Introduction
Following our advisory issued on 11 October 2023, the Beneficial Ownership Transparency Act, 2023 (the “Act”) and the Beneficial Ownership Transparency Regulations, 2024 (the “Regulations”) were brought into force on 31 July 2024 (the “Commencement Date”). Associated Guidance on Complying with Beneficial Ownership Obligations in the Cayman Islands (the “Guidance”) was also published by the Cayman Registry (the Competent Authority for beneficial ownership in the Cayman Islands) (the Guidance, the Act and the Regulations, together the “New BOR Legislation”).
The Ministry of Financial Services for the Cayman Islands (the “Ministry”) has advised industry members to suspend filing beneficial ownership information for existing Cayman entities under the current framework until industry is notified to commence filing under the new beneficial ownership framework. The Ministry has also advised that enforcement relating to the new requirements in the framework will be suspended until early next year, giving clients a few months to prepare for these changes.
Background
Our advisory published on 20 April 2017 sets out in detail the beneficial ownership regime in the Cayman Islands (the “BOR”) that applied before the Commencement Date.
Key Changes to the BOR
The following substantial changes have now been made to the Cayman Islands BOR as a result of the New BOR Legislation:
In Scope Entities
Cayman Islands companies, limited liability companies, limited liability partnerships and foundation companies continue to be in scope for the purposes of the BOR. For the first time, the New BOR Legislation has now brought into scope exempted limited partnerships (commonly used as closed-ended funds) and limited partnerships (together “Legal Persons”). Trusts and registered foreign companies continue to fall out of scope of the BOR.
In addition, entities such as general partners, subsidiaries of regulated entities, entities registered under the Securities Investment Business Act or the Virtual Asset Service Providers Act that were previously exempt from the BOR will now need to identify their registrable beneficial owners (“RBOs”) and provide details of their RBOs to their corporate services provider (“CSP”), save for those entities permitted to utilise the Alternative Compliance Route (as defined below).
Registrable Beneficial Owners
A RBO in relation to a Legal Person means an individual Beneficial Owner or a Reportable Legal Entity (“RLE”).
Individual RBO
The Act defines a “Beneficial Owner” as an individual who meets any of the following specified conditions:
- the individual ultimately owns or controls, whether through direct or indirect ownership or control, twenty-five per cent or more of the shares, voting rights or partnership interests in the Legal Person;
- the individual otherwise exercises ultimate effective control over the management of the Legal Person; or
- the individual is identified as exercising control of the Legal Person through other means.
Where an individual operates solely in the capacity of a “Professional Advisor” (which includes a lawyer, accountant, professional advisor or a financial advisor who provides advice or direction in a professional capacity) or a “Professional Manager” (which includes a liquidator, receiver or restructuring officer who exercises a statutory function), such individual will not be considered to meet the definition of a Beneficial Owner under the Act.
The Act also considers the following persons as individuals:
- a corporation sole;
- a government or government department of a country or territory or a part of a country or territory;
- an international organisation whose members include two or more countries or territories (or their governments); and
- a public authority.
Trustees
Where no individual meets any of the definitions of a Beneficial Owner but the trustees of a trust meets one of the definitions of a Beneficial Owner, the trustees of the trust will be the Beneficial Owners of the Legal Person if they have ultimate effective control over the activities of the trust other than solely in the capacity of a Professional Advisor or a Professional Manager.
Senior Managing Official
If no individual meets the definition of a Beneficial Owner, the Act provides that a Legal Person’s “Senior Managing Official” (“SMO”) will be identified as the contact person. A Senior Managing Official includes (for the first time under the BOR) a director or a chief executive officer of the Legal Person and the Guidance provides further clarity on who to identify as a SMO in this respect.
Reportable Legal Entity
A reportable legal entity or “RLE” in relation to a Legal Person means another Legal Person (other than a foreign company, foreign entity or a foreign limited partnership) that if it were an individual would be a beneficial owner of the first mentioned legal person.
It is not necessary for a Legal Person to report individual beneficial owners of a RLE since that entity will itself have its own reporting obligations under the New BOR Legislation.
Alternative Compliance Route
Any Legal Person:
- licensed under a regulatory law[1];
- listed on the Cayman Islands Stock Exchange or an approved stock exchange[2]; or
- that is a subsidiary of an entity listed on the CSX or an approved stock exchange,
may provide their CSP with details of their regulatory license or listed status rather than provide details of their RBO. The Legal Person’s CSP will in turn provide this information to the Competent Authority and this process is the “Alternative Compliance Route”.
Investment Funds
Legal Persons which are registered as mutual or private funds (“Registered Funds”) with the Cayman Islands Monetary Authority (“CIMA”) may provide their CSP with details of a “contact person” rather than their RBOs. The contact person will not be required to maintain a beneficial ownership register, but must provide the Competent Authority with the requested beneficial ownership information within twenty-four hours of a request being made, or at any other time as the Competent Authority may reasonably stipulate. Campbells Corporate Services Limited proposes to act as the contact person for its Registered Fund clients and further particulars will be provided by us in due course on implementing this arrangement.
Alternatively, Legal Persons who may otherwise avail themselves of the Alternative Compliance Route may decide to opt in to the BOR and provide details of their RBOs to their CSP.
Obligations on Legal Persons that do not benefit from the Alternative Compliance Route
Such Legal Persons must:
- identify every RBO;
- give written notice to those individuals or entities which have been identified as RBO’s and to any individuals or entities whom the entity reasonably believes may be a RBO. That notice requires each addressee to respond within 30 days of receipt, confirming whether the individual or entity is a RBO and, if so, to confirm or correct any of the information required to be inserted in the BOR;
- establish and maintain an up to date beneficial ownership register which includes the RBOs of such Legal Person. The register must be kept at the Legal Person’s registered office and is typically maintained by the Legal Person’s CSP;
- where it becomes aware that there has been a ‘relevant change’[3] to the information contained in the BOR, give notice as soon as reasonably practicable (and no later than 30 days after it becomes aware of the relevant change) to the RBO requesting confirmation of the change;
- provide the required particulars of its RBOs which includes:
- in respect of individuals:
- name;
- address;
- date of birth;
- nationality(ies);
- information from their unexpired and valid passport, driver’s license or other government issued identification document;
- the nature in which the individual owns or exercises control of the Legal Person;
- the date on which the individual became (or ceased to be) a RBO;
- in respect of RLEs:
- name;
- address of registered or principal office;
- legal form and law by which it is governed;
- the date on which the RLE became (or ceased to be) a RBO.
- in respect of individuals:
Statutory Offences and Penalties
The Act includes various offences and penalties and directors, managers, officers and partners of the Legal Person may also be liable to the same penalty as the Legal Person. The Competent Authority also has the power to impose administrative fines on any person who breaches the relevant provisions of the New BOR Legislation. The Competent Authority may strike an in-scope entity off the Register if an administrative fine remains unpaid for 90 days.
Public Accessibility
The Act provides that beneficial ownership information can only be made available to the public if and when regulations have been proposed by Cabinet and affirmed by a future resolution of Parliament. It is expected that there will be some limited access for persons with “legitimate interests” in due course and we will provide further information on this as and when available.
At present the major Cayman Islands authorities can access the centralised electronic platform established by the Competent Authority on which the registers of beneficial ownership are maintained.
The United Kingdom has entered into an agreement with the Government of the Cayman Islands for the sharing of beneficial ownership information.
Next Steps
Campbells can assist with all of these aspects. Please do not hesitate to contact your usual Campbells contact if you have any questions or require any additional assistance. As mentioned above, Campbells Corporate Services Limited will contact clients if the New BOR Legislation requires additional information or confirmations.
[2] As set out in Schedule 4 to the Cayman Islands Companies Act
[3] A relevant change occurs if:
– a RBO ceases to be a registrable beneficial owner in relation to the Legal Person; or
– any other change occurs as a result of which the ‘required particulars’ of a RBO in the Legal Person’s beneficial ownership register are incorrect, incomplete or not current.
