The Cayman Islands government has unveiled draft legislation that will require all Cayman registered companies to maintain a register of beneficial ownership that will be accessible to the competent authority in the Cayman Islands through an electronic beneficial ownership platform. The draft legislation does not come as a surprise following the government’s initial public consultation conducted in the course of last year.
The Cayman Islands already has in place a system to collect and verify the beneficial ownership of Cayman companies through regulated corporate service providers, but the government has decided to implement its own enhanced system with a centralised database. The system is based on the UK’s recently introduced register of ‘persons with significant control’ of UK registered companies. Though unlike the UK regime, the Cayman system continues to rely on information collected and maintained by regulated corporate service providers in the Cayman Islands.
The amendments affect Companies Law, LLC Law and Companies Management Law and will require all companies incorporated under the legislation to continue to maintain a register of beneficial ownership at the entity’s registered office, by the provider of the registered office in the Cayman Islands. The register will be searchable only by the relevant competent Cayman Authority.
However, because the Cayman Islands are a UK Crown Dependency the UK authorities can file a request with the Cayman authorities for a search of the Cayman register. In time this may be extended to other jurisdictions, subject to formal agreements being entered into.
Access to the register is otherwise confidential and is not open to public inspection.
The requirement to maintain a register applies to all Cayman companies, subject to certain limited exceptions including listed companies, registered or licensed companies, including Mutual Funds and certain individuals under the Securities and Business Law, and certain other listed or regulated companies.
The register will contain information on individuals who, in summary, hold over 25% of the shares or voting rights in the company, hold the right to exercise or actually exercise significant control over the company, whether directly or indirectly or exercise significant control over a trust or trustee firm, unless in a professional capacity.
The details recorded on such an individual include their full name, date of birth, address, identification details eg passport and the date when they became a registerable person.
In the event of a company’s default in keeping or maintaining the register or failing to reply to requests for information by its Cayman corporate services provider, a restriction notice must be issued on the relevant shares. The notice will, among other matters, prevent the transfer of shares, the exercise of rights under the shares and will also prevent the payment of dividends.
Criminal sanctions can be pursued against the company and its officers. On conviction, fines can be imposed of up to USD$30,490 and imprisonment.
It is anticipated that the bill will be passed into law and will take effect by 30th June 2017.
The draft legislation was announced with amendments to the Common Reporting Standards Regulations and Monetary Authority Law to ensure proper implementation of the OECD’s reporting standards and to demonstrate the Islands’ continuing commitment to meeting international standards of compliance and transparency as part of its drive to remain a leading global financial centre.