Incorporating in the Cayman Islands: exempted companies
The Cayman Islands is a leading jurisdiction for the establishment of private and mutual funds and is popular with trust and corporate services. Cayman’s tax-neutral status presents unique opportunities for businesses, while its recent removal from the EU's grey list has increased its international appeal. Cayman has zero-rated corporation tax and no wealth, capital gains or estate tax for entities, making it an attractive location for organisations to incorporate in.
The Cayman Islands ranks as the least complex jurisdiction in which to do business in TMF Group’s Global Business Complexity Index 2024 report. Despite this, companies looking to expand their operations into Cayman often struggle with a lack of understanding of local regulations.
While these regulations are not complex, they are numerous, and this can be overwhelming for newcomers. A notable skills gap in regulatory and compliance knowledge also makes local talent hard to find.
The process of incorporating a company in the Cayman Islands is quick and straightforward, but certain considerations must be made before and during the process.
Here’s what you need to know about incorporating in the Cayman Islands.
Before incorporating in the Cayman Islands
Laws in the Cayman Islands require know your client (KYC) checks to disclose the proposed activities of the company.
Certain basic information must be provided, such as the company’s proposed directors, officers, shareholders and beneficial owners, and due diligence documents including proof of identity, proof of residential address, the sources of funds and the source of wealth of each person must be collected. In addition, application and due diligence questionnaires are required.
Once all the necessary documents and supporting questionnaires have been submitted, reviewed and approved, the incorporation process can commence.
Types of entities
There are three types of companies frequently registered in the Cayman Islands:
- ordinary resident company
- ordinary non-resident company
- exempted company.
The most common of these is the exempted limited company, which is required when business activities are conducted primarily outside of the jurisdiction.
Four things to consider when incorporating in the Cayman Islands
These are the four key considerations for organisations setting up an exempted limited company in Cayman.
1. Registered office
An exempted company must have a registered office in the Cayman Islands approved by a local licensed service provider such as TMF (Cayman) Ltd. The company may change its registered office to another address in the jurisdiction via a directors’ resolution. The company must file a certified copy of the resolution authorising the change with the Registrar of Companies within 30 days from the date of the resolution together with the prescribed amendment fee.
2. Directors and shareholders
An exempted company must have at least one director or shareholder who need not be resident in the Cayman Islands. The subscriber(s) to the Memorandum of Association will appoint the first director(s). The subsequent appointment and/or removal of directors must be implemented according to the provisions of the Articles of Association. The board of directors is responsible for the management of the exempted company. Board members exercise control of their power to dismiss and/or appoint the directors, as per the Articles of Association.
A breach of the directors’ fiduciary duties can result in criminal convictions, civil sanctions, deregistration and reputational damage to the company.
The Registrar must be notified of any appointments, resignations and/or removals of directors and officers within 30 days from the date of change.
3. Incorporation procedures
The nature of business of an exempted company must be described in two documents, the Memorandum of Association and the Articles of Association. The business activities may be unrestricted or limited to specific activities as outlined in these documents.
The following documents are to be submitted to the Registrar upon incorporation:
- the Memorandum and Articles of Association signed by the subscriber
- the Section 165 declaration made by the subscriber that the operation of the proposed exempted company will be conducted mainly outside the Cayman Islands
- the appropriate incorporation fee.
Once the documents are filed and the fee is paid, the Registrar will issue a certificate of incorporation.
Approval is usually granted by the registrar within five to seven working days, but there is an express service available for an additional fee where approval is issued within 24 hours.
4. Economic substance
Economic substance (ES) requirements were introduced in the Cayman Islands in 2019 for certain geographically mobile activities (“relevant activities”). This legislation was introduced in order for the Cayman Islands to avoid being blacklisted on the EU’s list of non-cooperative jurisdictions for tax purposes.
Companies are required to file an ES notification in January each year. This is a pre-requisite to filing the annual return.
All legal entities domiciled or registered in the Cayman Islands must file this annual notification declaring whether they were in scope in the preceding year and whether they were involved with any relevant activities.
Exempted companies involved in relevant activities that are also tax resident outside the Cayman Islands must provide additional information to comply with the ES requirements for each relevant activity. These activities include:
- banking
- distribution and service centres
- finance and leasing
- fund management
- headquarters
- holding
- insurance
- intellectual property business
- shipping.
About TMF Cayman Islands
Since the establishment of our office in 1994, TMF Cayman Islands has incorporated thousands of companies in the jurisdiction.
With our local experts on the ground, we provide full administrative support for your prospective or existing operations in Cayman, from entity incorporation to local directorship services, HR and payroll and (fund) accounting and tax services. We assist both local and global companies looking to do business in the Cayman Islands.
Contact our experts today to find out how we can help grow your business.
