Cayman New Resident
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The definitive guide to living and working in the Cayman Islands
Jul 31, 2014 

Legal Requirements for Establishing a Business

Last updated: 21st November 2013

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.


ESTABLISHING A BUSINESS IN CAYMAN
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. As one well-known business leader in his field was fond of saying, "We are a very, very safe oasis in a troubled world".


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, multi-national 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. 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 managers 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.
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. 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 (2010 Revision). Formation of a company is fast and straightforward.


Cayman Island 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 the 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 beyond that envisaged by its principals. A Cayman Islands branch is able to secure a T&B Licence and, if necessary, an LCCL to provide it with the necessary locus standi to set up a physical presence in the Cayman Islands. Again, you are advised to consult a local attorney who will be able to legally assist you.


Funds & Investment Business
Cayman is the largest centre for hedge funds in the world and some funds require regulatory approval. Investment businesses may also need to be licensed by the CIMA. An attorney can both advise on the necessity for a licence/regulation and assist in compliance with the necessary formalities.


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 delivered in person 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:
1) Contact the Registrar of Companies and ask if the company name you want is available;
2) Prepare the following documents:
         a)     Memorandum of Association;
         b)     Articles of Association; and
         c)     A cover letter providing details of the proposed business;
3) Provide a minimum of two sets of copies of both signed forms (you may need a certified copy for a bank account); and
4) 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 corporate 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 and dealings with such assets deemed to be illegal. 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 register!

BUSINESS PLANS
You may wish to consider professional help when it comes to creating a business plan for your business. Business plans are typically required by lenders, banks or other investors who want a written understanding of your business objectives, cash flow, time-lines, etc. The Department of Commerce and Investment (Tel: (345) 945 0943) and ConsulTech Development Advisors Ltd. (Tel: (345) 945 2223) can help you with this exercise.

 



CORPORATE SERVICES
The following are a few of the local licensed corporate service providers who can assist you with the incorporation process. 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.


Bodden Corporate Services

Caribbean Plaza, West Bay Road
PO Box 10335, Grand Cayman KY1-1003
Tel: (345) 945 0400 Fax: (345) 945 0345
Email: info@bcsl.ky
www.bcsl.ky


Dinner Martin Attorneys
3rd Floor, One Capital Place (Deloitte Building)
Shedden Road, George Town
PO Box 10190, Grand Cayman KY1-1002
Tel: (345) 745 5000
Email:
info@dinnermartin.com
www.dinnermartin.com


Forbes Hare Trust Company
Cassia Court, Camana Bay
PO Box 716, Grand Cayman KY1 -9006
Tel: (345) 943 7700 Fax: (345) 943 7702
Email:
info@forbeshare.com
www.forbeshare.com
Corporate services offered from their offices in the Cayman Islands and British Virgin Islands include company formation and company administration services. They deliver value to clients through dedicated lawyer-led teams in both jurisdictions. Their clients include private equity groups, onshore law firms, corporations of all sizes and private clients.


Foreshore Corporate Services Ltd.
4th Floor, Queensgate House
113 South Church Street
PO Box 1994, Grand Cayman KY1-1104
Tel: (345) 949 7366 Fax: (345) 949 8652

Email:

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

www.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

Web: www.maplesandcalder.com


Maricorp Services Ltd
Suite 31, The Strand, 46 Canal Point Drive
PO Box 2075, Grand Cayman KY1-1105
Tel: (345) 949 9710 Fax: (345) 945 2188
Email: info@nellaw.com 
www.nellaw.com

 

Samson & McGrath - Legal Services in Cayman


Samson & McGrath
5th Floor, Genesis Building, Dr. Roy's Drive
PO Box 446, Grand Cayman  KY1-1106
Tel: (345) 949 2740 Fax: (345) 949 0073
Email: info@samsonandmcgrath.com

Web: www.samsonandmcgrath.com

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

Accountancy & Law Firms
(See here for Accounting and Audit firms in the Cayman Islands)

TRADE & BUSINESS LICENSING BOARD PAPERWORK
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).


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.


Employers are required to provide employees with health insurance and a pension plan which may or may not include a required contribution by the employee.  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.

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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