The Cayman Islands Beneficial Ownership: Key insights for funds
The Cayman Islands, long established as a leading jurisdiction for investment funds, has steadily evolved its regulatory framework to align with global standards while preserving its attractiveness to international investors. A notable development in this evolution is the introduction of the Beneficial Ownership Regime. For investment fund managers, understanding this regime and the valuable role of the Contact Person is essential to ensure both compliance and smooth operations.
The Beneficial Ownership Regime: A brief overview
On November 24, 2023, the Cayman Islands Parliament passed the Beneficial Ownership Transparency Act, 2023 (the "Act"), which became effective on July 31, 2024. This legislation consolidates previously disparate provisions into a unified framework, significantly expanding the scope of beneficial ownership transparency and associated compliance requirements. Enforcement of the Act will commence in early 2025, giving legal entities a transitional period to adapt.
The regime now encompasses Limited Partnerships, Exempted Limited Partnerships, and Foundation Companies, broadening its reach. Additionally, in line with the Cayman Islands Anti-Money Laundering Regulations, the definition of a beneficial owner has been updated, requiring entities to provide more detailed information on their beneficial owners. This information must be kept current, with the responsibility of ensuring updates placed directly on the entity.
The Act mandates that all "Legal Persons", which include funds, must maintain a Beneficial Ownership Register, recording the "Required Particulars" of their Beneficial Owners (BOs). BOs are individuals who:
- Directly or indirectly own or control 25% or more of shares, rights, or partnership interests;
- Exercise ultimate control over the management of the legal entity; or
- Exert control through other means.
If no individual satisfies these conditions, the entity must designate a Senior Managing Official (SMO) of the entity as the contact. For subsidiaries of Cayman-registered legal persons, a Reportable Legal Entity (RLE) should be identified.
While the Act removes exemptions, it introduces alternative routes to compliance for some entity types. This is designed to alleviate some of the administrative burden by streamlining reporting obligations for these entities, including funds.
Investment funds, while previously exempt, must now maintain a BO register with their corporate service provider, containing the Required Particulars. Investment funds have the option, however, to pursue an alternative route to compliance and nominate a Contact Person instead. The alternative route to compliance for funds was put in as Authorities recognised the fluid and transactional nature of funds.
Where a Contact Person is nominated, it is their details that would appear on the BO register, instead of investors or controllers. The Contact Person therefore effectively reduces the administrative burden associated with managing and updating the register by liaising with the relevant authorities on behalf of the fund.
Our experienced team is well-placed to serve as your Contact Person, ensuring compliance with the regime’s requirements.
Key responsibilities of the Contact Person:
- Liaison: The Contact Person facilitates communication between the fund and Cayman Islands authorities, is responsible for providing the requested BO information, and responsible for addressing any inquiries or requests for additional information regarding beneficial ownership.
- Access: To fulfil its obligations, the Contact Person is required to ensure it has access to the BO information to enable it to provide the information in the stipulated timeframe.
- Data: The Contact Person is also required to ensure the data provided to the Competent Authority meets the requirements stipulated in the Act.
- Confidentiality: All beneficial ownership data is handled with strict confidentiality, accessible only to authorized personnel and used in accordance with Cayman Islands law. The Contact Person must also stay up to date with regulatory changes to ensure ongoing compliance.
As global regulatory standards continue to evolve, maintaining compliance with the Cayman Islands Beneficial Ownership Regime is paramount to preserving the integrity and reputation of investment funds. Understanding the regime and leveraging the expertise of a Contact Person will ensure a smooth transition into this new regulatory landscape.
Engaging a professional provider not only guarantees compliance, but also allows fund managers to focus on core investment priorities. For more information on how our Contact Person services can support your investment fund, contact our dedicated team.
