Cayman New Resident
Heritage Holdings
The definitive guide to living and working in the Cayman Islands
Oct 20, 2014 

Legal Requirements for Establishing a Business

Last updated: 9th October 2014

In this chapter we explain how you go about setting up a new business in the Cayman Islands. We explain the legal formalities, the Trade & Business Licensing requirements, the registration process and which corporate service companies can help you with the paperwork. For information on the Cayman Islands Special Economic Zone (SEZ), Cayman Enterprise City please see our Special Economic Zone section. We also cover finding office and retail space in our Commercial Real Estate section and provide details for everything one would need to fit out an office in the Setting Up an Office section.

Cayman offers a well-regulated and internationally respected, tax-neutral, offshore business environment. The type of Cayman structure required or best suited for a particular endeavour, will depend largely on the type of business and whether it will be conducting its affairs locally or outside of the Cayman Islands. If the business is operating in another country, advice from that country’s legal and tax counsel will be of prime importance in understanding the benefits that can be derived from setting up a business in Cayman. A fully operational physical presence with locally based staff, as opposed to a nominal presence through a registered office address, can be an essential component in ensuring compliance with many international and local reporting requirements.

There are many reasons why Cayman is a great place to have a business. We are a small, yet sophisticated jurisdiction with a stable government, a well developed Common Law system based on English law and a proliferation of world class corporate and service companies, all contributing factors in the smooth and efficient running of a business.


Ritch & Conolly, Attorneys At Law, Cayman Islands


LEGAL FORMALITIES

A business in the Cayman Islands can be run as a sole trader operation, a partnership or a limited company. It is also possible for a foreign company to register a branch in the Cayman Islands in order for the foreign company to operate locally. The main distinction is that sole traders and general partners have unlimited liability to third parties doing business with them, whereas the shareholders of a limited company have limited liability to third parties doing business with the company. The differences in, and suitability of, various types of business structure are highly technical and are best discussed with an adviser qualified to discuss what might best fit your situation.

Typically, small owner-operated businesses with few liabilities, might consider operating as a sole trader (often using a ‘doing business as’ title such as Fred Smith d.b.a. Fred’s Fantastic Fences). There are few formalities for formation and few annual fees. However, the sole trader is personally responsible for any debts the business incurs.

Where two or more people want to go into business together but wish to avoid all the formalities and expense of a company, they would use a partnership structure. Professional advisors, such as lawyers and accountants, have traditionally used a partnership structure for their business. A partnership has less legislative governance than a company and can be more flexible in its treatments of the partners’ responsibility for liabilities and share of profits. Partners are also personally liable for any debts the business incurs.

A company will be used where the owners and operators of the business want to have limited liability for the debts of the business. Companies are very commonly used for all sorts of businesses, from one-man operations to multi-million dollar, multinational businesses. There are more formalities and fees associated with forming and operating a company, than with a partnership or sole trader business, but many people feel the limited liability a company affords is well worth the extra effort and cost.

Foreign businesses, who do not wish to establish a Cayman Islands subsidiary, do have the option of registering a branch operation in the Cayman Islands. The process to register a branch with the Cayman Registrar of Companies is straightforward and the branch, once registered, is required to maintain a local registered agent and pay annual fees to the Cayman Islands Government to maintain such registration.

If your aim is to operate a business on-Island, then (depending on the nature of the ‘on-island’ business to be conducted) it needs to be borne in mind that a Trade and Business Licence (“T&B Licence”) or some other form of local licensing will be needed. More detail on the T&B Licence procedure is given later in this section.

For a business wholly or at least 60% beneficially owned and controlled by one or more Caymanians, the acquisition of a T&B Licence can be a formality. Where beneficial ownership and control is less than 60% by Caymanians, a Local Companies Control Law Licence (“LCCL”) may be required.

The grant of an LCCL is a matter of discretion for the Trade & Business Licensing Board which will consider, amongst other things, the benefit such business will bring to the Islands, the extent to which Caymanian participation has been sought (which will ordinarily include a requirement for public advertising) and whether the proposed business will compete with local Caymanian owned businesses.

Businesses wishing to set up a physical presence in the Cayman Islands, whose activities are carried on mainly outside the Islands, are in most cases exempted from the Local Companies Control Law (LCCL). Therefore, although they would require a T&B Licence to set up their local office and secure work permits for any expatriate employees (as discussed further in the Immigration chapter), they would not require an LCCL or 60% ownership by a Caymanian Status holder. It should be noted that banks, trust companies, company management firms and a number of other businesses are exempted from requiring both a T&B Licence and LCCL though they would need to secure any requisite licensing with the Cayman Islands Monetary Authority (CIMA).

A different regulatory regime is available for businesses in certain approved categories seeking to set up within Caymans’ Special Economic Zone. See later in this chapter. There is a strong desire on the part of the Cayman Islands Government to encourage investment into the local economy; therefore businesses that are willing to move to Cayman and set up a physical presence on-Island are encouraged.


Sole Trader

Due to immigration requirements (see the Immigration chapter) and the rules governing the grant of a T&B Licence, in practise, only a Caymanian will be able to operate a business as a sole trader if they are competing in the domestic market. A sole trader is able to start his/her business without any formalities by simply offering services or goods in return for payment. The sole trader can employ people to work in the business, but is personally responsible for all the liabilities of the business (e.g. rent, T&B Licence fees, salaries and benefits of employees) and is also the person who receives all the profits. As indicated above, however, a sole trader competing only in the international economy from a base within the Cayman Islands, will be able to obtain a licence and operate without regards to nationality.

Partnerships

One form of partnership is where all the partners are “general” partners and participate in the management of the business. In this structure, the only restrictions on sharing profits and withdrawing capital are those agreed between the partners. As well as general partnerships, the Partnership Law sets out the rules for “ordinary” limited partnerships. However, limited partners must not participate in the management of the business and a limited partner’s right to share in the profits or withdraw capital is restricted. The exempted limited partnership is another form of partnership which is specially designed to provide more flexibility to suit the needs of the financial industry in Cayman. The Cayman Islands Exempted Limited Partnership Law was enacted on July 2, 2014. It introduces changes intended to simplify, clarify and add flexibility to the establishment and ongoing operation of Cayman exempted limited partnerships. In all cases, you are advised to contact a specialist to determine the partnership arrangement most suitable for your needs.

Companies

The main characteristic of a limited liability company is that the company is treated in law, as a legal person able to enter into contracts and own property as well as incur liabilities. An individual who is a shareholder in a company, has a liability to the company, limited to the amount unpaid on the shares the individual owns and cannot be liable for the liabilities of the company itself. The company may distribute profits to shareholders by paying dividends and a shareholder can only get their investment in the company back by selling or redeeming the shares they have. Company formation and operation is governed by the Companies Law (2012 Revision). Formation of a company is fast and straightforward.

Cayman Islands Branches

An overseas company which i) establishes a place of business; ii) commences carrying on business within the Cayman Islands (even “offshore” business); or iii) proposes to own real estate situated in the Cayman Islands, must register as a “foreign company” (essentially register a branch) under Part IX of the Companies Law. A registered Cayman Islands branch will not have a separate legal personality from the main company headquartered overseas. In many cases, this is desirable for group operations which are required to maintain tax residency in a certain jurisdiction, but wish to have a Cayman Islands presence from which to conduct certain business of the group. In the case of a bank, trust company, insurance company, management company, mutual fund, mutual fund administrator or any entity carrying on securities investment business, a licence to conduct such business will be required from CIMA even though such business is actually conducted outside the Cayman Islands. Care should therefore be taken to ensure that the ‘off Island’ activities of the foreign company do not inadvertently create a requirement for local licensing. A Cayman Islands branch is able to secure a T&B Licence and, if necessary, an LCCL licence to comply with the necessary legal requirements to set up a physical presence in the Cayman Islands.

Funds & Investment Business

Cayman is the largest centre for hedge funds in the world with 11,296 funds registered with the Cayman Islands Monetary Authority (CIMA) as of the end of the second quarter 2014. The annual increases have been steady and consistent since the enactment of the Mutual Funds Law in 1993 and over US$1 trillion in net assets are now represented by investment managers. Common fund vehicles used in the Cayman Islands to operate mutual funds include the exempted company, the segregated portfolio company, the unit trust and the exempted limited partnership. The exempted company may redeem or purchase its own shares and may therefore operate as an open-ended corporate fund. Closed-ended corporate funds can also be established using the exempted company and it is a relatively straightforward procedure to convert from one to the other. The segregated portfolio company can also be established as a “Segregated Portfolio Company” (“SPC”) with protected cells or portfolios. The SPC makes it possible to provide a means for different groups to protect their assets when carrying on business through a single legal entity. The unit trust is usually established under a trust deed with the investors’ interest held as trust units. The exempted and limited partnership provides a second unincorporated vehicle and it can be formed as easily as the exempted company or the unit trust. An attorney can provide more information on structuring a fund in the Cayman Islands and can advise on the necessity for a licence/regulation and assist in compliance with the formalities.

Cayman Islands Special Economic Zone (SEZ) & Cayman Enterprise City (CEC)

The Cayman Islands Government recently enacted the Special Economic Zone (SEZ) Law in an effort to encourage further economic growth and attract additional international investment. Cayman’s first SEZ is Cayman Enterprise City (CEC) which is a knowledge and technology focused special economic zone located in Grand Cayman. CEC enables businesses to easily and cost-effectively establish a genuine physical presence with staff and offices, to generate active business income in the Cayman Islands where there is no corporate, capital gains, sales or income tax. The CEC business licensing model removes much of the time consuming bureaucracy and financial obstacles associated with establishing a physical presence in the Cayman Islands. The zone enables companies to take advantage of Cayman’s jurisdictional benefits, along with a series of appealing concessions granted by the Cayman Islands Government. CEC offers businesses very flexible packages which include fully serviced offices, use of the business centre facilities, the Trade Certificate to operate the business and the Zone Employment Certificates (work/residency visas) for your staff. Set-up can be expedited within 3-4 weeks. 

Concessions and Reasons to Relocate to CEC

100% exempt from corporate, capital gains, sales, income tax and import duties
100% foreign ownership permitted
Five year work/residence visas granted within 5 days
3-4 week fast-track set-up of operations
Intellectual Property owned offshore
No government reporting requirements
Strategic base with easy access to lucrative North and Latin American markets

On NYC/EST time zone

Go to our Special Economic Zone section for more in-depth information or email CEC on info@caymanenterprisecity.com or call +1-(345) 945 3722 or visit www.caymanenterprisecity.com.

TRADE & BUSINESS LICENSING

Subject to limited exceptions, in order for an individual, partnership or company to conduct business in or from the Cayman Islands, an application must be made to the Trade and Business Licensing Board for the grant of a T&B Licence. A company wishing to carry on business in the local market with the public of the Cayman Islands, which does not have at least 60% Caymanian ownership and control, will also require an LCCL from the Trade and Business Licensing Board (unless it is otherwise exempted from such requirement).

The T&B Licence fee is payable every year and the application for renewal must be made at least 28 days before the anniversary of the grant of the T&B licence. It is an offence to operate a business without a valid T&B Licence or an alternative licence (unless exempted).


Incorporation/Registration

If you wish to establish a Cayman Islands company, an application must be made to the Registrar of Companies for Company Incorporation and a Cayman Islands registered office must be designated. The documents which are required to be filed are not pro-forma and most people seek help with these from attorneys or corporate services and management firms. Applications should be made to the Registrar of Companies (Tel: (345) 946 7922), Ground Floor, Citrus Grove Building, Goring Avenue, George Town.

Application Process

Your local legal counsel or incorporation consultants can:
Contact the Registrar of Companies and ask if the company name you want is available;
Prepare the following documents:
a) Memorandum of Association;
b) Articles of Association;
c) A cover letter providing details of the proposed business;
Provide a minimum of two sets of copies of both signed forms (you may need a certified copy for a bank account); and Submit paperwork with the filing fee payable to the Cayman Islands Government.
The fees for incorporation vary depending on the share capital and whether the company’s status is non-resident, resident, exempt, etc. For a typical local company with a share capital of less than CI$42,000, the fee is CI$300. The company is deemed incorporated on the day the incorporation papers and fees are submitted to the Registrar. The processing time for return of the proof of incorporation (namely the certificate of incorporation, Registrar stamped and certified Memorandum and Articles of Association) is approximately three to four business days, unless submitted on an express basis (for an additional fee of CI$400) in which case, the proof of incorporation will be returned the following business day. As a matter of practice, the Companies Registry will require some categories of companies, such as exempt companies, to have a local licensed service provider maintain the company’s registered office.

Company Registry Fees

The registration and annual fees for any company are dependent on the size of the authorised share capital. Also worth noting is that licence fees are due annually in January of each year, but the Companies Registry is under no obligation to notify the company that the fees are due. Every company is responsible for paying these annual fees and if you do not pay them the company will usually be struck off the register of Cayman Islands incorporated companies. If the company had any assets at the time it was struck off, those assets would then become the property of the Government of the Cayman Islands. It is possible, if you were ignorant of the fact that annual fees are due, that your company could be struck off without your knowledge. This is one of the benefits of using a local licensed corporate services provider, as they will process the annual paperwork and remind you of the amount and timing of annual fees. Their fees are a lot less than the fees you would pay to an attorney to make the necessary application to the Cayman Court for the company to be re-instated to the registry!


Corporate Services

The following are a few of the local licensed corporate service providers who can assist you with the incorporation process. The usual fee for their services is between US$700–US$1,250, excluding government filing fees. The other services they offer include: the provision of a registered office; maintenance of statutory registers; handling of annual returns; drafting resolutions and minutes; providing certified documents; getting documents apostilled and notarized; updating the register of officers, shareholders and directors; maintaining the minute book; assisting with corporate restructuring; revisions to the memo and arts, and some also provide director services.

Britannia Corporate Management Limited
196 Raleigh Quay, Governor’s Harbour
P O Box 1968, Grand Cayman KY1-1104
Tel: (345) 949 2700 Fax: (345) 949 0716
Email:info@britanniacorp.com
www.britanniacorp.com
Britannia is a boutique service provider offering full accounting and administrative services, invoicing, statutory filings and submissions, for a variety of institutional and high net worth clients in various industries. They offer company formations, registered office and professional independent director services, providing a home for your business away from home. 

Bodden Corporate Services
Caribbean Plaza, 2nd Floor, North Building
878 West Bay Road
PO Box 10335, Grand Cayman KY1-1003
Tel: (345) 945 0400 Fax: (345) 945 0345
Email: info@bcsl.ky or www.bcsl.ky
Provides incorporation services and maintains registered office of companies and all corporate records. The company also offers comprehensive immigration advice, assists with work permit renewals and processes Cayman Islands and British passport applications, as well as prepares business staffing plans. Bodden Corporate Services also provides compliance services.  

Cayman Management
Ground Floor, Harbour Centre
42 North Church Street
PO Box 1569, Grand Cayman KY1-1110
Tel: (345) 949 4018 Fax: (345) 949 7891
Email: enquires@caymanmanagement.ky
www.caymanmanagement.com
Cayman Management provides a comprehensive range of corporate and administrative services including company incorporation and management, fund establishment and independent director services, captive insurance management and yacht registration services - all with a personal time responsive touch.

Conyers Dill & Pearman
Boundary Hall, 2nd Floor, Cricket Square
PO Box 2681, Grand Cayman KY1 -1111
Tel: (345) 945 3901 Fax: (345) 945 3902
Email: cayman@conyersdill.com
www.conyersdill.com
Conyers Dill & Pearman provides responsive, sophisticated, solution-driven legal advice to clients seeking specialised expertise on corporate and commercial, litigation, restructuring and insolvency, trust and private client matters. With a global network spanning eight offices worldwide, Conyers advises on the laws of Bermuda, the British Virgin Islands, the Cayman Islands and Mauritius.


Dinner Martin Attorneys
One Capital Place, Shedden Road, George Town
PO Box 10190, Grand Cayman KY1-1002
Tel: (345) 745 5000
Email: info@dinnermartin.com
www.dinnermartin.com
Providing personalised corporate services for local, offshore and special economic zone companies at highly competitive rates. They also advise on the establishment and licensing of a wide variety of businesses and investment funds. Also immigration, real estate, notarial and bank account opening services.

Forbes Hare Trust Company
Cassia Court, Camana Bay
PO Box 716, Grand Cayman KY1 -9006
Tel: (345) 943 7700
Email: fhtc@forbeshare.com
www.forbeshare.com
Corporate, trust and fund services including Cayman company formation, company
administration, trustee services, fund administration services and fund director services. Delivers value to clients through dedicated lawyer-led teams. Clients include private equity groups, onshore law firms, banks, corporations, investment funds and private clients. 

HSM Chambers Attorneys-at-Law
Suite 3, Buckingham Square
720 West Bay Road
PO Box 31726, Grand Cayman KY1-1207
Tel: (345) 949 4766 Direct Line: (345) 815 7425
Email: info@hsmoffice.com
Providing corporate services and company management services in a responsive, timely and cost effective manner. 

Maples and Calder
Ugland House, South Church Street
PO Box 309, Grand Cayman KY1-1104
Tel: (345) 949 8066 Fax: (345) 949 8080
Email: info@maplesandcalder.com
www.maplesandcalder.com
A leading international law firm in the Cayman Islands with over 100 partners and associates worldwide to provide corporate services to clients.

Samson & McGrath - Legal Services in Cayman

Samson & McGrath Corporate Services

5th Floor, Genesis Building, Dr. Roy’s Drive
PO Box 446, Grand Cayman KY1-1106
Tel: (345) 623 2740 or (345) 623 2741
Email: info@smcscayman.com
www.caymancorporateservices.com
Provides dedicated offshore corporate services to both local and international clients, ranging from private individuals to international, institutional clients at competitive rates. Samson provides services for company and partnership formation, registered office and maintenance of statutory records, shipping and aircraft registration as well as other corporate services. 

Walkers
Walkers House, 190 Elgin Ave, George Town
Grand Cayman KY1-9001
Tel: (345) 949 0100 Fax: (345) 949 7886
Email: info@walkersglobal.com
www.walkersglobal.com
Walkers is a leading corporate law firm with offices in the BVI, Cayman Islands, Dubai, Dublin, Hong Kong, Jersey, London and Singapore.

Solaris Corporate Services Ltd.
FirstCaribbean House, George Town
PO Box 1990, Grand Cayman KY1-1104
Tel: (345) 949 0488 Fax: (345) 949 0364
Email: info@solariscorporate.com
www.solariscorporate.com


OTHER FORMALITIES

Work Permits

All businesses will require work permits and/or other relevant permissions for any non-Caymanian staff engaged in gainful employment in the Cayman Islands. Details of such requirements can be found in the Immigration chapter.

Employee Entitlements

The Labour Law in Cayman sets out the minimum entitlements that must be provided by an employer to its employees. There is no requirement that the employer provide a contract of employment, but the terms and conditions of the job must be set out in a statement and provided to the employee shortly, after commencing employment. Essentially, the minimum terms and conditions set out in the Labour Law include two weeks annual vacation, increasing up to four weeks after 10 years service. This is in addition to the (approximately) 11 public holidays scattered throughout the year. Employees are entitled to 10 paid sick days each year and 12 weeks maternity leave (20 days of which are at full pay and a further 20 days at half pay). Nine weeks adoption leave is available for female employees (of which 15 days are at full pay).

Upon termination of employment by the employer, there is an entitlement to severance pay, equal to one week’s pay for each completed year of service. There is a statutory unfair dismissal scheme which provides compensation equal to one week’s pay for each completed year of service in addition to severance pay in the event of unfair dismissal.

Health Insurance & Other Benefits

Employers are required to provide employees, their spouses and dependents with health insurance. Employees are also entitled to a pension plan. Similar to other parts of the world, employers may offer enhanced benefits to prospective employees and it is not uncommon to see employers offering enhanced vacation leave, relocation expenses, additional pension contributions, bonus options, upgrades to premium health insurance and private school fees, amongst others. It can be very expensive to move household items to Cayman and different employers will have more or less generous relocation packages, so review the offer of employment carefully. Many employers offer attractive health insurance packages for their employees, some even including wellness and preventative options. For a list of Health Insurance Providers see the Health & Wellness chapter.

Copyright 2014 The Resident Magazine 2014. All rights reserved.
Acorn Publishing Co, PO Box 31403, Grand Cayman KY1-1206, Cayman Islands,
Tel: (345) 946 3200 Fax: (345) 946 2830 Email: info@acorn.ky
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