The Cayman Islands to expand beneficial ownership rules

Cayman Islands

The Cayman Islands has prepared changes to legal entities’ beneficial ownership information regime. They are provided for in the Beneficial Ownership Transparency Act, 2023 (the Act), which is expected to come into force shortly. This Act consolidates the existing beneficial ownership provisions of the Companies Act, the Limited Liability Companies Act and the Limited Partnership Act. 

Beneficial ownership registers in the Cayman Islands 

Under the Act, almost all Cayman Islands entities must identify their beneficial owners and provide up-to-date information about them to their corporate services provider (a local company licensed to provide registered office services). 

The corporate services provider creates and maintains a non-public register of information about the beneficial owners of each legal entity it services. In the case of an ordinary Cayman resident company that does not have a corporate services provider, such a company maintains its own register. 

What information does the register contain?

The beneficial owners’ required particulars include: 

  1. full name;
  2. residential address;
  3. an address for service of notices;
  4. date of birth;
  5. nationality;
  6. information from the valid passport, driver’s licence or other government-issued identity document, including identification number, country of issue and date of issue and expiry;
  7. nature in which the individual owns or exercises control of the legal person; and
  8. the date on which the individual became or ceased to be a beneficial owner in relation to the legal entity.

Registers of beneficial owners are maintained on a centralised electronic platform and are not available to members of the general public. They are only accessible by the Registrar of Companies, as well as specific regulatory authorities (on request), in particular the police, financial supervision authority, CIMA, anti-corruption commission, tax information authority and some others.  

Companies exempted from maintaining a beneficial ownership register?

Several categories of companies are exempt from the obligation to maintain a register of their beneficial owners in the above manner. They include: 

  • Companies listed on the Cayman Islands Stock Exchange or an approved stock exchange and their subsidiaries;
  • Companies licensed under a regulatory law;
  • A fund registered under the Private Funds Act or the Mutual Funds Act of the Cayman Islands;
  • Entities exempted by Cabinet (currently none).

However, the mentioned companies are still required to provide the corporate service provider with the relevant particulars of their beneficial owners and written confirmation of their status. The difference is that the corporate service provider does not maintain a register for them but submits beneficial ownership information directly to the competent authority (the Minister in charge of financial services). 

Changes under the new Act

What is changing?Comments
1. Scope of applicationThe Act expands the scope of the beneficial ownership information regime to entities not previously subject to these requirements.These now also include limited partnerships and exempt limited partnerships.
2. The definition of “beneficial owner” The definition of “beneficial owner” has been modified to bring it closer to the corresponding definition under Cayman anti-money laundering legislation. However, the percentage threshold of ownership and control remains at the same level – 25% or more (for the purposes of AML legislation, this threshold is 10% or more). According to the Act, “beneficial owner” in relation to a legal person means an individual who meets any of the following conditions —The individual ultimately owns or controls, whether through direct or indirect ownership or control, 25% 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 orThe individual exercises control of the legal person through other means.If no individual meets the criteria of a beneficial owner, then a “contact person” must be identified. They might be a senior management representative – a director or CEO of the legal entity.A person who acts in relation to a legal entity solely as a “professional advisor” or a “professional manager” cannot be considered beneficial owners.  
3. Who is exempt from the requirement to maintain a BO register?The list of entities exempted from the obligation to maintain a register of beneficial owners at the corporate service provider level has been reduced. Among them only:listed companies; licensed companies;  private funds and mutual funds.  
4. Required particularsThe list of required particulars in respect of beneficial owners has been expanded. The new details include:nationality of each beneficial owner;the nature of each beneficial owner’s ownership or exercise of control over the legal person.
5. Availability to the general publicThe Act does not provide any public access to beneficial ownership information. However, the Cabinet will have the power to authorise the competent authority to provide such access to those applicants who can demonstrate a “legitimate interest” in such information. The “legitimate interest” is interpreted in the light of the Judgment of the European Court of Justice of 22 November 2022. In this judgment, the Court recognised the conflict between the requirement to provide public access to beneficial ownership information and the principle of respect for private life and personal data protection.   Those who may have a “legitimate” interest in obtaining beneficial ownership information include the press and civil society organisations whose activities are related to the prevention/combating of money laundering, as well as persons who need such information when planning transactions with relevant companies.  

What do you need to do to comply with the law? 

Until the new requirements come into force, we can advise companies in the Cayman Islands to:

  • Check existing beneficial owners’ registers with due regard for the updated definition of “beneficial owner”;
  • Prepare additional beneficial owners’ particulars as required by the new Act;
  • Investment funds registered with CIMA should check whether their administrator or corporate services provider can be a point of contact to provide information on their beneficial owners to the competent authority. 
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