The Judicial Committee of the Privy Council (the ‘Privy Council’) delivered its decision in the latest round of Madoff litigation on 20 May 2019. It is the highest court of appeal for the British Virgin Islands (‘BVI’) and it found that BVI insolvency legislation could be applied by a court outside BVI (in this case the US) if that court decided it should be applied in proceedings before it. The Privy Council also found that the US proceedings were not unjust, vexatious or oppressive and an anti-suit injunction to stop them was neither appropriate nor necessary.

In an Industry Advisory dated 3 May 2019, the Cayman Islands (‘Cayman’) Department for International Tax Cooperation (‘DITC’) advises that the The International Tax Co-operation (Economic Substance) (Amendment of Schedule) (No. 2) Regulations, 2019 (‘Regulations’) and the Economic Substance Guidance v2.0 (‘Guidance’) have been approved. Important definitions used in The International Tax Co-operation (Economic Substance) Law, 2018 (‘Law’) have been updated and these changes incorporated into the updated Guidance.

If passed into law in its current form, The Monetary Authority (Amendment) Bill, 2019 (‘Bill’) published in the Cayman Islands (‘Cayman’) Gazette, will amend the Monetary Authority Law (2018 Revision) (‘MAL’) to clarify the definition of ‘money laundering regulations’. The definition will be expanded to include regulations made under section 145 of the Proceeds of Crime Law (2019 Revision) (‘PCC Law’), although the Bill currently refers to the earlier 2018 Revision.

Two indictments filed in the Southern District of New York Court have resulted in the arrests of the both the founder of Abraaj Investment Management (‘AJM’), Arif Naqvi (‘Naqvi’), and the former Managing Partner of the Abraaj Group, Mustapha Abdel-Wadood (‘Abdel-Wadood’). Allegations include that Naqvi misappropriated US $230 million to cover cash shortfalls at AJM and its parent company, Abraaj Holdings Ltd. (‘Abraaj Holdings’), a Cayman based separate entity to which Joint Provisional Liquidators were appointed in June 2018. Solomon Harris acts for interested parties and we will be keeping a close watching brief on developments in these New York criminal proceedings.

After a long period without any changes, on 9 April 2019 the Cayman Islands (‘Cayman’) Department of International Tax Co-operation (‘DITC’) has updated its Automatic Exchange of Information (‘AEOI’) Portal News & Updates page (‘Update’). The changes include an update to the AEOI Portal (’Portal’) User Guide to version V5, a new section ‘C’ with FAQs, new information on error notifications for Foreign Account Tax Compliance Act (‘FATCA’) returns and Common Reporting Standard (‘CRS’) status messages, as well as important information on current Country by Country Reporting (‘CbCR’) deadlines.

With the Cayman Islands already the leading jurisdiction for the formation of international investment and financial structures, it comes as no surprise that it has achieved pre-eminence in the establishment of companies undertaking initial coin offerings (ICOs) and security token offerings (STOs), as well as funds investing in cryptocurrencies.

On 2 April 2019 the Cayman Islands ('Cayman') Data Protection Regulations, 2018 ('Regulations') were published in the Gazette, together with a Commencement Order setting a date of 30 September 2019 for the Data Protection Law, 2017 ('Law') to come into force. The Regulations will come into force immediately after the Law comes into force.

The Non-Profit Organisations (Amendment) Law, 2018 (‘Amendment’) comes into force in the Cayman Islands (‘Cayman’) on 1 April 2019. It clarifies which Non-Profit Organisations (‘NPO’) fall within or outside the law. If you are now within the scope of the law and have not been registered the clock is ticking, you must register within 6 months from the 1 April 2019 to avoid penalties.

A decision of the Ontario Superior Court (‘OSC’) has considered what remedy might be appropriate where a trustee has made significant breaches of trust through an innocent lack of understanding. The trust beneficiaries had suffered no loss as a result of the breaches, other than the cost of having documents prepared for the Court to examine what had become of the trust funds. Whilst the decision would not be binding on Cayman Islands Courts it would be persuasive argument.

The Caribbean Financial Action Task Force (‘CFATF’) recently published its Fourth Round Mutual Evaluation Report (’Report’) on the Cayman Islands (‘Cayman’). Over 274 pages it assesses Cayman’s progress towards adoption of ever improving international regulations on matters such as anti-money laundering (‘AML’) and counter the financing of terrorism (‘CFT’) and makes recommendations. The assessment is based on measures in place in Cayman as at December 2017. An online version of the CFATF report including the recommendations is available from

A Special Notice published by the Cayman Islands (‘Cayman’) Department of Commerce and Investment (‘DCI’) informs Real Estate (agent and property developers) ('Real Estate') and dealers in precious metals and stones (‘Dealers’) that under the Anti-Money Laundering (Designated Non-Financial Business and Professions) (Amendment) (No.2) Regulations (‘AML Regulations’) they must register with the DCI as soon as possible. The Special Notice explains the DCI is the organization designated to supervise compliance with the Cayman money laundering prevention regime for such businesses, and gives a deadline of 29 May 2019 for applications. Although the Special Notice specifically references property developers, the DCI have confirmed that they do not yet supervise property developers, but that it is expected that the AML Regulations will be changed to include them. So far there is no definition of 'property developer' in the AML Regulations but it is possible that a definition similar to that used in s.2 of the The Stamp Duty (Amendment) Law, 2018 to define ‘development schemes’ could be adopted.

The Cayman Islands (‘Cayman’) Grand Court (‘Court’) has given important guidance on when a Limited Partner (‘LP’) of a Cayman registered Exempted Limited Partnership (‘ELP’) can insist that a General Partner (‘GP’) provides them with “true and full information” on the financial state of the ELP under Section 22 of the Exempted Limited Partnership Law (2014 Revision) (‘Law’). It also considered when a GP might be able to refuse. 

The Formal Validity of Wills (Persons Dying Abroad) Law 2018 (‘Law’) came into force in the Cayman Islands (‘Cayman’) on 1 February 2019.

What is the Law about?

The Law relates to Cayman’s recognition of formalities required to make a testamentary instrument or act (a ‘Will’) valid in law when it is executed by the person making the Will (‘Testator’). A Testator executes a Will by following formalities required when it is signed, such a signing it in front of witnesses. Importantly, the Law only deals with the valid execution of a Will which disposes of Cayman moveable assets, such as shares, investments or personal effects such as jewellery. It does not change the requirements for a Will disposing of Cayman immovable property (such as real estate) or any interest in land in Cayman.

On 12 March 2019, the European Commission (‘EC’) published its latest list of non-cooperative tax jurisdictions, adding ten jurisdictions to the five already on its list. The list, often called a ‘blacklist’, is composed of countries that either failed to deliver on their commitments to comply with the European Union’s (‘EU’) required good governance criteria, or did not commit to do so at all. The Cayman Islands was not one of the countries added and was recognised as having taken many positive steps to comply with the EU listing process requirements.

The new Cayman Islands ('Cayman') Trusts (Amendment) Law 2019 (‘Amendment’) is due to be heard in the Legislative Assembly's fourth sitting in March 2019, and assuming it passes without amendments from the Bill, it will bring welcome amendments to enhance the existing Cayman regime under the Trusts Law (2018 Revision) (‘Trusts Law’).

UPDATE: The Law has been passed by the Legislative Assembly and published in the Cayman Gazette, but will not come into force until Cabinet publishes an Order setting a date.

What are the main changes? 
The Amendment introduces various enhancements to make it easier for the Cayman court (‘Court’) to correct trustees' mistakes, agree variations of trusts on behalf of minors, unborns and others and to approve the compromising of trust litigation on behalf of beneficiaries. It also bolsters the protection of Cayman trusts under the existing ‘firewall’ provisions and widens the definition of ‘trust corporation’.
How do the changes help trustees correct mistakes? 
The Amendment provides a statutory basis for the Court to correct a trustee’s mistaken exercise of their power (‘Mistake’). In effect, it removes any doubt that the Court will continue to be able to make ‘Hastings-Bass’ type orders in future. The Amendment gives certainty and clarity as to what Mistakes the Court can correct, who can apply to ask for a Mistake to be corrected and gives the Court wide powers and discretion to impose terms and/or conditions when correcting a Mistake.
What can the Court do to correct mistakes?
Under the Amendment the Court can set aside the exercise of any ‘fiduciary power’ (see below) where it is satisfied that the person who has the right to exercise it (or any person delegated to exercise it) (the ‘Holder’) did so mistakenly. The Court can set aside a mistaken exercise of a fiduciary power in whole or in part and in doing so it may impose any terms or conditions or make any order it considers appropriate, provided that in doing so it does not prejudice a bona fide purchaser for value of any trust property who did not have notice of the circumstances behind the mistaken exercise. Importantly, where any part of an exercise of fiduciary power has been set aside it is treated as never having occurred.
What is a fiduciary power?
The Amendment defines a power as including a discretion as to how an obligation is performed. It defines a ‘fiduciary power’ as a power which the Holder must exercise for the benefit of someone other than themselves. It does not matter whether the Holder is a trustee or not or whether they can exercise the fiduciary power alone or jointly with others.
When can a court exercise this power?
An application asking the Court to set aside a Mistake can be made by the Holder, a beneficiary of the trust, the enforcer of a purpose trust or, where the trust is a charity, the Cayman Attorney General. The Court can grant leave to allow any other person to apply. There is no requirement to allege or prove that the Holder or an advisor to the Holder acted in breach of trust or in breach of duty. Instead the Court needs to find that, in exercising their fiduciary power, the Holder did not consider relevant considerations or took into account irrelevant considerations and, as a result, would not have exercised their power, or would have done so at a different time or in a different way.
A new standard will make it easier to vary a trust but still protects minor and unborn beneficiaries
The Amendment allows the Court to approve a variation of a trust on behalf of a minor or as yet unborn beneficiaries where it is satisfied the variation “would not be to the detriment of that person”. This allows the Court a much more flexible approach than it had to varying such trusts under the Trusts Law, which restricted the Court from varying a trust unless it was satisfied “the carrying out [of the variation] would be for the benefit of that person”.
Changes make it easier to compromise trust litigation
The Amendment gives the Court the power to approve the settlement of any trust litigation in its jurisdiction on behalf of any beneficiary provided that it is satisfied that it is not to the beneficiary’s detriment. This replaces the previous requirement that the Court had to be satisfied the settlement would be to the beneficiary’s benefit.
Beneficiaries will benefit from the extension of protection against foreign laws
The Amendment extends the existing ‘firewall’ protections to prevent the operation of any foreign law which might apply to a Cayman trust (or foundation company) by reason of someone’s personal relationship not just to the settlor but also now to “…any beneficiary (whether discretionary or otherwise)”.
Widening of definitions of ‘trust corporation’
The Amendment widens the definition of trust corporation to include not just licensed trust companies but also controlled subsidiaries thereby widening the scope for trustees to retire and bringing the definition into line with what was the definition under the STAR trust provisions.
Solomon Harris
Solomon Harris has many years’ experience in advising trustees and others in fiduciary roles on their duties generally and in specific challenging situations. If you would like further information or advice on how we can help contact Solomon Harris Partner Andrew Miller.
The information contained in this article is necessarily brief and general in nature and does not constitute legal advice. Appropriate legal or other professional advice should be sought for any specific matter.

The Cayman Islands (‘Cayman’) Grand Court (‘Court’) recently blessed the Final Distribution Proposal (‘Proposal’) of a trustee (‘Trustee’) of a family trust (‘Trust’) which benefitted two sisters and their brother. The Court was in no doubt that the Trustee had the power to make the decision and that it should be approved by the Court unless the brother persuaded it that the Proposal was, in whole or in part, irrational.

In a Notice dated 25 January 2019, the Cayman Islands Monetary Authority (‘CIMA’) reminds entities registered under the Cayman Islands (‘Cayman’) Securities Investment Business Law (2015 Revision) (‘SIBL’) of their Anti-Money Laundering (‘AML’) Countering the Financing of Terrorism (‘CFT’) responsibilities. It also sets out issues which have arisen in 2018 audits which may help organisations identify areas which they may need to address in their own organisation to ensure that the expected standards are being met.

A decision from the Ontario Superior Court (‘OSC’) provides a useful summary of the common law ‘red flags’ which help creditors and insolvency practitioners identify when a bankrupt’s assets are held in a sham trust. Of interest was the expert evidence showing a font used in a trust document was not invented until seven years after the document was supposed to have been created.

The Cayman Islands (‘Cayman’) International Tax Co-operation (Economic Substance) Law, 2018 (‘Law’) and  International Tax Co-operation (Economic Substance) (Prescribed Dates) Regulations, 2018 (‘Regulations’) came into force on 1 January 2019. Official Guidance Notes are expected in early 2019 to set out how the new regime will work. Here we consider what steps Cayman entities should be taking to find out if the Law and Regulations apply to them and, if so, whether they carry out the core income generating activities defined in the Law for their business.

NOTE - Definitions used in this piece have been updated. For more information please refer to links in our piece Cayman issues Industry Advisory on Economic Substance Regulations and Guidance v2.0.

As expected, the Cayman Islands (‘Cayman’) International Tax Co-operation (Economic Substance) Law, 2018 (‘Law’) came into force on 1 January 2019. The Law was published in the Cayman Gazette on 27 December 2018 at the same time as the International Tax Co-operation (Economic Substance) (Prescribed Dates) Regulations, 2018 (‘Regulations’) which set the dates from which a relevant entity must satisfy the economic substance requirement in relation to a relevant activity. Guidelines are expected to be published early in 2019.

NOTE - Definitions used in this piece have been updated. For more information please refer to links in our piece Cayman issues Industry Advisory on Economic Substance Regulations and Guidance v2.0.


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