The England and Wales Court of Appeal (‘EWCA’) has decided that litigation privilege (‘LP’) does protect documents prepared by attorneys in anticipation of an investigation by a regulator (in particular interviews between attorneys and the company’s employees). It also considered the application of legal advice privilege (‘LAP’) to interviews with ex-employees and considered the earlier decision in ‘Three Rivers No. 5’ and whether that decision should be reviewed by the Supreme Court. The decision of the EWCA would be persuasive authority in the Cayman Islands (‘Cayman’).
In the Cayman Islands (‘Cayman’) under section 107 of the Companies Law (2018 Revision) (‘Companies Law’) an Official Liquidator (‘OL’) may be removed from office by order of the Grand Court (‘Court’) made on the application of a creditor or shareholder of the company.
The Cayman Islands (‘Cayman’) Department for International Tax Cooperation (‘DITC’) has issued an Industry Advisory to remind the financial services industry of the deadline for Constituent Entities (‘CE’s) in Cayman to make Country-by-Country Reporting (‘CbCR’) notifications for Multinational Enterprise (‘MNE’) Groups that have a fiscal year which began on or after 1 January 2016, and ended on or before 30 September 2018, if the MNE Group’s Reporting Entity is not resident in Cayman.
The Cayman Islands (‘Cayman’) has published in the Gazette the Immigration (Amendment) Law, 2018 (‘Amendment Law’), which is aimed at addressing issues with residency. In particular the Law addresses the right to be Caymanian; specialist caregivers; and includes provisions to establish a Refugee Protection Appeals Tribunal (‘Tribunal’). The provisions relating to the Tribunal will come into force at a date which has yet to be fixed.
Applications for the right to be Caymanian
The Amendment Law removes the limitations on certain individuals whose immigration status in Cayman has been uncertain for a number of years, the so-called ‘ghost-Caymanians’. These are people who were born or brought up in Cayman to non-Caymanian parents and who have found that they do not have Caymanian status once they reach 18. The Amendment Law removes the following deadlines on applying for Caymanian status:
In the Cayman Islands (‘Cayman’) when the Grand Court (‘Court’) appoints an Official Liquidator (‘OL’) to a company it gives it powers based on those set out in Schedule 3 ‘Powers of Liquidators’ to the Companies Law (2018 Revision) (‘Companies Law’). The OL will be able to exercise some powers without asking the Court to ‘sanction’ their actions, but other powers, those set out in Part I of Schedule 3 of the Companies Law, will always need the OL to apply to Court for sanction. In any circumstance where a creditor or shareholder is aggrieved by action or inaction by an OL they can apply to the Court for an order directing the OL to exercise or refrain from exercising any of their powers in a particular way. Such application is called a Sanction Application. The process for making such an application is set out in the Companies Winding Up Rules 2018 (‘CWR’), Order 11.
The Cayman Islands (‘Cayman’) has seen considerable growth in recent years in investment vehicles for crypto-assets. The Cayman Islands Government has not yet published specific legislation or regulation on crypto-asset investment funds, but other international organisations are considering global standards which should apply. In a communique at the end of its July 2018 meeting in Buenos Aires the G20 Finance Ministers and Central Bank Governors (‘G20’) asked the Financial Action Task Force (‘FATF’) to clarify, in October 2018, how its standards apply to crypto-assets. At the same meeting the Financial Stability Board (‘FSB’) explained in a report to the G20
that whilst crypto assets do not pose a material risk to global financial stability at the moment, given the speed at which the market for them is developing it needs “vigilant monitoring”. Working with the Committee on Payments and Market Infrastructures (‘CPMI’) the FSB has set out a framework to monitor the financial stability implications of developments in crypto-asset markets.
In the Cayman Islands (‘Cayman’) an Official Liquidator (‘OL’) is appointed to a company under section 105 of the Companies Law (2018 Revision)(‘Companies Law’). The Cayman Grand Court (‘Court’) may appoint such person as it seeks fit to be the OL of a company to assist it in winding up a company and to conduct the winding up proceedings. As well as powers granted to an OL, considered here,the OL has specific duties.
On 30 July 2018 the Cayman Islands (‘Cayman’) Grand Court (‘Court’) issued a new practice direction (‘PD’) No: 1 of 2018 which provides that those involved in cross-border insolvency cases should consider as soon as possible whether to incorporate some or all of existing guidelines into an international protocol to be approved by the Court or an Order of the Court adopting the guidelines.
What are the existing guidelines?
The two guidelines for court-to-court communications and co-operation attached to the PD and referred to in the PD itself which the Court considers might be adopted in Cayman (with appropriate modifications) are the:
In the Cayman Islands (‘Cayman’) an Official Liquidator (‘OL’) is appointed to a company and given powers by the Grand Court (‘Court’) in accordance with Cayman legislation. Under section 105 of the Companies Law (2018 Revision)(‘Companies Law’) the Court may appoint such person as it sees fit to be the OL of a company. Under section 108(2) of the Companies Law an OL is an officer of the Court whose role is to “wind up” a company’s business. In the first of a series of articles we take a brief look at the powers of OLs, and subsequent articles will consider their duties, how to challenge decisions made by OLs and how they can be removed.
In a Notice dated 19 July 2018, the Cayman Islands Monetary Authority (‘CIMA’) has given its answers to frequently asked questions (‘FAQs’) on its Guidance Notes on the Prevention and Detection of Money Laundering in the Cayman Islands (‘Cayman’) that relate to Anti-Money Laundering Regulations (‘AMLRs’) and funds. Below is a summary of the main points, but the FAQs should be available on the CIMA website in due course.
The Cayman Islands (‘Cayman’) Department for International Tax Cooperation (‘DITC’) has updated its AEOI Portal updates and Industry Advisories (‘AEOI Update’) page to remind users of the Cayman Automatic Exchange of Information (‘AEOI’) Portal (‘Portal’) and Country by Country Reporting (‘CbCR’) Portal (‘CbCR Portal’) that they are both open and to update on dates by which Cayman Financial Institutions (‘CFIs’) need to comply with their reporting and notification obligations. The Updates only appear on the AEOI Update page which users should check on a regular basis.
The Cayman Islands Monetary Authority (‘CIMA’) has issued a new Regulatory Policy ‘Net Worth and Liquidity - Trust and Corporate Service Providers’ (‘Policy’) to ensure categories of Licensee maintain a minimum net worth and have adequate assets which are readily available to them. The Policy outlines the criteria against which CIMA will assess liquidity for: Trust Licensees; Restricted Trust Licensees; Companies Management Licensees; and Corporate Services Licensees.
Grand Cayman, CAYMAN ISLANDS, 9 JULY 2018
The partners of Solomon Harris have announced that they will merge with offshore law firm Bedell Cristin. It is hoped that the deal will complete by the end of August and Solomon Harris will rebrand as Bedell Cristin at a later date.
Founded in 1998, Solomon Harris is a full service law firm employing 28 people in Grand Cayman. It has been awarded recognition for its legal expertise across a broad range of services including as a premier firm for captive insurance and investment funds, capital markets, inward/local investment, private client services, corporate/residential real estate, immigration, litigation and insolvency & restructuring.
The last year has seen a considerable growth in the international and Cayman Islands (‘Cayman’) market for investments in virtual or ‘crypto’ currencies and Initial Coin Offerings (‘ICOs’). The Cayman Islands Monetary Authority (‘CIMA’) has issued a ‘Public Advisory - Virtual Currencies’ (‘Advisory’) aimed at helping investors better understand the risks involved.
The deadline by which those Cayman Islands (‘Cayman’) companies and limited liability companies that are required to provide data on their beneficial ownership to the Beneficial Ownership Competent Authority (‘BOCA’) is Friday 29 June 2018.
Where can I find out more information?
For more information on Cayman Beneficial Ownership legislation see our earlier article Guidance on Cayman Islands Beneficial Ownership Registration, which gives guidance on the legislation, regulations and exemptions. Further information is also available from Cayman Finance here. Briefly, certain companies and limited liability companies (‘LLCs’) are required under existing Cayman legislation to provide information on their beneficial ownership. All directors of all Cayman companies and LLCs should check whether their company or LLC falls within the scope of the legislation and regulations requiring them to provide Beneficial Ownership data to BOCA. Those who made an assessment before December 2017 should check again to ensure that their company or LLC is not affected by changes which were made to exemptions from the regime. (See also The Cayman Islands Beneficial Ownership Register and why your captive shouldn’t need one.)
The liquidator of a solvent Cayman Islands (‘Cayman’) company is given the power to adjust the rights of the company’s shareholders under s.112 (‘s.112’) of the Companies Law (2016 Revision) (‘the Law’) (‘the Discretion’). Under Order 12 Rule 2 (‘O2r2’) of the Companies Winding Up Rules, 2008 (‘CWR’) the liquidator ‘shall’ use the Power to rectify the register of shareholders where fraud or default has caused asset values to have been mis-stated at a time when shares have been redeemed (‘Duty’). The issue of when that Discretion becomes a Duty was considered by the Cayman Islands Court of Appeal (‘CICA’) in Primeo Fund (in Official Liquidation) v The Herald Fund SPC (in Official Liquidation) (CICA 5/2017).
By 31 July 2018 all Cayman Islands (‘Cayman’) non-profit organisations (‘NPOs’) which solicit contributions from the public need to register with the Registrar of Non-profit Organisations (‘Registrar’) under the Non-profit Organisations Law, 2017 (‘NPO Law’).
What is the deadline?
The deadline for registration is 31 July 2018, but on 27 April 2018 the Ministry of Financial Services (‘Ministry’) recommended NPOs which are required to register that they need to submit their registration application and accompanying documents by 15 June 2018 in order to ensure the application is processed in time, and advising that those NPOs which register ahead of the deadline would also save the CI$300 application fee. That recommended date has passed, but applications can be completed and filed before the 31 July deadline via the Cayman Business Portal (CBP), the General Registry’s online tool for local businesses.
The Cayman Islands (‘Cayman’) statutory reporting deadline for the Common Reporting Standard (‘CRS’) and US Foreign Account Tax Compliance Act (‘FATCA’) is today, 31 May 2018.
The Cayman Department for International Tax Cooperation (‘DITC’) has reminded the financial services industry in an ‘Industry Advisory’ that the Cayman Automatic Exchange of Information (‘AEOI’) Portal (‘Portal’) will be taken offline for various periods during the summer and brought back online to allow Cayman Financial Institutions (‘CFIs’) to comply with their reporting obligations. There is a grace period before which CFIs will attract enforcement measures or penatlties or attract the DITC’s attention for compliance reviews (see below).
On 4 May 2018 the Cayman Islands (‘Cayman’) Ministry of Finance (‘Ministry’) circulated an Industry Advisory informing recipients that the Cayman Department for International Cooperation (‘DITC’)’s Country-by Country Reporting (‘CbCR’) Portal (‘Portal’) is now open. The Portal allows multinational enterprises groups (‘MNE’) to register with (Notify) the Cayman Tax Information Authority (‘TIA’) as and where required by the Tax Information Authority (International Tax Compliance) (Country By-Country Reporting) Regulations, 2017 (‘Regulations’).
New documents and guidance
The Industry Advisory has links to the latest versions of documents (listed below) which must be used instead of earlier versions posted on the DITC’s website. It highlights particular sections of the CbCR Guidance V.1.1 as being of particular help to users: Appendix I: CbCR Notification and Appendix II: The Reporting Procedure on the CbCR Portal.
The anti-money laundering regime (‘AML Regime’) in the Cayman Islands (‘Cayman’) has been updated and its scope widened, introducing a risk-based regime with enhanced due diligence requirements. Here we look at some of the important changes.
Does the new AML Regime apply to me?
The new AML Regime applies to Cayman domiciled entities (‘Financial Service Providers’ or ‘FSPs’) which conduct ‘relevant financial business ’. That definition has been revised and expanded to include ‘otherwise investing, administering or managing funds or money on behalf of other persons’ and ‘underwriting and placement of life insurance and other investment related insurance’ and now extends to include the following:
Court of Appeal rules on privilege for internal investigations...
The England and Wales Court of Appeal (‘EWCA’) has decided that litigation privilege (...