含羞草社区

On 24 November 2023, the Parliament of the Cayman Islands passed the Beneficial Ownership Transparency Act, 2023 (the act), which was gazetted on 15 December 2023 and brought into force on 31 July 2024. The act represents the most significant changes to the beneficial ownership reporting regime since it was introduced in the Cayman Islands in 2017, as it brings thousands of entities within its scope for the first time, and arguably necessitates existing entities that are subject to the outgoing regime to review their reporting requirements under the new rules.

The act is accompanied by the Beneficial Ownership Transparency Regulations (2024), and it is anticipated that the Ministry of Financial Services and Commerce of the Cayman Islands (the ministry) will release a final version of the Beneficial Ownership Transparency Guidance Notes shortly. There are significant penalties for failing to comply with the new requirements under the act, although the ministry has announced that there will be no enforcement of the act until 1 January 2025, from which date all in-scope legal persons are expected to be compliant.

New in-scope entities

The act brings new entities within its scope and applies to all “legal persons”, including companies, LLCs, LLPs, limited partnerships, exempted limited partnerships, foundation companies and any other legal person that may be prescribed in regulations. Helpfully, the act consolidates all of the legislation with respect to beneficial ownership in a single instrument, which, together with the above-mentioned regulations and guidance notes (once available) make for a more user-friendly experience.

Definition of ‘beneficial owner’

Under the act, the definition of “beneficial owner” in relation to a legal person has been amended to capture an individual:

1. Who ultimately owns or controls (directly or indirectly) 25% or more of the shares, voting rights or partnership interests in the legal person;
2. Who otherwise exercises ultimate effective control over the management of the legal person; or
3. Who is identified as exercising control of the legal person through other means.

The act also specifically provides for circumstances in which no individual can be identified as a “beneficial owner”. In those circumstances, the act mandates that a “senior managing official” must be identified as a contact person.

Removal of exemptions and alternative routes to compliance

As widely expected, most of the exemptions under the beneficial ownership regime have been removed in favour of “alternative routes to compliance”. This requires a legal person to report limited “required particulars”, rather than reporting its beneficial owners or establishing a beneficial ownership register.

Under the act, an alternative route to compliance is open to a legal person that is:

1. Listed, or is a subsidiary of a listed entity, on the Cayman Islands Stock Exchange or an approved stock exchange;
2. Licensed under certain Cayman Islands regulatory laws;
3. A fund registered under the Private Funds Act (as revised) or the Mutual Funds Act (as revised); or
4. Otherwise exempted by the Cayman Islands Cabinet.

Importantly, in contrast with the outgoing beneficial ownership regime, only subsidiaries of listed entities are recognised as being able to take advantage of an alternative route to compliance. Trading subsidiaries or blocker entities in an investment fund structure are therefore in-scope and must maintain beneficial ownership registers and identify any beneficial owners or (where relevant) a senior managing official.

Furthermore, Cayman Islands private funds or mutual funds are required to supply the contact details of a licensed fund administrator or another contact person licensed or registered under a Cayman Islands regulatory law and located within the Cayman Islands that will provide beneficial ownership information to the Registrar of Companies of the Cayman Islands on request within 24 hours.

Public registers

The act provides that the Cayman Islands Cabinet may, subject to resolution in the Parliament of the Cayman Islands, make further regulations to provide public access to certain required particulars of registrable persons.

For individual registrable beneficial owners, the act envisages that such particulars may include a person’s name, country of residence, nationality, date of birth and the nature of control of the relevant entity.

At present, the author understands that the government of the Cayman Islands is monitoring the progression of similar legislation and approaches in other jurisdictions to consider when and how best to implement a public register of beneficial ownership. The author also understands that this may entail extending beneficial ownership information to parties who meet a “legitimate interest test”.