THE BENEFITS
Cayman offers a well-regulated and internationally respected, tax-neutral, offshore business environment. The type of Cayman company 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 to making the running of a business easy. The dominant factor though is that there is no taxation on income or gains. We are, as one well known leader in his field is fond of saying, "a very, very safe oasis in a troubled world".
LEGAL FORMALITIES
A business in the Cayman Islands can be run as a sole trader operation, as a partnership or as a limited company. 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, the different 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 annually repeating 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 brings is well worth the extra effort and cost.
If your aim is to operate a business on Island then it needs to be bourn in mind that a Trade and Business Licence ('T&B Licence') will be needed (more detail on this procedure is given later in this section). For a business wholly or 60% owned by a Caymanian, or a person with Caymanian Status ('Local Business'), the acquisition of a T&B Licence is a formality. For a business that is not a 'Local Business', acquiring the T&B Licence is a matter of discretion for the Trade & Business Licensing Board who will consider, amongst other things, if the business will compete with local Caymanian owned businesses and whether it will bring any benefit to the Islands. A T&B Licence is rarely granted to a non 'Local Business'.
If you want to start a business but don't know a Caymanian or a Caymanian Status holder to go into business with, then it is possible to advertise for a Caymanian business partner and become a minority shareholder in the 'Local Business'. The relationship between shareholders can be governed by a shareholders agreement which can determine how shareholders will deal with profits etc.
Sole Trader
Due to immigration requirements (see the Immigration chapter), and the rules governing the grant of a T&B Licence, in practice only a Caymanian or a person with Caymanian Status will be able to operate a business as a sole trader. 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 the sole trader 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 gets all the profits.
Partnerships
One form of partnership is where all the partners are 'general' partners and participate in the management of the business and 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, but 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 payable for 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 (2007 Revision). Formation of a company is fast and straight forward.
Types of company:
The categories of companies that may be formed in the Cayman Islands include:
> Ordinary Companies are generally formed by those wishing to conduct business within the Cayman Islands. However you must ensure at least a 60% Caymanian participation.
> Exempted Companies are the most common and are utilised by those wishing to conduct business outside the Cayman Islands. There are no restrictions on the nationality of the directors or shareholders of an exempted company and an exempted company is not required to hold an annual shareholders meeting.
> Limited Duration Companies and Limited Life Companies were created as an equivalent of the US limited liability company but are not used very often these days as a result of changes in US tax rules which generally enable an exempted company to be used instead.
> Segregated Portfolio Companies were first developed for the Cayman Islands insurance industry, but are complicated structures that wouldn’t normally be suitable for a business supplying goods and/or services in the Cayman Islands.
Registration Process
If you wish to establish a Cayman Islands company, an application must be made to the Registrar of Companies for company incorporation. The documents which are required to be filed are not pro-forma and most people would obtain help with these from attorneys or corporate services and management firms. Applications should be delivered in person to the Registrar of Companies, Ground Floor, Citrus Grove Building, Goring Avenue, George Town. (Tel: (345) 946 7922).
Application Process
Your local legal counsel or incorporation consultants can:
1) Contact the Registrar of Companies and enquire if the company name you want is available;
2) Prepare
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 these signed forms (you may need a certified copy for a bank account);
4) Submit paperwork with a filing fee payable to the Cayman Islands Government for CI$200 for ordinary resident companies.
The fees for incorporation vary depending on the share capital and whether the company 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$150. Processing time is approximately three to four working days unless submitted on an express basis for an additional fee of CI$400 in which case it is 24 hours.
As a matter of practice the Companies Registry will require some categories of company, 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 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 Island's 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 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, either in the form of banks or other investors, who want a written understanding of your business objectives, cash flow, time-lines, etc. Often it will be impossible to secure funding for your enterprise without an appropriate business plan and it is also a very useful exercise to perform, even if you are a sole trader, to focus your mind and efforts on the most important aspects of your business. Two companies that might be able to help you with this exercise are:
Cayman Islands Investment Bureau
1st Floor, Cayman Corporate Centre
Hospital Road, George Town
Tel: (345) 945 0943 Fax: (345) 945 0941
CIIB offers business counseling geared towards assisting clients with writing business plans.
ConsulTech (Development Advisors) Ltd
2nd Floor, Barnet Building
Huldah Avenue, George Town
Tel: (345) 945 2223 Fax: (345) 945 2244
Email: consult@candw.ky
Target Businesses: Manufacturing, tourism, industry, agriculture, heavy equipment and construction.
Financing
As well as approaching any of the retail banks listed in the Settling In chapter you might also wish to consider contacting the Cayman Islands Development Bank. They offer financing to Caymanian owned small business projects, and along with the Cayman Islands Investment Bureau, will work out a business plan and repayment schedule.
Cayman Islands Development Bank
Dr. Roy's Drive, Downtown George Town
Tel: (345) 949 7511
Email: ralph.lewis@gov.ky
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 CI$800-$1200, excluding the Government filing fees.
Appleby & Appleby Trust (Cayman) Limited
Clifton House, 75 Fort Street
PO Box 190, Grand Cayman KY1-1104
Tel: (345) 949 4900 Fax: (345) 949 4901
Email: info@applebyglobal.com
Bodden Corporate Services Ltd.
Ground Fl, Grand Pavilion Commercial Centre
West Bay Road
PO Box 10335, Grand Cayman KY1-1003
Tel: (345) 945 0400 Fax: (345) 945 0345
Email: info@bcsl.ky
Britannia Corporate Management Ltd.
Plantation House, 196 Raleigh Quay Road
PO Box 1968, Grand Cayman KY1-1104
Tel: (345) 949 2700 Fax: (345) 949 0716
Email: gary.oakley@britanniacorp.com
Foreshore Corporate Services Ltd.
4th Floor, Queensgate House
South Church St, George Town
PO Box 1994, Grand Cayman KY1-1104
Tel: (345) 949 7366 Fax: (345) 949 8652
Email: fcs@rc.com.ky
H & J Trulaw Corporate Services Ltd.
PO Box 866, Grand Cayman KY1- 1103
Tel: (345) 949 7555 Fax: (345) 949 8494
Email: cayman@higgsjohnson.com
Ogier Fiduciary Services (Cayman) Limited
PO Box 1234, Grand Cayman KY1-1108
3rd Fl, 89 Nexus Way, Camana Bay
Tel: (345) 945 6264 Fax: (345) 945 6265
Samson & McGrath
5th Fl, Genesis Bldg, Dr. Roy's Dr.
PO Box 446, Grand Cayman KY1-1106
Tel: (345) 949 2740 Fax: (345) 949 0073
Email: info@samsonandmcgrath.com
SH Corporate Services Ltd.
4th Floor Harbour Centre, George Town
PO Box 61, Grand Cayman KY1-1102
Tel: (345) 949 4244 Fax: (345) 949 8635
Email: igoodall@solomonharris.com
Walkers SPV Limited
Walker House, 190 Elgin Avenue
George Town, Grand Cayman KY1-9002
Tel: (345) 945 3727 Fax: (345) 945 4757
Paperwork for the Trade & Business Licensing Board
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 Trade and Business Licence. A company wishing to carry on business in the local market which does not have 60% Caymanian ownership and control, will also require a Local Companies (Control) Law Licence (LCCL) from the Trade and Business Board.
In all cases steps 1 and 2 below are necessary. For Sole Traders and Partnerships details of the business owners and their Caymanian nationality, status, or work permit will need to be given. In the case of companies you should complete all the following steps.
1) Application form duly completed with a short cover letter giving details of the proposed business
2) The appropriate fees (inquire at the offices of the Board as to the current applicable fee). Currently the filing fee is CI$75. A programme of Trade and Business Licence fees can be downloaded from www.immigration.gov.ky.
3) Certificate of Incorporation
4) Memorandum and Articles of Association
5) Return of Shareholdings under Section 7 of the Local Companies (Control) Law (2007 Revision)
6) Register of Directors
7) Proof that at least 60% of the shareholders and at least 60% of the directors of the company are Caymanian
8) Every non-Caymanian director and shareholder must provide the following:
a) A personal reference
b) A financial reference from a bank where an account has been maintained for not less than 3 years
c) A police clearance certificate
d) Copy of the picture page of their passport
9) All documents supplied to the Board that are copies must be certified.
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.
OTHER FORMALITIES
Work Permits
All businesses will require work permits and/or other relevant permissions for any staff engaging in gainful occupation in the Cayman Islands who are not Caymanian or who are not a Caymanian Status holder. Details of such requirements can be found in the Immigration chapter.
Funds and Investment Business
Cayman is the largest centre for Hedge Funds in the world and some Funds require regulatory approval. Investment businesses may also need licensing by the Cayman Islands Monetary Authority which deals with such regulation and licences. An attorney will be able to both advise on the necessity for a licence or regulation and assist in compliance with the necessary formalities.
SETTING UP AN OFFICE
Commercial Office Space
Historically, there has been a limited market supply of office and retail space for lease that meets the requirements of most corporations. What is available varies widely in quality, location, age and therefore price, and of course availability depends on the timing of your move. Pricing is generally fairly competitive with worldwide office space rates. Class A office space in downtown George Town and quality out-of-town corporate developments lease for a minimum of US$50 per sq ft per annum, whilst just securing a parking space will cost in the region of US$200 per sq ft for land in downtown George Town if you can find it. Class B space, less centrally located or in lower quality buildings between 5 to 10 years old, rents for US$30-35 per sq ft per annum as an average. All other basic space costs between US$30 to US$40 per sq ft per annum and again depends on the four main factors - size, age, use and location. Class A retail space is down in value by 10-20% as of July 2009 and class B retail space is down in value by 20-25%.
Maintenance charges or Common Area Maintenance fees (CAM) typically vary from US$10 to US$14 per sq ft per annum and include such things as the building insurance, electricity costs, outside cleaning, landscaping and security. The biggest factor in CAM is building insurance, which has doubled in the last few years.
Office Space Availability
You are advised to talk with a realtor who specialises in corporate office rentals to find out what is available that will suit your needs. One large project that recently came on line is Camana Bay with 400,000sq ft, which is made up of a combination of retail, offices and rental apartments, all of a very high standard - a good location for both George Town and Seven Mile Beach.
Though many of the real estate companies listed in the Finding a Home chapter can help you with corporate office rentals, Jeremy Hurst from the International Relocation Group (Tel: (345) 623 1111 or irg@candw.ky) specialises in relocation services to corporations seeking to set up a physical presence in the Cayman Islands. Services include office space market analysis, identification of premises, negotiation of leases, liaison with architects, contractors, utility and equipment suppliers and Government Departments for a turnkey fit-out solution as well as staff and family relocation and familiarisation services, human resources and licensing issues.
The Process of Setting Up An Office
Depending upon the finished condition of the premises and how closely this meets a corporation's requirements, offices can be set up in as little as eight to twelve weeks. However, by the time your office design has been finalised, interior finishes have been chosen, furniture ordered, IT systems specified and work permits and licences granted, a set up period of 4-6 months is more usual. Tenants may also be required to submit fit-out plans to the Planning Department for building code approval in advance.
Costs to Prepare Office Space
These depend on a number of factors including the existing condition of the space and the quality of the final product. Well fitted-out existing office space, with partitioned walls and internal offices, a suspended ceiling, fluorescent lighting, a/c and power grid already in place, but in need of reconfiguration, can be prepared for as little as US$50 per square foot. Finding such space is limited. Finding a new space with only perimeter walls, one to two hour fire rating separation walls and an a/c unit with an electrical panel sufficient for the tenants’ requirements is the norm. For space like this you will likely spend between US$150 and US$200 per sq ft to prepare it to a reasonably high quality fit-out. Some landlords will offer a standard fit-out package or a fit-out allowance in the region of US$10 to US$25 per sq ft depending on the location and the landlord.
Office Space Planning & Design
In the corporate sector the business of interior office space planning and interior design is well established. We have a few architectural firms with qualified interior designers on staff who can take an office, new or existing, and create a space to suit the requirements of your business. They review the space and recommend design, lighting and furniture options to enhance your company’s image, vision and values. In essence a well planned interior will maximize the use of valuable space and help a business work more efficiently. See the Building a Home chapter for a list of architects who specialize in this service.
FITTING OUT YOUR OFFICE
Telephone & Internet
Among other things, you will need to source and install a telephone system, internet access and telephone service from a local carrier. The Cayman Islands is well served with a number of local service providers for both internet and voice services. Choosing among them can prove to be challenging as there are different delivery methods (wired, wireless), rates and interconnection choices. Choosing the right combination can make quite a difference in the monthly service bills. You may choose to use your own telephone system and direct your outgoing calls through a carrier with the lowest costs and the best line quality.
Telecommunications standards differ somewhat to those in North America where the T1 line type is the standard for delivering high density call traffic. Here in Cayman the E1 (European standard) line type is the connection of choice. This has the advantage of supporting more simultaneous calls over the same dedicated line. Services such as ADSL, ATM and Metro Ethernet are available from some telecommunication providers. A recent offering from a local telephone carrier is a service called MPLS which allows for cost effective high bandwidth connections to overseas offices. In addition, voice and data satellite services can also be provided so that you can communicate should your elected carriers be unable to provide service during or after a hurricane.
Carriers also offer diversity and redundancy for voice/data links to the Islands. Grand Cayman is serviced by two underwater fibre links; MAYA1 which connects most of the western Caribbean nations before returning to the US and CJFS (Cayman Jamaica Fibre System) that takes an alternative route via the eastern Caribbean back to the US. On route to Jamaica, the CJFS fibre also transitions Cayman Brac.
Local Data Network & Personal Computer Equipment
Electrical and wiring standards generally follow those of North America so installing and configuring standard telecommunications and computer equipment should present no problems. Power is the standard 120v AC, 60 cycle with standard plug style (dual pin with ground).
Internationally known names such as HP, CISCO, Checkpoint and Mitel are represented on the Island and you will find that local vendors can meet all of your VoIP (Voice over IP), networking, storage (NAS and SAN), data security and disaster recovery needs. Manufacturer’s warranties on failed hardware are honoured for equipment purchased on Island from authorised dealers. See the Shopping & Services chapter for local providers.
Office Staff
Hiring qualified staff from the local market can be difficult as there is virtually no unemployment in Cayman and well qualified Caymanians can pick and choose their jobs. Using one of Cayman's wealth of professional recruitment companies to weed through CVs and conduct initial interviews can save you considerable time and effort. Cayman's 'roll-over' policy will also have an impact when determining staffing plans. See the Immigration chapter for more information.
