April 10, 2017 – The Cayman Islands have recently (7 April 2017) released the draft amendments to existing laws as well as regulations relating to the introduction of Beneficial Ownership Registers. Below is a Q&A format as it may apply to funds, which of course is subject to change or amendment when introduced which is anticipated to be in June: (the actual law can be found here not yet in force)
 
 Question 1: What types of entities are exempt from gathering the information for a Beneficial Ownership Register?
Answer: Companies, LP’s, LLC’s and Trusts (including subsidiaries i.e. owned 75% or more) that meet any one the following criteria are exempt: 
a)     Listed on a stock exchange (a list is included of recognized exchanges);
b)    Registered or holder of a license under regulatory law (this includes funds registered under the Mutual Funds law and the Securities Investment Business Law)
c)     Managed, arranged or administered operated or promoted by and approved person as a private equity fund, collective investment scheme, special purpose vehicle or investment fund
d)    General partners of a fund
 
Question 2: If a Cayman Islands entity is not exempt then what is required?
Answer: The first step is to ascertain if individuals are the beneficial owner under the Companies law, known as registerable persons the tests are:
a)     they hold (directly or indirectly) 25% of the company’s shares; or
b)     they have (directly or indirectly) 25% of the company’s voting rights; or
c)     they can exercise (directly or indirectly) the power to appoint or remove a director
If none of these are met individuals can still be the registerable persons if they can exercise significant influence or control of the company (other than as a director, professional advisor or professional manager).
 
Question 3: what information is required if individuals are registerable persons the beneficial owners under the Companies Law?
Answer: The Cayman Islands service provider must serve a notice (example below) on individuals noting that the information must be provided within one month and they must reply: 
a)     confirming that they are not registerable persons within the definitions above; or 
b)    update or provide further information as requested in the notice.
 
Question 4: What must the Notice include?
Answer: The notice must include: 
a)     a request whether or not they know the identity of a registerable person (if not the person to whom it is addressed) or they should provide details of a person likely to have knowledge; and 
b)    to provide the information requested within one month on the registerable person(s)  and state whether this information is being provided WITH or WITHOUT the registerable person(s)  knowledge
 
Question 5.: Must Cayman Islands service providers request this from all companies they provider services to?                                                                                                                         
Answer: No, they do not require to send a notice if they already can determine that the company is exempt or there is no registerable person OR the Cayman Islands service provider already knows the client company status and has all the require particulars of a registerable person(s) already.
 
Question 6: Must all notices be replied to i.e. where sent to a lawyer?
Answer: No, if legal privilege could be maintained in a legal proceeding then the recipient who can invoke the privilege need not reply OR if the recipient of a notice is prohibited by law from providing the information likewise they need not reply.
 
Question 7: Will there be a legal duty to provide this information?  
Answer: Yes each company not exempted and each registerable person will have a positive legal duty to supply the information.
 
Question 8: Who must maintain the Beneficial Ownership Register?
Answer: In respect of all exempted companies their Cayman Islands (Cayman Islands service provider) which means their registered office provider must maintain this information. Ordinary resident companies must either engage a Cayman Islands service provider to maintain or provide the information to the Registrar of Companies.
 
Question 9: What action must Cayman Islands service providers (usually the registered office) take?                                                                                                                         
Answer: They must prepare a Beneficial Ownership Register and include: 
a)     registerable person information (see below for details); or 
 b)    if no registerable person then enter a nil return (see example registers below).
 
Question 10: What exact information is required on a registerable person?
Answer: They must prepare a Beneficial Ownership Register and include: 
a)     full legal name; 
b)    residential address and, if different, an address for service of notices under this Law;
c)     date of birth; 
d)    information identifying the individual from their passport, driver’s licence or other government-issued document, including – 
(i) identifying number;
(ii) country of issue; and
(iii) date of issue and of expiry.
e)     the date on which the individual became or ceased to be a registrable person in relation to the company in question
Question 11: How long must the ultimate beneficial register information relating to the registerable person be retained?                                                                                                                          
Answer: Five years from the date the registerable person ceases to be so or five years from the dissolution of the company
 
Question 12: Who has access to the Beneficial Ownership Register information? 
Answer: The Cayman Islands service provider will make the Beneficial Ownership Register information
accessible on an IT platform to the following Cayman Islands based agencies:- 
-       Financial Reporting Authority 
-       Tax Information Authority 
-       financial intelligence unit 
-       Cayman Islands Monetary Authority
-       any other body which is assigned responsibility for monitoring compliance with money laundering regulations.
 
Question 13: What are the penalties for not establishing a Beneficial Ownership Register or not providing correct information?  
Answer: CI$25,000 fine and CI$500 each day that no Beneficial Ownership Register is established – or if the information is frivolously, falsely or intentionally misleading up to one year in prison. Also restrictions can be placed on the sale or transfer of ownership interests.
 
 
EXAMPLE BENEFICIAL OWNER NOTICEMG Management Ltd.PO Box 301162F Landmark Square64 Earth CloseSeven Mile BeachGrand Cayman KY1-1201Cayman IslandsDear Sirs:Company/Companies: Time limit: You must reply with this information within one month of receipt – failure to comply may result in penalties as set out Under the Companies Law 

In connection with you providing services to the above company(ies) I confirm that as of the date hereof, as follows:

 

  1. The company/companies are exempt as they are (please update as necessary):

 

  1. Listed on a stock exchange (a recognized exchange);
  2. Registered or holder of a license under regulatory law (this includes funds registered under the Mutual Funds law and the Securities Investment Business Law);
  3. Managed, arranged or administered operated or promoted by and approved person as a private equity fund, collective investment scheme, special purpose vehicle or investment fund; or
  4. General partners of a fund.

 

OR

 

  1. The beneficial owners are as follows:

 

Full Name  Date of Birth  Residential Address  Date they become registerable person Percentage Ownership / voting rights / Ability to remove Directors/ Exercise significant influence or control (give details) 
         
 
A passport / drivers license copy of each of the above registered persons is attached. 
[3.        The registered persons noted above HAVE been informed that this information is being provided to you.  OR 3.  The registered persons noted above HAVE NOT been informed that this information is being provided to you. ]
I undertake to inform you should there be any changes to this information within one month of becoming aware of such change: 
On behalf of the above entities                                 WitnessedBY:X_________________ Date:___________           X______________________________FULL NAME:                                                                WITNESS NAME:OFFICE: Director                                                         WITNESS ADDRESS:
EXAMPLE A: no registrable person identified (to be noted in theBENEFICIAL OWNERSHIP REGISTER)
Where (a) the company knows or has reasonable cause to believe that there is no registrable beneficial owner or relevant legal entity in relation to the company; or (b) the company has taken reasonable steps to identify all beneficial owners and relevant legal entities and has not, in the course of taking such steps, been able to identify any registrable person.
 
EXAMPLE B: - “confirmations pending”
To show that the company has identified a registrable person in relation to the company but that all the required particulars of that person have not yet been confirmed.  
EXAMPLE C: - “enquiries pending”
To show that it is still in the process of taking reasonable steps to find out if there is anyone who is a registrable person in relation to the company.