The Cayman Islands (‘Cayman’) is set to introduce a new entity ideally suited to professionals looking for the flexibility of a traditional partnership, but with the protection of a separate corporate identity – the Limited Liability Partnership (‘LLP’). As well as benefitting those who do business in Cayman, the legislation is drafted widely enough to allow the use of Cayman LLPs internationally.
When will this happen?
The Limited Liability Partnerships Bill 2017 was Gazetted on 31 January 2017 and it is expected to be passed by the Cayman Legislative Assembly later this month, parliamentary time permitting.
A recent Northern Ireland Court of Appeal (‘Court’) decision, which would be considered persuasive authority here in the Cayman Islands (‘Cayman’), looked at whether a view, specifically a ‘view of the sea’, can be protected. The case looked at the interpretation of covenants generally, including the interpretation of being unreasonable when enforcing a covenant. At stake was the loss of all or part of a sea view. The case will be of interest to anyone looking to enforce or interpret either a covenant over land, to protect their view or interpreting conflicting terms in a contract.
In adding a ‘Second Tranche’of regulations (the ‘2016 Regulations’) to the existing 2015 Regulations for the Common Reporting Standard (‘CRS’), the Cayman Islands (‘Cayman’) Government (‘CIG’) has introduced a new Notification deadline of 30 April 2017 (one month before the Reporting deadline of 31 May 2017) for Cayman Financial Institutions (‘CFIs’) (including a nil return requirement) and Cayman Reporting Financial Institutions (‘CRFIs’). There are fines and criminal offences for default. The CIG is expected to combine both Regulations (the ‘Regulations’) later in the year, but until then they need to be read together. Those with Cayman entities should consider taking professional advice on the effect of the Regulations as soon as possible.
The England and Wales High Court (‘Court’) has found that notes prepared by in house and external attorneys as part of a contract review were not automatically privileged from disclosure in subsequent litigation. The case ('Astex') serves as a reminder that privilege cannot be claimed automatically simply because a document has been prepared by an attorney, and that once again advice should be sought at an early stage on whether a document or class of documents is or will be privileged. The decision in Astex (and in RBS where Astex was applied) would be persuasive authority in the Cayman Islands (‘Cayman’).
The Cayman Islands Monetary Authority (‘CIMA’) has made changes to its notification process for Fund Annual Return (‘FAR’) fees and is continuing to roll out its Regulatory Enhanced Electronic Forms Submission (‘REEFS’). Details were given in a CIMA Notice dated 16 December 2016 and updated on 19 December 2016.
The Cayman Islands (‘Cayman’) the National Pension (Amendment) Law 2016 (‘Amended Law’) will come into force on 31 December 2016, although key changes will come into effect in the first three months of 2017, to allow preparation of the necessary regulations. The related Normal Age of Pension Entitlement Option Order (‘NAPEO’) will come into effect as of 1 January 2017.
Your new Caribbean winter home
Snowbirds are the fortunate few with the time and money to spend their winter months away from the bustle and cold of a North American winter. Those looking for a safe English-speaking option should consider the advantages of the Cayman Islands, a small Caribbean territory with a stable government, affordable healthcare, no income, capital gains, inheritance or real estate taxes, and just a four hour flight from New York City. Those with a healthy annual income and capital to invest might want to consider their residency options as a Person of Independent Means (see below).
The latest Legal 500 review of Cayman Islands law firms and attorneys has once again recommended Solomon Harris’ attorneys in all five commercial practice areas, staying top ranked in Insurance/Reinsurance, with improved rankings in Corporate and Commercial work, Investment Funds and Real Estate, and a sustained good ranking in Dispute Resolution.
The Legal 500 team researches Cayman legal teams ‘providing the most cutting edge and innovative advice to corporate counsel’ and this year the rankings and research highlight not just our attorneys' knowledge and understanding, but also their responsiveness, innovation and approachability. The results by practice area are:
The Cayman Islands (‘Cayman’) Court of Appeal (‘CICA’) has ruled that the test of whether a company is able to pay its debts (‘the cash flow test’) is not confined to consideration of debts that are immediately due and payable, but also allows consideration of debts that will become due in the reasonably near future. In the same judgment the CICA decided that a decision to pay redemptions in the order in which the redemption requests were made, was a policy to prefer those whose requests were made in December over those whose requests were made in January. As any policy relating to the payment of redemptions means that some redeemers are paid before others, the decision leaves open the possibility that liquidators may claw back any or all redemption payments as preferences. These decisions have binding authority on the Grand Court of the Cayman Islands’ ('Grand Court') approach to whether a company is unable to pay its debts, and whether payments were made with an intention to prefer in claims brought under section 145 of the Cayman Companies Law (2016 revision) (‘the Law’). This is a distinct departure from previous decisions on both these points and will require anyone involved as a director or creditor (including redeemed shareholders) of a Cayman company to re-think they way they deal with payments to creditors. There are a number of other points of interest in the decision but here we concentrate on these two very fundamental shifts in the law.
A Scheme of Arrangement under section 86 of the Cayman Islands (‘Cayman’) Companies Law (2016 Revision) (‘Scheme’) remains a truly useful tool for non-hostile takeovers, mergers and acquisitions. However, many shareholders of a takeover target company (‘the Target’) are daunted by the task of working their way through the weighty document package their company has sent them in the short time allowed before they have to vote for or against the Scheme. Here are ten points to bear in mind whilst reviewing the Scheme documents.
1. What is a Scheme of Arrangement?
In a Scheme where a bid company (‘the Bidder’) wishes to take over the Target, the Bidder and Target agree the terms of the Scheme, which will usually be that the shareholders take cash or shares in exchange for either the cancellation of their shares in the Target or the transfer of those shares to the Bidder.
A September 2016 judgment of the Cayman Islands (‘Cayman’) Grand Court, obtained by Solomon Harris on behalf of Receiver clients, has clarified for the first time that a Cayman segregated portfolio company (‘SPC’) can terminate an individual segregated portfolio (‘Cell’) if the Cell has either no assets, or no liabilities. The decision is a welcome clarification to Directors of how to operate section 228A(1) of the Companies Law (2016 Revision) (‘Companies Law’), and means that Directors of an SPC can pass a resolution to terminate a Cell if it becomes insolvent and has no assets.
On 18 August 2016 the United Kingdom (‘UK’) Government published consultation documents on proposed reforms to the taxation of non-domiciles (see below). They include draft legislation to implement the July 2015 UK Budget proposals to make UK residential Property (‘UKRP’) subject to UK inheritance tax (‘IHT’) where that property is owned by an overseas company (which would include one incorporated in the Cayman Islands (‘Cayman’)).
Solomon Harris has achieved court approval of the Share Capital Reduction (‘SCR’) of a Cayman Islands (‘Cayman’) company without the need to produce a list of creditors and seek their approval for the SCR. This significantly reduced the time and costs involved. Here we discuss when and how court approval of an SCR can be obtained without creditor involvement.
In an August 2016 update to its online document AEOI Portal updates and Industry Advisories, the Cayman Islands (‘Cayman’) Tax Information Authority (‘TIA’) has given Cayman financial institutions (‘FI’s) an extension to Friday, 2 September 2016 to complete their notification and reporting under the United States of America (‘US’) Foreign Account Tax Compliance Act (‘FATCA’) and United Kingdom (‘UK’) CDOT (Crown Dependencies and Overseas Territories) (‘CDOT and FATCA’).
A party to without prejudice negotiations may be allowed to give evidence in court of what another party said in those same negotiations, where excluding that evidence would act as a cloak for perjury, blackmail or other‘unambiguous impropriety’. An example of this can be found in recent a decision of the England and Wales Court of Appeal (‘EWCA’), which, whilst it is not binding on the Cayman Islands (‘Cayman’) Grand Court, would be considered persuasive authority.
The Confidential Information Disclosure Law, 2016 (‘CIDL’) came into force in the Cayman Islands (‘Cayman’) on 15 July 2016, replacing the Confidential Relationships (Preservation) Law, 2015 (‘CRPL’).
What has changed?
The introduction of the new law means that a breach of duty of confidentiality is no longer a criminal offence in Cayman. However, a person whose confidentiality is breached can sue the person who divulged the confidential information.
… ESMA is of the view that there are no significant obstacles regarding competition and market disruption impeding the application of the AIFMD passport to the Cayman Islands.
On 19 July 2016 the European Securities and Markets Authority (‘ESMA’) produced its latest advice to the European Commission (‘EC’) on the extension of the Alternative Investment Fund Managers Directive (‘AIFMD’) passport arrangements to non-European Union (‘EU’) countries. Whilst ‘… ESMA is of the view that there are no significant obstacles regarding competition and market disruption impeding the application of the AIFMD passport to the Cayman Islands’, as the Cayman Islands (‘Cayman’) is in the process of implementing new regulatory regimes ESMA has taken the view that, whilst the draft legislation and proposals are positive, it cannot give definitive advice on the application of the AIFMD passport to Cayman until those final rules are in place. Cayman investment funds may continue to be marketed in the EU under national private placement regimes (‘NPPR’s) until at least 2018.
Someone not leaving a Will, or leaving an ill-considered or improperly prepared Will which results in a legal challenge, can have devastating consequences on the finances and family relationships of those left behind. We recently looked at some everyday events which should prompt the review of a Will, and here we look at some recent judgments which highlight what challenges may arise and, in some cases, just how long it can take to resolve a challenge to a Will.
The provisions of The Limited Liability Companies Law, 2016 (the ‘Law’) came into force on the 8 July 2016. The Law was passed on 28 April 2016, and its provisions were brought into force by the Limited Liability Companies Law, 2016 (Commencement) Order, 2016. Limited Liability Companies (‘LLCs’) are now available to those wanting to establish a new corporate entity in the Cayman Islands (‘Cayman’), and the Law also includes a mechanism for converting existing companies into LLCs. Cayman LLCs will be particularly useful for those setting up master/feeder structures that include a Delaware LLC as it will enable investment managers to use the same type of corporate entity and documentation throughout the structure.
“Without question, the world is in for a period of great uncertainty over the course of the next year and perhaps beyond…In this sea of uncertainty Cayman is an increasingly attractive place to live, work, invest and do business.” Cayman Premier Alden McLaughlin 24 June 2016.
In his address to the Cayman Islands (‘Cayman’) Legislative Assembly on the result of the United Kingdom’s (‘UK’) referendum on whether to ‘Remain’ in or ‘Leave’ the European Union (‘EU’), Cayman Islands Premier Alden McLaughlin reminded members that “the sound financial position of the Cayman Islands Government and the growing strength of our economy make us an excellent option for businesses and investors looking for a safe haven amid the current political and economic turmoil.” (Premier's statement) The consequences of the referendum for the UK, the EU and the rest of the world are being debated elsewhere, but here we look at whether and how the result may affect Cayman.
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