From STEP

Cayman Islands law firm Harneys has published an analysis of the jurisdiction’s proposed introduction of company beneficial ownership registers that will be searchable by the competent authority in Cayman but otherwise private.

Background

The proposals were first published in a consultation last year. A more detailed outline was issued on 2 December 2016, in a second consultation that closed on 9 December. The relevant draft legislation, the Companies (Amendment) Bill 2016, was published the following week, and the opportunity for public comment ended on 6 January 2017.

Historically, Cayman licenced corporate service providers (CSPs) have been required to collect and maintain beneficial ownership information only locally. The UK wanted Cayman (as well as other British overseas territories and crown dependencies) to develop fully public registers of ownership, but most overseas territories were reluctant to implement this. Instead, Cayman and other jurisdictions are developing a means of centralising this information so that it can be delivered to foreign authorities, especially London, rapidly in response to a request. The UK has stated that this is acceptable.

Accessing the register

Regulated entities incorporated in Cayman under the Companies Law and Limited Liability Company Law will still be obliged to maintain their local register at the company’s registered office address, and the register must be updated within one month of any changes. However, it will not have to be submitted immediately to the government. Instead, the separate registers will be accessed from a central point within the Cayman government when the need arises. They will not be open to the public unless and until that becomes an accepted and implemented international standard.

Harneys approves of this solution. The firm says it ‘strikes a sensible balance by enabling law enforcement authorities to have access to the information they need in cases where people abuse the corporate veil, while continuing to protect the privacy of legitimate commercial interests and individuals’.

Exempted companies

Several types of company will be exempted from having to maintain a beneficial ownership register. These include stock exchange listed companies, regulated funds under the Mutual Funds Law, and special purpose companies, private equity or collective investment schemes or investment funds administered by a regulated firm based in an approved jurisdiction. There are also no proposals to extend the registers to cover beneficial ownership of limited partners in Cayman exempted limited partnerships.

‘The new regime should allow Cayman to reach closure with the United Kingdom on the beneficial ownership issue’, said Harneys. ‘It also reflects similar international initiatives, including the EU’s Fourth Anti-Money Laundering Directive, which is to be implemented by EU member states by June 2017.’

‘Challenging’ timetable

The Cayman government plans to introduce the registers and platform by 30 June 2017 in line with Cayman’s agreement with the UK. However, this timetable could be ‘challenging’ given the technical difficulties, says Harneys.

• The move is the result of several years of pressure from the UK government, starting in 2013.

Sources

• Harneys
• Cayman Island Government (Gazetted version of bill, PDF)
• STEP International News Story (5 December 2016): Cayman Islands allows four days to comment on company beneficial owner registry plan

For more on this story go to: http://www.step.org/news/caymans-beneficial-ownership-register-strikes-sensible-balance