In an Industry Advisory dated 8 April 2016 the Cayman Islands (‘Cayman’) Ministry of Financial Services advised that the Department for International Tax Cooperation (‘DITC’) will take a soft approach to enforcement of notification and reporting due dates for 2016 under agreements for the United Kingdom Commonwealth Dependencies and Overseas Territories (‘UK CDOT’) and United States of America Foreign Account Tax Compliance Act (‘US FATCA’). The deadlines under both agreements are 30 April 2016 for Notifications and 31 May 2016 for Reporting, but the Ministry advises that provided Cayman Reporting Financial Institutions (‘FIs’) comply with the new dates below there will be no enforcement measures or other adverse consequences. The DITC’s Automatic Exchange of Information (‘AEOI’) News and Updates page (see AEOI_News_&_Updates.pdf) has given details of current and pending updates to its AEOI Portal User Guide (‘Portal Guide’) in March and April 2016, and further guidance in the form of AEOI FAQs should be online soon. Below is a summary of the latest updates as at 12 April 2016, but readers should always check the news and Updates page and Portal Guide for details and the latest updates - AEOI Portal User Guide).
Cayman Minister of Finance speaks out on effective global collaboration by law enforcement and tax authorities
The Cayman Islands (‘Cayman’) Minister for Financial Services and the CEO of the financial services industry body, Cayman Finance, have both issued statements addressing the issues raised by the recent leak of information from a law firm in Panama. The leak has drawn negative press attention to international financial centres (IFCs), including those which are not mentioned in the leaked documents (like Cayman). In their statements, Minister Panton looks at current and future action being taken to further improve international transparency for the future, whereas Mr Scott of Cayman Finance stresses the need for a clear understanding of the positive role which international financial centres play in the global economy.
The United Kingdom Court of Appeal has considered whether any or all of a meeting between a firm of solicitors and a litigant in person was covered by without prejudice protection. Here we look at how the Court approached the situation where there was no agreement or statement that the meeting would be conducted without prejudice, the ostensible purpose of the meeting was not to negotiate settlement of the litigation and parts of the meeting were open. We also look at how the Court addressed the issue of whether the protection had been waived or was being abused.
A decision of the Cayman Islands (‘Cayman’) Grand Court (‘Court’) has created uncertainty on whether the Directors of a Cayman company incorporated prior to November 2009 can petition for the company’s winding up (i.e. liquidation) without the sanction of the company’s shareholders. Here we look briefly at the uncertainty generated by the decision and what steps directors might take until the issue is clarified.
The European Commission (‘EC’) has responded to the advice from the European Securities and Markets Authority (‘ESMA’) on extension of the Alternative Investment Fund Managers Directive (‘AIFMD’) passport regime. It has asked that ESMA complete the third country assessments of the Cayman Islands (‘Cayman’) and the United States (‘US’) by June 2016.
The Limited Liability Companies Bill, 2015 (the ‘Bill’) was published in the Cayman Islands (‘Cayman’) on 18 December 2015. This legislation is expected to result in Limited Liability Companies (‘LLCs’) being available in Cayman as an alternative form of corporate entity sometime during the first half of this year.
STANDARD FOR AUTOMATIC EXCHANGE OF FINANCIAL ACCOUNT INFORMATION IN TAX MATTERS
The Standard for Automatic Exchange of Financial Account Information in Tax Matters (also known as the “Common Reporting Standard” or “C.R.S.”) is a global system of automatic exchange of information for tax purposes (“A.E.O.I.”). As of January 1, 2016, financial institutions (“F.I.’s”) in jurisdictions that have signed up as members of the Early Adopters Group (“E.A.G.”) of the C.R.S. are obligated to gather identification and residence information from new account holders to pass it to their jurisdictions’ reporting authority in order to enable reporting of the accounts. By 2018, the 96 jurisdictions that have adopted the C.R.S. will be exchanging information on those account holders identified as reportable between their respective reporting authorities. F.I.’s and tax authorities still need to work through all the details, but below is a brief introduction to the system, how it is expected to work, and some potential pitfalls.
Property Alliance Group v The Royal Bank of Scotland
The UK High Court (‘Court’) has considered whether secret recordings made by one party prior to the start of litigation are covered by ‘litigation privilege’. The recordings were of meetings between the founder ('R') of Property Alliance Group Limited (‘PAG’) and former employees of a division of a UK bank (‘RBS’) who thought the meetings were for them to attract future work from PAG and who were not aware that their meetings were being recorded.
Having obtained a judgment for money to be paid to you against a party with assets in the Cayman Islands, the next step is to enforce that judgment against those assets. Unless your judgment is from certain states in Australia, then your judgment may only be enforced at Common Law.
The Cayman Islands (‘Cayman’) Department for International Tax Cooperation (‘DITC’) has issued an Industry Advisory for Cayman financial institutions (‘FI’s) on the latest developments towards the implementation of the Common Reporting Standard or CRS. Progress includes updated Self Certification Forms, a list of participating jurisdictions, and the designation of certain limited life debt investment entities as Non Reporting Financial Institutions.
The CRS is part of the Organisation for Economic Co-operation and Development’s (‘OECD’) Standard for Automatic Exchange of Financial Account Information in Tax Matters ('the Standard’). As an early adopter, the Cayman Islands is getting procedures ready for FIs to be able to record tax residence in all new accounts opened from 1 January 2016.
Kam Leung Sui Kwan v Kam Kwan Lai and Ors
The Hong Kong Court of Final Appeal (‘HKCFA’) recently considered when a Hong Kong Court has jurisdiction to wind up a foreign holding company which does no business in Hong Kongand whose only assets are shares in a company also incorporated outside Hong Kong. The decision concerned a British Virgin Islands (‘BVI’) incorporated company (‘YKH’) but it will interest those operating a family owned business structure using Cayman Islands (‘Cayman’) holding companies.
When making a Will it is important to make sure everything is explained clearly and precisely: it contains your instructions for a time when you are no longer available to correct any mistakes. Here we take four recent cases from the Courts of England and Wales to show how easy it is to get things wrong, the consequences, and look at how those cases would be treated in the Cayman Islands.
Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Limited v Beavis
Contracts governed by Cayman Islands (‘Cayman’) law which contain clauses relating to the consequences of breach of contract, in particular standard terms and conditions, should be reviewed to take account of a new approach to penalty clauses.
It has been a long established rule in common law jurisdictions such as Cayman that a penalty clause is unenforceable. A decision of the highest appeal court in the UK, the Supreme Court (‘UKSC’), has reviewed the accepted approach to these clauses. It sets out for the future how to consider when the penalty rule applies, and what makes a contractual provision for consequences of breach penal. The decision would be highly persuasive authority in a Cayman Court and here we consider the review and its effect.
In re: Berau Capital Resources Pte Ltd.
A decision of the Southern District of New York Bankruptcy Court (‘SDNYBC’) (In re: Berau Capital Resources Pte Ltd (‘Berau’)) will be of interest to liquidators of Cayman Islands entities when considering whether they can seek Chapter 15 recognition in the US of their appointment and, thereby, get assistance in carrying out their functions from the US Courts. Whilst we draw attention to the decision as a point of interest, we do not offer advice on this or any matter of New York law, which should only be given by appropriately qualified US attorneys.
Progress continues on the Organisation for Economic Co-operation and Development’s (‘OECD’) Standard for Automatic Exchange of Financial Account Information in Tax Matters ('the Standard’). On 16 October 2015, the Cayman Islands Department of International Tax Co-operation (‘DITC’) published its regulations under the Standard. The OECD also recently launched a new Portal and released two new publications – a handbook on implementation of the Standard and a second edition of Offshore Voluntary Disclosure Programmes.
IRS transitional rules and Cayman DITC Updates
AEOI under FATCA begins
On 2 October 2015 the United States Internal Revenue Service (‘IRS’) announced that it had met a key deadline of 30 September 2015 for the exchange of financial account information with certain foreign tax administrations (those with reciprocal Intergovernmental Agreements), under the Foreign Account Tax Compliance Act (‘FATCA’). In an announcement to mark this significant step, IRS Commissioner John Koskinen recognised and appreciated efforts of jurisdictions for "the assistance of our counterparts... who have helped to make this possible". Cayman Islands reporting financial institutions (‘FI’s) should have already submitted their Notifications and Returns to the Cayman Islands Automatic Exchange of Information (‘AEOI’) Portal by 25 September 2015.
On 13 October 2015 the Chair of the European Securities and Markets Authority (‘ESMA’) confirmed that ESMA will assess the Cayman Islands for the possible extension of the Alternative Investment Fund Managers Directive (‘AIFMD’) passport.
A ‘key area’ of work
In an address to the Economic and Monetary Affairs Committee at the European Parliament, ESMA’s Chair identified three key areas on which further work by ESMA is required in the short term in regard to the extension of the passport to non-European Union (‘EU’) countries. The first was to continue its existing incomplete assessments, and the second that ESMA - will start to assess a second group of non-EU countries, namely Australia, Canada, Japan, the Cayman Islands, the Isle of Man and Bermuda....
A positive statement
The third key area of work was that ESMA - will focus on putting in place the extensive framework foreseen by the co-legislators in case the passport is indeed extended to one or more non-EU countries. This last element includes making preparations for ESMA's role in the functionning of the passporting system and to strengthened supervisory cooperation that that will be crucial to its success
It would seem positive that the Chair has announced that ESMA “will focus” on putting the framework in place and prepare for the “functioning” of the passport system before the European Commission (‘EC’) has announced its decision on whether to extended the AIFMD passport to non-EU countries. It indicates that ESMA itself, or at least its Chair, considers that the EC will extend the AIFMD passport. The EC decision was due on 22 October 2015 deadline, but so far there has been no announcement or information when one will be made.
The Cayman Islands Legislative Assembly has passed two new laws to provide an ‘opt-in’ regime which will eventually allow Cayman-domiciled funds and fund managers with European Union (‘EU’) connections to be included in the passport regime under the EU’s Alternative Investment Fund Managers Directive (‘AIFMD’).
A July 2015 Cayman islands (‘CI’) judgment dismissed a winding up petition (‘Petition’), holding that it was an abuse of process for Petitioners to present a petition to wind up a CI Exempted Limited Partnership (‘ELP’) when they were contractually precluded from doing so by a term of the Limited Partnership Agreement (‘LPA’) which they had agreed to and signed. Here we look at the Judge’s reasons, published by the Grand Court (‘Court’) on 16 September 2015.
New regulations for the annual returns of Cayman Islands Mutual Funds (‘Funds’) come into force on 15 September 2015. The Mutual Funds (Annual Returns) (Amendment) Regulations 2015 (the ‘New Regulations’) set out additional information which needs to be provided in an Annual Return.
Real Estate Agents and Property Developers have until 29 May 2019 for AML Registration...
A Special Notice published by the Cayman Islands (‘Cayman’) Department of Commerce and...