Hedge Funds in the Cayman Islands

The Cayman Islands constitute the world’s fifth biggest financial centre. There are about 580 licensed banks and trust businesses in the Cayman Islands with assets of around US$747.6 billion. forty seven of the world’s fifty leading banks have a presence within the Cayman Islands.

The Cayman Islands is among the major offshore jurisdictions for money with more than 3,600 regulated mutual funds. There are additionally a number of unregulated money in the Cayman Islands that belong under available exemptions. In the last several years, the Cayman Islands have emerged as the jurisdiction of preference for a lot of hedge fund managers. Actually, it’s been estimated that more than eighty per cent. of all the new offshore hedge funds are domiciled in the Cayman Islands. Why are the Islands like an appealing jurisdiction?

Authorized Framework

The laws on the Cayman Islands are significantly founded upon English common law, and also a selection of “key” English statutes with the inclusion of neighborhood statutes which happen to have in several aspects changed and modernised the popular law to mirror the needs of the worldwide financial market. This offers Cayman Islands law as well as legal system a typical origin with all those of most of the jurisdictions of its subscribers. Additionally, it would mean that the fund vehicles free and the forms of securities provided by them are nicely recognised and accepted around the planet.

Buildings Available

You will find 3 primary structures available: the business, the limited partnership as well as the unit trust.

Unit trusts are especially favoured by promoters hoping to promote the money of theirs to investors in Japan. This’s because participations in a device trust are considered much more acceptable or maybe beautiful than shares in a business or perhaps passions in a small partnership. Products might lead to far more favourable tax treatment for the investor or perhaps, in various other jurisdictions, provide regulatory advantages.

Cayman hedge funds trust law primarily uses English trust law and utilizes the sizable body of English case law on the topic. The idea of a device trust is that subscribers add money to some trustee that in essence has those funds as custodian whilst they’re handled by the expenditure manager for the gain of the subscribers, referred to as unitholders. Each unitholder is entitled to a pro rata share of the trust’s assets.

For investors outside Japan, the most typical car for mutual funds in the Cayman Islands is the business.

Businesses are nearly constantly incorporated with limited liability; although it’s likely to integrate companies with limitless liability or perhaps with liability restricted by guarantee. The responsibility of any shareholder of an enterprise incorporated with limited liability is restricted to the amount given up and also agreed being paid up on the shares taken by that shareholder.

Shares of the identical class in a business rank equally with one another. Nevertheless, by appropriate adaptation of the posts of association (constitutional documents) of the business, it’s likely to produce separate share classes (or maybe sort series inside the exact same class). This might be required if, for instance, performance fees payable on the expenditure manager are being estimated on a per investor basis or maybe if specific types of investors aren’t allowed to get involved in a few martial arts classes or assets of assets.

The great bulk of Cayman Islands companies issue shares of a reported par worth (although no par value shares are permitted). The Cayman Islands legislation permits amounts standing up on the recognition of a company’s share premium account to be utilized for dividends or maybe any other distributions, subject on the business currently being solvent, even if no earnings can be found.

Shares in a Cayman Islands business might be redeemed or even repurchased from capital, governed by the business being ready paying its debts as they belong thanks in the typical course of small business.

The other main form of investment vehicle that the Cayman Islands currently offers will be the limited partnership. The limited partnership idea is basically like that which is true in the Country and really the Exempted Limited Partnership Law of the Cayman Islands relies considerably on the Delaware equivalent. For that purpose, the limited partnership is extremely well known with United States promoters and the advisors of theirs.

Each one of the readily available automobiles could be applied to make some financial investment fund structure like master/feeder, umbrella, multiclass, multiple allocator (replicating partnership accounting inside a corporate vehicle) along with hybrid debt/equity structures.

Basic Advantages

Along with the authorized framework of its, the Cayman Islands has the next basic advantages for establishing mutual funds:

Quality of Local Service Providers

The caliber of the service providers (attorneys, mutual fund administrators, company managers, trust companies, etc.) in the Cayman Islands is typically pretty large. Of specific interest to Japanese fund managers and promoters is the fact that you will find Cayman Islands service providers placed inside the Asian region making the Islands an incredibly good jurisdiction for offshore funds.

Speed of Formation

The fund automobile may be determined quickly, typically within 1 working day of the constitutional documents currently being settled, and without the demand for any previous governmental approvals.

Absence of Tax

The Cayman Islands lack direct taxes of any sort. There aren’t any salary, capital gains, corporation, withholding taxes or even death duties. Under the conditions of relevant legislation it’s likely for all of the kinds of fund vehicle – the business, the device trust as well as the limited partnership – to register with and also use on the federal government of the Cayman Islands for a written undertaking which they won’t be subject to different descriptions of direct taxation, for a minimum time, that in the situation of a business is normally 20 years and also, within the case of the device trust plus limited partnership, 50 years.

Absence of Exchange Control Restrictions

There aren’t any exchange control restrictions or maybe laws in the Cayman Islands (unlike a number of other jurisdictions, together with several of the Cayman Islands’ offshore competitors). What this means is that money could be readily transferred in and outside of the Cayman Islands in unlimited quantities.

No Local Service Providers Required

There’s no necessity that a Cayman Islands’ fund must have some local officers or directors; these could be supplied by the advisors, administrators, promoters or maybe the investors themselves. Neither is there any necessity for community service providers, for instance, custodians or administrators; except that for funds regulated under the Mutual Funds Law, there’s currently a necessity for their audited accounts being signed off by a neighborhood firm of auditors.

No Requirement for Annual Shareholder Meeting

Expenses might, if desired, be minimised by virtue of the lack of a statutory obligation for business meetings being kept inside the Cayman Islands. There’s no necessity that an exempted company hold any shareholders’ meetings at many, if the shareholders or maybe directors don’t want to do it. Neither is there any necessity to keep directors’ group meetings in the Cayman Islands.