Company formation in Cayman Islands

The standard procedure for obtaining a certificate of official entry in the General Register of Companies takes up to one week, with an additional fee an accelerated process is possible in 1 day.

The “All included” package of services for offshore company formation in the Cayman Islands includes:

• Filing an application with the registry, signing the company registration application, and obtaining a Certificate of Incorporation on its behalf.
• Drafting of all initial documents: Memorandum of Association, Memorandum of Association, Minutes of Shareholders’ Meeting, Merger/Reorganization Agreements, etc.
• Drafting of orders appointing a receiver.
• Drafting of the shareholders’ resolution on the initial issue of shares.
• Registration of the local registered office.
• Drawing up a list of all shareholders filing information about the ultimate beneficiary in the register.
• Notarization of all necessary documents.
• State fees upon payment to the General Registry.
• Delivery of documents to the address.

The legal system of the islands is based on English law. In the Cayman Islands company register, as well as in other public reports, information is displayed in English. When registering, the name must indicate the type of legal entity must be Ltd, Corp, etc., not mention the name of the royal family, as well as without obtaining a license, do not indicate the words “bank,” “trust,” “fund,” etc.

The Monetary Authority (CIMA), as the main regulator of the financial industry, acts based on the following:

• Companies Act of 1961 (last amended in 2020).
• The Limited Liability Companies Act (2021 revision).
• The Fund Companies Act, 2017.
• The Beneficial Ownership (Limited Liability Companies) Regulations (2019).
• The Companies (Winding Up of Companies) Regulations, 2018.

The jurisdiction is on the FATF white list and, to maintain this status strictly monitors compliance with all AML criteria OECD requirements and has adopted the following:

• Proceeds of Crime Act, 2020.
• Anti-Money Laundering Regulations of 2020.

The authorities have signed 36 tax information exchange agreements (TIEAs).

In this jurisdiction, there is a choice of several types of business structures for registration. In addition, it is possible to start a business in the Cayman Islands as a foreigner, so as a resident. Most often, international trading companies, investment funds, and banking structures choose this legal zone because of several advantages:

Taxes Benefits

Generally, recognized offshore jurisdiction with a neutral tax system makes businesses think about the question of how to open a business in the Cayman Islands.

The tax regime of the Cayman Islands provides for no tax on profit, income, capital gains, inheritance or gift, or transfer of shares; stamp duty is only in some cases. Another option is the possibility of obtaining a certificate of tax exemption for 50 years. There is also no exchange control and no limits on the movement of funds. Optimization of the tax burden gives a powerful impetus to business and the opportunity to redirect resources to the development of new areas.

Fast Set-Up of a Company

Cayman Islands company incorporation can take as little as one day. There is no need to file a financial report, except for investment funds, low annual fees for the renewal of registration, and the ability to appoint a non-resident director greatly simplifies the issue of collecting and filing a package of documents with the Registrar. In the territory of the islands, activities related to investment and financial services, use of ships, insurance, and use of intellectual value are subject to licensing.

Cayman Islands as a Financial Services Center

Many companies have chosen to set up an offshore company in the Cayman Islands because of the economic stability and wide range of accounting, insurance, and rental services. The ease and simplicity of doing business have prompted the opening of representative office branches to 116,996 companies, of which there are 724 insurance companies, 87 banks, and 12,963 investment funds.

Privacy and Confidentiality

The algorithm of registering a company in the Cayman Islands takes place without public disclosure of data on the ultimate beneficiary, shareholders, and general managers. Registers of directors and shareholders are kept wherever the company needs them. The use of nominee managers and shareholders is also acceptable. There is investment confidentiality and anonymity of accounts in the islands where it is acceptable not to disclose details of investment transactions. There are no restrictions on the choice of bank for servicing and the number of corporate accounts.

Financial Reporting for Cayman Islands Companies

Cayman Islands business registration gives businesses the freedom to decide how to keep financial records (in any country in the world), there is no requirement to file an annual report and no criteria for keeping accounting records.

Apostille/ Notarization/ Legalization

Acceleration of incorporation of foreign companies in the Cayman Islands is done remotely by drawing up a power of attorney to a representative with the notarization of a set of constituent documents and apostille.

Leading offshore allows you to choose from different types of structures, including establishing a company with a segregated portfolio or with a limited duration. This helps businesses to adapt and set up a company for specific needs. This economic region is mainly chosen by investment companies, foundations, trusts, and holding companies.

The main types of companies include:

• Ordinary Company -Ordinary Company (resident and non-resident).
• Exempt Company -Exempt Company.
• Foreign Company-Foreign Company.
• Limited Liability Company (LLC).

Ordinary Company

A resident ordinary company must comply with all local laws when conducting business, file financial statements, have a registered office, and the register of all shareholders is publicly available.

A non-resident ordinary company is not authorized to conduct business activities in the Islands, must obtain a certificate indicating non-resident status and file financial statements.

Exempted Company

For several reasons, investors most often choose an exempted company for business activities. When running such an organization, there are no deadlines for the mandatory annual meeting of shareholders or the amount of initial capital. The company is launched with at least one shareholder and one manager. When establishing an exempted company, there is no need for public disclosure of data about the managers and owners of the company. A certificate of exemption for up to 20 years is also issued.

An exempted company is divided into subtypes:

• With a segregated portfolio.
• Association not for profit.
• Foundation.
• A company with limited duration.
• Special economic zone company.

Foreign Company

Cayman Islands legislation allows a foreign company with registration outside the jurisdiction and company setup costs outside the jurisdiction to own land and conduct business activities with other companies already on the territory of the islands.

LLC

One of the common models of investment business is LLC. Features of this type: activity takes place outside the islands, the owners are not responsible for the company’s obligations, no information about shareholders and managers is disclosed to the public, every year a report is submitted to the Registrar, and the state fee is paid.

Trusts

The number of registered trusts in the Cayman Islands has already reached more than 2,300, with up to 10 new trusts being added each month. The Trust Law (as amended) has become the main legal norm.

The most common types of trusts are:

• Discretionary and fixed interest trusts.
• STAR trusts.
• Noncharitable and charitable remainder trusts.

Investors use the benefits of registering a trust to protect and preserve assets (capital, antiques, other valuables), to avoid probate when owning large amounts of capital, the privacy of owner data, and for charitable purposes.

Holding

For tax optimization and simplification of business activities, many corporations prefer to conduct business registration in the Cayman Islands. Holding companies are used for capital management, protection of assets from legal disputes in other jurisdictions, and preservation of privacy regimes. The holding company is required to submit financial statements as proof of economic presence.

About 450 companies with registration in the Cayman Islands are listed on the NYSE/Nasdaq, and 1700 in Hong Kong.

Financial Services

Financial services are widespread in the Cayman Islands. The banking structure consists of 87 banks, 11 of which have the A category with the right to provide services to local customers. Among the top financial structures are the largest operators of the market, such as Scotiabank, Butterfield Bank, Royal Bank of Canada, and Fidelity Bank. According to statistics, $80bn of deposits are made in the banks of this jurisdiction.

The jurisdiction offers excellent business opportunities that are successfully utilized by many international companies, their representative offices, and private clients. Legalization of a business requires gathering a set of documents, passing KYC checks, and complying with regulatory rules to obtain a license.

Necessary Documents

Any registration process starts with the preparation of a set of documents which consists of:

• Application for registration with the Registrar General of Companies.
• Basic documents like Articles of Association and Memorandum and Memorandum of Association, Memorandum of Association.
• Minutes of the Shareholders’ Meeting.
• Minutes of the meeting of the managing directors.
• Register of shareholders (minimum number of shareholders – 1, can be both individuals and legal entities, resident of any country).
• Register of beneficiaries.
• Register of directors.
• Resolution on the appointment of a manager (no residency requirements), notification of change/changes in the management structure. Consent of the manager to take office. A legal entity or a natural person may be appointed as a manager. If a nominee director is appointed, an apostilized power of attorney, declaration of nominee services, and letter of consent to take office shall be provided.
• Details of directors and owners required for KYC procedures.
• Resolution on the issue of shares.
• Share certificate.

KYC Documents Checklist

The British territory is on the FATF’s “white list” because it requires companies to comply with KYC/AML rules when setting up a company as a nonresident or resident. To maintain the integrity and stability of the market and to comply with relevant international standards, companies are required to provide such information:

• Managers, owners, beneficiaries – passport data with proof of residence (utility bill, bank statement, etc.). All documents are up to date at the time of submission. Directors of the company provide a resume or a link to their professional profile.
• Basic documents such as memorandum and articles of association, registration certificates, registers of managers and shareholders, list of authorized signatories on behalf of the company, and financial statements (if any).

The information is not subject to public disclosure, only by court order will the data be disclosed.

Applicable Legal Frameworks and Regulations

The basic company documents, business norms, licensing rules, and authorization to do business with residents are laid down in regulations such as:

• Companies Act of 1961 (latest amendments of 2020)
• Limited Liability Companies Act (2021 revision).
• Fund Companies Act, 2017.
• Beneficial Ownership (Limited Liability Companies) Regulations (2019 revision).
• Proceeds of Crime Act 2020.
• The Money Laundering Regulations 2020.

The Cayman Islands to get the status of one of the main offshore financial centers helped the Cayman Islands to adopt a taxation system:

• 0% corporate income tax.
• 0% VAT.
• 0% capital gains tax.
• 0% tax on dividends royalties.
• 0% income tax for individuals.
• Stamp duty on property leases -5-20%, on land leases -5%.
• 22-27% import duties.
• No currency control.
• State fees for company formation depend on the initial capital.

Corporate Tax

Tax neutrality of offshore jurisdiction with 0% corporate tax facilitates scaling of activities by investing additional funds into the business. The authorities issue a Tax Exemption Certificate (TEC) for 20 years, which allows tax avoidance in case of changes in local accounting policies.

Compulsory state fees include the payment of annual fees for the renewal of official registration. The amount varies depending on the chosen business structure and capital; the data is indicated on the Registrar General‘s website.

International Tax Treaties

The Cayman Islands cooperates with the OECD, automatically exchanges financial information with 130 countries, and has signed tax information exchange agreements with 36 countries. This is done to detect subject-to-tax and other tax accounting irregularities.

Accounting and Auditing

Accounting/auditing plays a key role in the operations of any corporation. Payment of all capital gains tax, corporation tax, etc., helps to keep the business operating productively within the local laws and also to avoid penalties.

Accounting and Bookkeeping

Proper company management includes accurate bookkeeping. The company’s financial records must be kept for up to 5 years. The jurisdiction offers simplified requirements for most companies (Article 193 of the Companies Act), the main criterion being the filing of reports/notification to the Registrar that no changes have been made to the structure of the company during the year and that the main activity takes place outside the economic zone. Tax returns are filed even if the company is exempt from tax.

Some types of business, such as insurance activities, report to the Insurance Regulatory Authority (CIRA), and financial companies submit statistical reports to CIMA.

Failure to comply with such regulations leads to license revocation, termination of registration, and fines.

Auditing requirements

If types of business entities fall under the exempted category – auditing is not required.

Crypto and Bitcoin in Cayman Islands

CIMA supervises crypto activities, including crypto exchanges, funds, and brokers, and decides whether to issue VASP licenses. Since 2022, the VASP Act has established the legality of cryptocurrencies, as well as the process of licensing any type of company, including shelf companies, which are engaged in long-term or short-term exchange of fiat and crypto coins, transfer and storage and issuance of tokens. A virtual asset, according to VASP, is a digital representation of value that can be used in payment sales/exchange but is not equated with fiat currencies.

There are no restrictions for personal use, purchase, or transfer of Bitcoin or other crypto coins. There is no tax on cryptocurrencies.

Taxation

The legislation of the Cayman Islands is designed to meet all international standards, both in accounting, authorization, and exchange of information on financial transactions. Any legal entity can obtain the status of an offshore company by registering and then profitably using the tax environment and providing its services worldwide.

Registry of Directors

The register of directors in this jurisdiction is not publicly available, which is a certain protection for businesses and their operations. Access to the data is by request from law enforcement agencies.

Registry of Shareholders

The company’s constituent documents specify the currency and amount of share capital. The average size in this zone is -$50,000. The register of shareholders, beneficiaries as well as directors goes to the General Register. Data from this register is available only for state bodies; there is no public access, and no one can find out who owns the company and how many shares it has. The jurisdiction fully ensures the anonymity of the data.

Nominee Services

The jurisdiction allows the use of nominee directors and nominee shareholders, which preserves the confidentiality of the owners of the company. In this case, additional documents, powers of attorney, letters of consent, declarations, etc., are filed at the time of incorporation.

Director and Shareholder Information

Substance and Residency

In 2019, the International Tax Cooperation Law on Economic Presence was enacted in Cayman. Since then, non-resident companies except:

• investment funds;
• local companies;
• tax residents of other countries.

Must operate in the islands, employ local staff, and have a registered office and business expenses.

Economic Substance

Economic presence (conducting a substantial part of business, incurring expenses, and employing local staff) in the jurisdiction must be proven by companies such as:

• Banks.
• Insurance companies.
• Leasing services.
• Fund management.
• Affiliated company/headquarters.
• Intellectual property-related activities.
• Shipping and transportation.
• Holdings.

Residency Requirements of Shareholders and Directors

The Cayman Islands does not impose residency requirements for directors and owners.

Company Types

There are both local and foreign banks that have been providing their services for over 30 years. Most of them are branches of large banks from North and South America and Europe. When interacting with the bank, you need to provide a full package of documents, including information about directors and managers, to confirm the source of income. Within five days, the account is opened. Banking operations are confidential, bank secrecy is observed, the number of open accounts is not limited, and the account balance can be equal to zero. Online banking is also developed, allowing you to make bank transfers remotely.

Banking