Grand Cayman, Little Cayman, and Cayman Brac. The capital located on Grand Cayman Island is George Town. It is a British Overseas Territory with an estimated population of 60,000 where English is its official language. The Caymans has been a popular global offshore financial center for many years catering to wealthy clients.
Cayman Islands Limited Liability Company (LLC) Benefits
A Cayman LLC has several benefits including:
• No Taxation: The Cayman Islands do not tax corporations on income earned outside of its territory. Nor does it have an income tax if the profits are gained outside of its borders. This includes dividends and interest earned on investments.
However, U.S. citizens and others from countries taxing global income must declare all income to their tax authorities.
• Different Legal Structure: Being a cross between a corporation and a partnership means the LLC is a completely different legal structure.
• No Minimum Capital: There is no minimum capital requirement for a LLC.
• Privacy: To register a Cayman LLC, there is only a simple document filed with the Registrar which does not provide the names of its members or managers for public access.
• Control: The LLC Agreement can be written to provide great leeway by its members to designate the amount of power members, managers, and outside parties can have regarding the operation of the LLC. The only prohibition is that no one can be allowed to engage in dishonest or fraudulent activities.
• Adaptability: The LLC Agreement can designate the manner of allocation and distribution of profits & losses to its membership along with members’ voting rights which can be changed at any time.
• Simple Formation: LLC’s can be formed with just one member who files a simple statement with the Cayman Islands Registrar.
• Manager: The law allows for one manager or by majority vote of the members to manage a LLC.
• Consolidation: Cayman LLC’s can merge with foreign entities and continue as a LLC. Other Cayman legal entities can choose to become a LLC with the filing of a simple form with the Registrar.
• English: English is the official language in the Caymans.
Company Name
Cayman LLC’s must choose a unique company name not similar or resembling any Cayman legal entity’s name.
It is only optional for a Cayman Islands LLC to include the words “Limited Liability Company” or one of the abbreviations “L.L.C.” or “LLC”. However if a LLC is located in the special economic zone, then it must include the words “special economic zone” or the letters “SEZ” in its name.
While a LLC may have a foreign company name, only foreign languages using the Roman alphabet can be used.
Office Address and Local Agent
A local office address is required for a LLC along with a local registered agent.
Membership
LLC’s have a membership instead of shareholders. The LLC Agreement determines what privileges and rights its members may have. This pertains to controlling interests, voting rights, profit allocations, and the types of classifications and/or group’s members can be designated. The LLC Agreement can be amended or modified at any time.
Members can reside anywhere in the world. There is no limit on the number of members.
Contributions of a member may be in the form of any assets including cash and services rendered or an obligation to contribute any assets or to perform services.
Manager
A Cayman LLC does not have directors or officers. The LLC Agreement determines whether it is managed by its members or by a manager. The Agreement should clarify the duties of its manager and what limitations (if any) he or she will have during its typical operations.
There is no requirement for the manager to be a Cayman Islands resident and can reside anywhere in the world. A corporation as the manager is permitted.
Limited Liability
Only the LLC can be held liable for debts, liabilities, and obligations of the LLC whether arising from contract, tort, or conduct. None of the members or managers shall be personally liable for such debts, liabilities, or obligations unless the individual was engaged in the conduct which gave rise to them. However, liability of the manager or members will be limited as follows:
1. The manager’s or member’s contribution to the LLC assets;
2. For acting under the terms of the LLC Agreement; and
3. To such extent the member is entitled to be returned upon termination of membership by law or in the LLC Agreement.
Authorized Capital
A LLC does not have to declare a minimum capital.
Taxes
The Cayman Islands does not have corporate or income taxes on income earned outside its borders. Interest earned on investments and dividends distributed to its members are not taxed.
A LLC may apply to the Governor for a 50 year guarantee that no future laws imposing taxes on appreciation, gains, income, or profits will apply to the specific LLC or its members. This can also apply to estate and inheritance taxes.
Public Records
There is only one simple declaration filed with the Cayman Islands Registrar which does not name a LLC’s members or manager.
Accounting and Audit Requirements
The Cayman Islands does not require specific methods for maintaining and recording books and financial statements. There are no mandatory audits of LLC’s.
However, a LLC is required to keep a membership registry which contains each member’s name and address, the date of membership and date when membership ceased (if applicable). While the registry does not have to be maintained in the Cayman Islands, the address where the registry is kept must be kept in the registered office. The registry is not open for public inspection.
In addition, a LLC must maintain a record of managers, mortgages, and debts to be available to the government to inspect, if requested.
Annual General Meeting
LLC meetings are not required.
Time Required for Registration
The filing of a simple statement with the Cayman Islands Registrar can be done in one day. The Registrar shall issue a Certificate of Registration as proof that the LLC is registered, but that is a mere formality because as soon as the statement is filed, the LLC is legally registered.
Shelf Companies
Because LLC’s are so unique; no shelf LLC companies are available.
Conclusion
A Cayman LLC has several benefits including: no taxes on income earned outside its territory, a LLC is a separate legal structure, no minimum capital, complete privacy and control over all matters of the LLC, adaptability of the LC Agreement, simple and fast registration, option of management by full membership or one manager, easy mergers and consolidation or conversion by legal entities into a LLC, and English is the primary language.
