Termination of Cayman Islands regulated mutual funds
By Caroline Heal and Prasana Walkers From Mondaq
Early action to reduce costs and minimise 2017 fees
If you are considering winding up a Cayman Islands regulated mutual fund (a “Fund”), it would be prudent to start the process now with a view to completing it by year-end and minimising and/or precluding 2017 annual fees. Delays in commencing the deregistration and winding up process may ultimately hinder the Fund from maximising cost savings in relation to regulatory and service provider fees.
Prior to 1 October 2015, where an application for deregistration of a Fund was made to the Cayman Islands Monetary Authority (“CIMA”) before the end of the Fund’s financial year, CIMA routinely waived the requirement for audited accounts to be filed for the partial year of operation (known as the “stub audit”).
However, since 1 October 2015, it is no longer possible to receive an audit waiver for the stub audit period. Further, there are very limited circumstances when CIMA will exercise its discretion to exempt a Fund from submitting audited financials. The strict application of the requirement to file a stub audit with CIMA means that, in addition to filing the core deregistration requirements and supporting affidavit before 31 December, the Fund must file the stub audit with the accompanying Fund Annual Return (“FAR”) Form and pay to CIMA the FAR filing fee on or before 31 December in order to complete the deregistration application. In this regard, it is imperative that the Fund engages with its auditors to address the stub audit preparations and timing to complete such filings with CIMA in conjunction with the deregistration application.
A Fund wishing to cancel its licence or certificate of registration with CIMA must also be in good standing with CIMA on the date of the cancellation of the licence or certificate of registration. Good standing requires that a Fund must have paid all prescribed fees, submitted all required audited financial statements and that there be no outstanding queries or regulatory filings with CIMA, including, with regard to a company, that the Fund directors are current with their registration filings under the Director Registration Licensing Law, 2014.
Once CIMA has confirmed that deregistration of the Fund is complete, the Fund can begin the administrative wind down process of the Fund vehicle which can take many weeks to complete. The Fund should also ensure that relevant contracts are terminated with service providers to minimise Fund expenses. If all necessary documents relating to the wind down of the Fund vehicle are not filed before the end of January, following the relevant calendar year end, the Fund will be liable for full annual Government fees. The Fund may also continue to incur fees related to director services and registration, registered office services and other service providers of the Fund. For the upcoming calendar year end, it would be prudent to commence the winding up process by mid-December at the latest in order to ensure that there is sufficient time to conduct the wind down and dissolution process.
Accordingly, while a decision to cease and wind down a Fund is a significant assessment, it is important once such a determination has occurred, that sufficient time is allocated by the Fund to allow for the finalisation and filing by the auditors of the audited financials and FAR Form, in addition to all of the usual deregistration requirements, so that the deregistration can be completed with adequate time to close the Fund vehicle and to minimise and/or preclude annual fees for the following year.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
