Aug 12, 2024
Key takeaways
A corporate services provider ("CSP") is a licensed provider of registered office services to a Legal Person. All Legal Persons are required to have a CSP.
You can check to see what if any regulated status a Legal Person has by searching the database maintained by the Cayman Islands Monetary Authority ("CIMA") here. This can be done for you by Walkers Professional Services ("WPS") if it is engaged as CSP for your entities.
Instead of identifying and reporting their RBOs to their CSP, CIMA registered mutual funds and CIMA registered private funds may opt for an alternative route to compliance whereby they need only to provide their CSP with contact details of a contact person licensed or registered by CIMA for providing beneficial ownership information (typically a CSP) or a licensed fund administrator located within the Cayman Islands (a "Contact Person").
The Contact Person is a liaison who facilitates communication between the Legal Person and the Registrar of Companies or Registrar of Partnerships, as applicable (together, the "Registrar"). A Contact Person is not required to maintain a beneficial ownership register or beneficial ownership information in respect of the relevant Legal Person but must have access to such information so that it is able to provide the competent authority with any requested beneficial ownership information within 24 hours of a request being made or at any other time as the competent authority may reasonably stipulate. WPS is able to act as Contact Person subject to agreement.
A list of approved stock exchanges is set out in Schedule 4 of the Companies Act here. This can be done for you by WPS if it is engaged as CSP for your entities.
A Beneficial Owner in relation to a Legal Person means an individual (other than a Professional Advisor or a Professional Manager) who meets any of the following specified conditions:
a) 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;
b) the individual otherwise exercises ultimate effective control over the management of the Legal Person; or
c) the individual is identified as exercising control of the Legal Person through other means.
Where no individual meets any of the above specified conditions and the trustees of a trust meet one of the specified conditions in relation to the Legal Person, the trustees of the trust are 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.
Where there is no individual that meets the requirements above in respect of a Legal Person, the Senior Managing Official must be identified by name as the contact person. The Senior Managing Official may be contacted by the competent authority for enquiries relating to the ownership and control of the Legal Person.
See FAQ 8 on the meaning of holding an interest directly. See FAQs 9 to 11 in relation to indirect holdings. See FAQ 16 for the meaning of "ultimate effective control". See FAQ 17 for the meaning of "control through other means". See FAQ 33 on how RBOs which are trusts are treated. See FAQ 18 for the meaning of Professional Advisor and Professional Manager. See FAQ 24 for the meaning of Senior Managing Official.
A holds an interest in a Legal Person directly if A holds shares, voting rights or partnership interests in the Legal Person directly.
A also holds an interest in a Legal Person directly if A exercises ultimate effective control over the Legal Person. See FAQ 16 for the meaning of "ultimate effective control".
If none of the above tests are met, A holds an interest where A exercises "control through other means" of the Legal Person. See FAQ 17 for the meaning of "control through other means".
The Majority Stake concept is crucial to determining whether A indirectly holds a share or right in a Legal Person via another legal entity ("P"). If A does not hold a Majority Stake in P, A will not be regarded as holding a share, right or interest in a Legal Person indirectly and FAQs 10 and 11 below are not relevant. Therefore, even if P wholly owns a Legal Person, A will not be a RBO of the Legal Person by virtue of indirect ownership or control of the Legal Person unless A has a Majority Stake in P.
A has a Majority Stake in P if A holds or controls a majority (meaning more than 50%) of the voting rights in P or A exercises ultimate effective control over the management of P or A is a member of P and controls alone a majority of the voting rights in P pursuant to an agreement with the other members or has the right to exercise, or actually exercises, dominant direct influence or control over P.
Any reference to holding shares in a legal entity means holding a right (if any such right exists) to share in the capital or, as the case may be, profits of that legal entity.
A foundation company typically has no share capital or equivalent and may not have any RBOs, although this is subject to whether any particular members of a decentralised autonomous organisation (such as a founder or a council member) exercise ultimate effective control over the foundation company. If there is no RBO, a Senior Managing Official should be identified. See FAQ 24 for the meaning of Senior Managing Official.
If two or more persons hold a share or right jointly, each of the two or more persons is treated as holding that share or right.
If shares or rights held by a person and shares or rights held by another person are the subject of a joint arrangement between those persons, each of the two or more persons is treated as holding the combined shares or rights of all of them.
For example, there may be instances where an agreement is made to vote or exercise rights jointly with the total combined value of the shares or rights being 25% or more. Each person party to such agreement should be identified as a RBO.
Voting rights means the rights conferred on shareholders in respect of their shares (or, in the case of an entity not having a share capital, on members) to vote at general meetings of the entity on all or substantially all matters.
In relation to a Legal Person that does not have general meetings at which matters are decided by the exercise of voting rights, a reference to exercising voting rights in the Legal Person shall be read as a reference to exercising rights in relation to the Legal Person that are equivalent to those of a person entitled to exercise voting rights in a company.
Voting rights in a Legal Person shall be deemed to be reduced by any rights held by the Legal Person itself.
The term "ultimate effective control" includes having control through a chain of ownership or by means other than direct control over the management of the Legal Person.
An example might be where an individual controls the removal or appointment of the Legal Person's directors.
Another example might be where a person exercises ultimate control over a Legal Person by being appointed as a nominee or given power of attorney.
Another example might be where an individual at the Legal Person's investment manager has ultimate control to direct the Legal Person's directors.
If the Legal Person also has a RBO by virtue of direct or indirect ownership, that RBO as well as the RBO by virtue of ultimate effective control are each RBOs.
These scenarios will not be apparent merely by reviewing a Legal Person's register of members or record of investors.
Control of a Legal Person could be exercised through other means, such as debt instruments or financing arrangements, in certain circumstances. For example, where a lender or creditor has a contractual right to control a Legal Person via the provisions of a lending agreement (which might include convertible debt instruments that are convertible into voting equity). Generally, a regulated lending or credit institution providing financing to a Legal Person will rarely be considered as exercising control for the purposes of the BOTA as the lender or creditor is unlikely to have ultimate control.
There may potentially be other scenarios where a person can control a Legal Person's shareholder such that they have control over a Legal Person.
A Professional Advisor includes a lawyer, an accountant or a financial advisor who provides advice or direction in a professional capacity. A Professional Manager includes a liquidator, a receiver or a restructuring officer who exercises a statutory function.
Rights are treated as held by the person who controls their exercise and not by the person who in fact holds the rights (unless that person also controls such rights).
If shares, voting rights or partnership interests are treated as held by a person other than the person who in fact holds them, both persons shall be regarded as holding the shares, voting rights or partnership interests.
A person controls a right if, by virtue of any arrangement between that person and others, the right is exercisable only by that person or in accordance with that person's directions or instructions or with that person's consent or concurrence.
Rights that are exercisable only in certain circumstances shall be taken into account only when the circumstances have arisen, and for so long as they continue to subsist or when the circumstances are within the control of the person having the rights. However, rights that are exercisable by an administrator or by creditors while a Legal Person is in insolvency proceedings shall not be taken into account even while the Legal Person is in those proceedings.
Rights attached to shares held by way of security or interests shall be treated as held by the person providing the security where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in accordance with that person's instructions; and where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in that person's interests.
A Senior Managing Official includes a director or a chief executive officer of the Legal Person. Unlike an individual Beneficial Owner, a Senior Managing Official may be a Professional Advisor or a Professional Manager. The Senior Managing Official is generally the director who exercises greater authority compared to the other directors (such as a managing or executive director or chairman). If there is no such person or other senior official that exercises ultimate or greater authority as compared to other officials (ie multiple persons exercise the same level of authority), at least one of the persons who exercise the same level of authority should be listed as the Senior Managing Official for this purpose.
Partnerships are not required by law to have directors or senior officers and instead have a general partner which may be an individual or entity. Ultimately, a determination as to whom should be listed in the beneficial ownership register will depend on the partnership's unique constitution and operations.
No. A Legal Person can only provide details of a Senior Managing Official if it has no individual Beneficial Owner(s).
No. Even if a Legal Person has no individual Beneficial Owner(s), there will always be a Senior Managing Official.
A reportable legal entity ("RLE") in relation to a Legal Person is a legal entity, other than a non-Cayman Islands entity, that would be a Beneficial Owner of that Legal Person if it were an individual. It is not necessary for a Legal Person to identify individual beneficial owners which hold an interest in a RLE, since the RLE will have its own reporting obligations through which such persons are identified to the Registrar.
The Legal Person only needs to report its RLE. It does not have to report any individual Beneficial Owner(s).
The Legal Person must report its RLE and must also look through the non-RLE entity for any individual Beneficial Owners.
Certain RBOs (which may include sovereign wealth funds and state pension funds) are deemed and reported as individuals for the purpose of the BOTA so there is no need to "look through" them. These are a corporation sole (for example a sole trader); a government or government department of a country or territory or a part of a country of territory; an international organisation whose members include two or more countries or territories (or their government); and a public authority.
A segregated portfolio company may have several segregated portfolios, each with its own RBO. If a RBO cannot be identified, then the Senior Managing Official should be reported, who may be required to provide information on the ownership and control of the segregated portfolios upon request.
If there is no RBO (which will only be the case if the managing member(s) is a non-Cayman legal entity), the managing member may be identified as the Senior Managing Official. Where the management of the limited liability company vests in all the members, but there is no member with 25% or more of the limited liability company’s interests, only one member would need to be named as Senior Managing Official.
Individual trustees should be recorded in the same way as other individual Beneficial Owners. Trustees which are Cayman Islands entities will be recorded in the same way as other RLEs. Trustees which are foreign entities will need to be recorded by name of the foreign trustee entity together with the name of an individual within the foreign entity trustee. The identity of an individual is included in order to ensure the facilitation of communications between the competent authority and the foreign corporate trustee, where necessary.
These FAQs will be updated on an ongoing basis.
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