Cayman’s LLC law seen in force by July
New legislation to provide for the creation of limited liability companies in the Cayman Islands, similar to those in such other jurisdictions as Delaware, is expected to come into force by the end of this month, following its official publication by the government.
According to an update of the law on the website of Cayman’s Maples & Calder law firm, the Limited Liability Companies Law 2016 “has a delayed implementation date, and will be brought into force by way of a separate commencement order, which is anticipated to be published and take effect in late-June 2016”.
Once the LLC Law takes effect, businesses will be able to “form and register a new Cayman Islands limited liability company, or LLC; migrate an entity organised in another jurisdiction into the Cayman Islands as an LLC – including from Delaware – whether for regulatory or other reasons; convert an existing Cayman Islands exempted company into an LLC; and merge an existing Cayman Islands exempted company into an LLC”, Maples & Calder noted.
It added that the flexibility of the new structure “will lend itself to a broad range of structuring applications”, making it likely to become “a useful addition to the Cayman Islands’ product offering”.
The introduction of the LLC has been “eagerly anticipated, particularly by the investment funds and venture capital industr[ies]”, according to an analysis on the website of Campbells, another Cayman law firm.
The analysis notes that the legislation had been developed as a joint effort between the Cayman Islands Government and the Cayman Islands Monetary Authority in consultation with representatives from industry bodies, including Campbells.
However, it adds, “while the Cayman Islands has sought to broadly follow the Delaware LLC Law, it has adapted [it] for consistency with Cayman Islands legal principles”, for example, by preserving certain broad legal principles applicable to companies and the rules of equity and common law.
“[The LLC] will be of interest to fund managers, by offering a level of commonality in Cayman Islands structures to those which they see in the US investment funds market (such as Delaware LLCs),” the Campbells’ analysis adds.
“The LLC Law and LLC concept have been well received by our clients, most notably those in the hedge, private equity and venture capital funds sectors in North America.
“It is also of interest to those wishing to use Cayman Islands vehicles in corporate transactions, special purpose vehicles and joint-venture arrangements, due to the differences in duties owed by managers – the LLC equivalent of company directors – and the ability for a written operating agreement, to allow for provisions such as weighted voting rights of managers.”
In addition, “Fiduciary risk for those managing an LLC can be curtailed when compared to the risks of acting as a director of a Cayman Islands company”.
To see the law on the Cayman Islands’ government website, click here.