LEGAL FORMALITIES
A business in the Cayman Islands can be run as a sole trader operation, as a partnership, or as 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 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.

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 and you are advised to consult an attorney who will be able to both advise and assist with compliance with the necessary local business licensing.)
 
For a business wholly or 60% owned and controlled by a person with Caymanian Status (which term includes Caymanians), the acquisition of a T&B Licence is a formality.
 
For a business that is not a “Local Business” (which term means a business which is “carrying on business in the Islands” as defined in the Local Companies Control Law) in addition to acquiring a T&B Licence it will also need to secure a Local Companies Control Law Licence (the “LCCL Licence”) unless it is otherwise exempted from this requirement.
 
The grant of an LCCL Licence 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 outside the parameters of the Local Companies Control Law due to the fact that they are not considered to be “carrying on business in the Islands”. 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 Licence 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 T&B Licences and LCCL Licences though they would need to secure licensing/regulation with the Cayman Islands Monetary Authority as may be appropriate given their proposed on-Island activities.)

There is a strong desire on the part of the CI Government to encourage investment into the local economy, which could therefore be considered optimal for the set up of a physical presence on-Island.

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 Status holder 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 receives all the profits.

Partnerships
One form of partnership is where all the partners are “general” partners and participate in the management of the business. 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 Cayman Islands Monetary Authority (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 Licence 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.

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 would require 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 on Company Incorporation
Your local legal counsel or incorporation consultants can:

• Prepare:
           a)     Memorandum of Association;
           b)     Articles of Association; and
           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);

• Submit paperwork with a filing fee payable to the Cayman Islands Government.

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$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, and Registrar stamped and certified Memorandum and Articles of Association) is approximately three to four business days, unless these are 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 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 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 will 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, either in the form of banks or other investors, who want a written understanding of your business objectives, cash flow, time-lines, etc. Two companies that can help you with this exercise are the Cayman Islands Department of Commerce and Investment (Tel: (345) 945 0943) and ConsulTech Development Advisors Ltd. (Tel. (345) 945 2223).

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 Caymanians for mortgages, agriculture, student loans and small business projects. Along with the Cayman Islands Department of Commerce and Investment they 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: tracy.ebanks@cidb.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 US$800–$1200, excluding the Government filing fees.

Appleby & Appleby Trust (Cayman) Ltd.
Clifton House, 75 Fort Street
PO Box 190, Grand Cayman KY1-1104
Tel: (345) 949 4900 Fax: (345) 949 4901
Email: info@applebyglobal.com 

Foreshore Corporate Services Ltd.
4th Floor, Queensgate House
113 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 

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

Samson & McGrath
5th Floor, 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@ims.ky 

Accountantcy & Law Firms
(See the Working in Cayman chapter for a list of local accounting and law firms)

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 Trade and Business Licence. A company wishing to carry on business in the local market with the public of the Cayman Islands, which does not have 60% Caymanian ownership and control, will also require an LCCL Licence from the Trade and Business 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 staff engaging in gainful occupation in the Cayman Islands who are not Caymanian Status holders. 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 on the employer to 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 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.

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 licensing. An attorney will be able to both advise on the necessity for a licence/regulation and to 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. However, certain factors have changed the commercial office rental scene significantly. The CI Government’s new office block came online in early 2011 and freed up an enormous amount of office space in and around George Town. In addition, the continuing expansion of mixed office and retail space at high-end commercial plazas such as Camana Bay, Cricket Square and Governors Square (to name a few) have improved the quality of space and provided many additional benefits to tenants.
 
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$45 per sq ft per annum, whilst just securing a parking space will cost in the region of US$120 per space per month 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, rent for US$30 to US$35 per sq ft per annum as an average. All other basic space costs between US$20 to US$35 per sq ft per annum and again depends on the four main factors – size, age, use and location. Class A retail space in George Town has dropped 20% in the last 12 months. Retail space on West Bay Road has held its value in the last 12 months.
 
Maintenance charges or Common Area Maintenance fees (CAM) typically vary from US$10 to US$16 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.)

Office Space Availability
You are advised to speak with a realtor who specialises in corporate office rentals to find out what is available that will suit your needs. One large project that continues to expand is Camana Bay (currently at 400,000sq ft), which is made up of a combination of retail, offices and rental apartments, all of a very high standard. This is 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 residential rentals and sales, there are only a handful of people that specifically specialise in commercial properties. Below is a list of three of them:

Heritage Holdings Ltd.
Tel: (345) 945 4204
Email: heritage.holdings@candw.ky
Heritage Holdings is a private, locally owned, real estate development and investment company, which develops, leases and manages commercial projects throughout the Cayman Islands. Their commercial space includes the Countryside Shopping Village in Savannah and Centennial Towers in West Bay.

International Relocation Group - Jeremy Hurst
Tel: (345) 623 1111
www.IRG.ky
IRG 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, Government departments for a turn-key fit-out solution, staff and family relocation, familiarisation services, human resources and licensing issues.



RE/MAX Commercial Cayman Islands - Michael Binckes
Commercial Leasing and Sales Division
Tel: (345) 945 2011 Cell: (345) 938 3269
Email: michael.binckes@remax.ky
www.caymancommercial.com
RE/MAX Commercial specialises in commercial property to buy, lease or sell. They can offer you good advice from a well informed, knowledgeable and dedicated team.

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 8 to 12 weeks. However, by the time your office design has been finalised, interior finishes have been chosen, furniture ordered, IT systems specified, work permits and licences granted, a set up period of 4 to 6 months is more realistic. 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 existing office space in need of reconfiguration, with partitioned walls and internal offices, a suspended ceiling, fluorescent lighting, a/c and power grid already in place, can be prepared for as little as US$50 per sq ft. 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$120 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$15 to US$30 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.

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 service, namely Digicel, LIME, Logic and TeleCayman.

Choosing a carrier 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 your 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. Most of the local carriers now offer low cost VOIP calling which allows for very low rates for international dialing.

Telecommunication 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. It has the advantage of supporting more simultaneous calls over the same dedicated line. For internet, traditional data services such as ADSL and data circuits are available. Increasingly popular is a service called MPLS, which allows for cost effective high bandwidth connections to overseas offices, and is a flexible alternative to static international data circuits. Carriers can 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. En-route to Jamaica, the CJFS fibre also transitions the Island of Cayman Brac. Albeit with limited capacity, voice and data services can also be provided via satellite so that your office can communicate should your chosen carrier be unable to provide service during or after a hurricane.

Cell phone service providers provide data for Blackberries and other smart phones. Typically sending and receiving messages and emails are relatively inexpensive but you should check the cross-carrier rates and  sign-up for a data plan that best suits your needs. International cell phone roaming, like anywhere in the world, can be very expensive unless your provider has regional rates across the Caribbean.
 
Transmission speeds are on par with US providers with fast data mobile services, such as 4G (LIME and Digicel) technologies starting to emerge. As we go to press, local number portability is becoming available; this will allow businesses and individuals to retain their existing cell and land line phone number should they change provider.
 
With the general reduction in internet costs, many businesses are now providing free Wi-Fi.



LOCAL DATA NETWORK & PERSONAL COMPUTER EQUIPMENT
Electrical and wiring standards generally follow those of North America so installing, configuring and standard telecommunications and computer equipment should present no problems. 120AV is the power standard, 60 cycle with a standard plug style (dual pin with ground).
 
Internationally known names such as HP, CISCO, Checkpoint and Mitel are all 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. Manufacturers warranties on failed hardware are honoured for equipment purchased on-Island from authorised dealers (see IT, computer and other office equipment suppliers below). Comprehensive Disaster Recovery (DR) services are now available within the Cayman Islands, with the option to vault data at short notice within protected hurricane resistant data centres. Some solution providers also offer managed professional services which specialise in ‘cloud’ services to ensure that business servers remain operational even after a catastrophic event. Such services can be the basis for, or augment, an existing business DR plan.

Computer & Office Supplies
Alphasoft
GKF Industrial Park, Godfrey Nixon Way
Tel: (345) 949 8251
Alphasoft is the authorised dealer and service provider for Hewlett-Packard hardware and is a McAfee, Microsoft, VMware, and Symantec partner. They sell Hewlett-Packard toner supplies and offer recycling of all HP toner cartridges. Sells Apple/Mac products.

Cayman Business Machines
49 Hospital Road, George Town
Tel: (345) 949 8642
This company is the authorised dealer for Xerox, Lenovo, Smartboard and NCR. They supply a range of business solutions and services, from Xerox printing on demand to document scanning projects. They also carry Lenovo computers, laptops, servers, monitors and accessories. In addition, CBM sells Smartboard interactive whiteboards and Infocus projectors for schools, offices and conference rooms. A Docu-centre printing service is also available for all printing needs.

Cayman MAC Store
Opening in February 2012 - Camana Bay, on the Paseo
Tel: (345) 943 4763
Apple-authorised reseller and service provider, with a full range of Macs, iPads and iPods.

Kirk Office Equipment
67 North Sound Road, George Town
Tel: (345) 623 5475
They have a large retail store on North Sound Road and provide a wide range of products and service solutions including photocopiers, facsimiles, computers and accessories, furniture, carpeting, filing systems and office supplies. They carry Apple, HP and Ricoh.

Office Supply Ltd.
Marquee Plaza, 36 Lawrence Blvd
Tel: (345) 949 1200
Email: stephen.heal@officesupply.ky
Office Supply Ltd. has an 8,000sq ft space selling office supplies and furniture. They have an extensive arts and crafts section, a dedicated back to school section and a full impress printing section with courier service options by DHL, FedEx and UPS. They are the exclusive dealers for Sharp business machines.

IT & Web Design Services   
Ignition Cayman Ltd.
Grand Pavillion, 802 West Bay Road
Tel: (345) 815 0369
They offer IT management support, disaster recovery solutions, data replication services, system monitoring, information protection and virtual office cloud systems.

Netclues Inc
Tel: (345) 925 2222
They offer web design and development, search engine optimisation, 3D rendering, pay per click, customer software development, graphic design and printing.