The Cayman Islands, a leading offshore jurisdiction for financial services, has taken steps towards amending its beneficial ownership regime to better align with international standards. This guideline provides an overview of the changes proposed by the Beneficial Ownership Transparency Bill, 2023 (the "Bill") and how these changes may affect relevant entities.
Background
Since 2017, the Cayman Islands have implemented a beneficial ownership regime.
Entities within scope must:
Establish a private beneficial ownership register.
Monitor and identify changes to beneficial owners.
Regularly update this register.
Registers are centrally maintained but are not publicly available. They can be accessed by the Registrar of Companies and select regulatory bodies.
The Beneficial Ownership Transparency Bill 2023 is set to overhaul the current regime, with the old obligations standing until the new ones are phased in.
Key Changes Proposed in the Bill
Expansion of Scope:
Includes exempted limited partnerships and limited partnerships.
Removes certain exemptions, making more entities subject to the regime.
Access to Beneficial Ownership Information:
Commitment to a public register by December 2023.
However, public access will only be possible after regulations by the Cabinet and a parliamentary resolution.
Consolidation of Existing Legislation:
Merges provisions from various acts into a single Act of Parliament.
Intended to clarify obligations and emphasize transparency.
Alignment of "Beneficial Owner" Definition:
Aims to match the Cayman Islands Anti-Money Laundering Regulations.
Control percentage remains at 25%.
Increased Reporting Requirements:
More data on beneficial owners, especially on the nature of ownership/control and the individual's nationality.
Implications for Entities
Entities currently in the beneficial ownership regime should:
Anticipate continued reporting requirements.
Familiarize themselves with increased reporting demands.
Determine if they fall within the expanded regime's scope and understand the obligations.
Especially relevant for those previously exempted due to their association with an "approved person."
Entities benefiting from the Current BOR due to association with the Securities Investment Business Act or the Virtual Asset (Service Providers) Act:
These exemptions are not in the new Bill.
Affected entities should establish or maintain a beneficial ownership register.
Investment Vehicles and Entities:
Those not needing to register under the Private Funds Act or the Mutual Funds Act must establish a beneficial ownership register.
Beneficial owners might often be individuals controlling the entity or its top executives.
Entities registered under these Acts can benefit from an "Alternative Route," which demands contact details of a licensed fund administrator or equivalent.
Current Cayman Islands Beneficial Ownership Regime
Entities Under the Regime:
Cayman Islands companies.
Limited liability companies.
Limited liability partnerships.
Exclusions:
Cayman Islands trusts.
Other partnership forms.
Foreign registered companies.
Corporate Service Providers (CSPs):
The Regime imposes certain obligations on these entities, especially those registered in the Cayman Islands.
Exemptions
In-Scope Entities (or their subsidiaries) might be exempted based on several criteria:
Listing on Cayman Islands Stock Exchange or another approved stock exchange.
Registration under specific regulatory laws such as the Mutual Funds Act or the Private Funds Act.
Management or operation by an "approved person" under specified conditions.
Regulation in an equivalent jurisdiction recognized for strong anti-money laundering measures.
Specific partnerships related to vehicles, funds, or schemes.
Holding interests under specified acts like the Banks and Trust Companies Act.
Other exemptions under the Beneficial Ownership (Companies) Regulations.
Entities that benefit from an exemption are termed "Exempt Entities", while others are termed "Non-Exempt Entities".
Obligations of Exempt Entities
Duty to File Written Confirmation:
Must provide written confirmation of the exemption they’re using.
Should provide specific related information about the exemption.
Duty to Keep Confirmation Updated:
If any info in the written confirmation becomes outdated or untrue, an updated confirmation must be provided within a month.
Obligations of Non-Exempt Entities
Establishing a Beneficial Ownership Register:
Must establish and maintain a private beneficial ownership register at its registered office.
Identification of Registrable Persons:
These include "beneficial owners" and "relevant legal entities".
There's a three-stage test to identify beneficial owners.
Duty to Serve Notice:
Must notify registrable persons they've identified or anyone they suspect might be a registrable person.
Recording Required Particulars:
The regime mandates specific details to be recorded.
Duty to Keep Register Updated:
Regular updates are needed when changes occur concerning a registrable person.
Obligations on Corporate Service Providers (CSPs)
CSPs might have direct obligations under the regime, including:
Maintaining a Register for a Non-Exempt Entity.
Notifying a Non-Exempt Entity of non-compliance.
Issuing restriction notices for compliance purposes.
Regularly updating the Registrar of Companies with beneficial ownership details.
Responding to information requests from the Registrar.
Access to Registers
Registers are held on a centralized electronic platform managed by the Registrar of Companies.
The platform isn't public. Access is limited to specific regulatory bodies like the Financial Reporting Authority and Cayman Islands Monetary Authority.
Notes:
An “approved person” relates to entities regulated or licensed in the Cayman Islands or an equivalent jurisdiction or those listed on the Cayman Islands Stock Exchange.
The Anti-Money Laundering Steering Group's list of equivalent jurisdictions, established in 2018, can be found here.
The information provided is not legal, tax, investment, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. Some parts of the text may be automatically generated. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information.
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