The Cayman Islands has brought into force new legislation allowing for the creation of “foundation companies”, in what experts there are hoping will enable companies established under Cayman company law to function like a civil law foundation, while retaining separate legal personality and limited liability.
Foundations are seen as appealing to investors from countries with a civil law tradition, such as France and certain countries in the Middle East, who are often unfamiliar with trusts and in particular, their concept of the separation of legal and beneficial ownership.
A number of common law financial services jurisdictions have passed legislation in recent years aimed at enabling them to cater to clients from civil law countries, including Jersey, Guernsey and the Isle of Man.
As reported, Gibraltar’s Parliament passed similar legislation in May, following an industry consultation on the matter, in response to demand from wealth management professionals in that territory.
In a guidance document detailing the main points of the new Cayman foundations legislation, two lawyers with Ogier’s Cayman outpost, Anthony Partridge and Fraser Allister, note that the Cayman “foundation companies” structure is “unique” in its approach, relative to those of other jurisdictions, and add that “it is hoped that [this] creative solution will appeal to many clients”.
“It is expected that its uses may include as a holding vehicle for shares in a private trust company, as a protector or enforcer of a trust, as a special purpose vehicle in finance or commercial transactions, including in crypto-currency and other technology offerings, as well as a traditional succession planning vehicle,” they add.
“For private clients, [the Cayman foundations structure] may be an attractive alternative to trusts, particularly for those clients in civil law jurisdictions where there are concerns about the tax treatment of trusts.”