You should note that now all Cayman Islands companies must report their status early in 2020 (whether they are a “Relevant Entity” conducting “Relevant Activity” or not). 

The Cayman Islands have issued a decision tree a copy of which is below:

 

 

Thereafter it is necessary to look at the main types of entity:

 

 

 

 

For a Pure Holding Company there is a reduced ES Test which is:

 

“Holding Company Business 
1. Pure equity holding company The term “pure equity holding company” means a company that only holds equity participations in other entities and only earns dividends and capital gains. 
 
A relevant entity that is only carrying on the business of a pure equity holding company is subject to a reduced ES Test which is satisfied if the relevant entity confirms that - 
 
(a) it has complied with all applicable filing requirements under the Companies Law (2018 Revision); and 
 
(b) it has adequate human resources and adequate premises in the Islands for holding and managing equity participations in other entities. 
 
A pure equity holding company maintaining a registered office in the Islands engaging its registered office service provider in accordance with the Companies Law (2018 Revision) may be able to satisfy these reduced substance requirements in the Islands where the pure equity holding company is passively holding equity interests in other entities, depending on the level and complexity of activity required to operate its business. A pure equity holding company is not required to be directed and managed in the Islands.”

 

Definitions – ‘Investment fund’ (not just CIMA registered funds it  is wider)     

‘Investment fund’ means -

“an entity whose principal business is the issuing of investment interests to raise funds or pool investor funds with the aim of enablinga holder of such an investment interest to benefit from the profits or gains from the entity’s acquisition, holding, management or disposal of investments and includes any entity through which an investment fund directly or indirectly invests or operates (but not anentity that is itself the ultimate investment held), but does not include a person licenced under the Banks and Trust Companies Law(2018 Revision) or the Insurance Law, 2010, or a person registered under the Building Societies Law (2014 Revision) or the FriendlySocieties Law (1998 Revision).”

 

Definitions – Fund Management Business

 

means the business of managing securities as set out in paragraph 3 of Schedule 2 to the Securities Investment Business Law (2019Revision) carried on by a relevant entity licensed or otherwise authorised to conduct business thereunder for an investment fund (here managing securities means managing securities belonging to another person in circumstances involving the exercise of discretion). In existing fund management business which becomes a “registered person” under SIBL “excluded persons” to re- register as “registered persons”) are in scope of the ES Regime and are deemed to be carrying out a Relevant Activity (i.e. Fund Management Business as defined above). The deadline for such entities to register under SIBL is 15 January 2020. Such entities will be deemed to be in scope for the ES Regime with effect from 15 January 2020 and will be deemed to not have been carrying out a RelevantActivity for the 2019 calendar year.

 

New fund management businesses must apply to be a “registered person” with CIMA as soon as they

 

start carrying out the relevant fund management activities. The ES Regime will apply to these entities as soon as they become registered persons. Therefore, if such entities were established and became a registered person in 2019 they will be deemed to havebeen carrying out a Relevant Activity from the date of registration (as opposed to the above treatment for entities which were “excludedpersons” before re- registering with CIMA) and will be required to confirm that they were carrying out a Relevant Activity in 2019 for the purposes of the ES Notification.

 

Definitions – Holding Company Business

 

means the business of a pure equity holding company, with “pure equity holding company” meaning a company that only holdsequity participations in other entities and only earns dividends and capital gains.

 

Definitions – Intellectual Property Business

 

means the business of holding, exploiting or receiving income from intellectual property assets. An intellectual property assetmeans an intellectual property right including a copyright, design right, patent and trademark.

 

Definitions – Headquarters Business

 

 

means the business of providing any of the following services to an entity in the same group:

a)  the provision of senior management;

b)  the assumption or control of material risk for activities carried out by any of those entities in the same group; or

c)  the provision of substantive advice in connection with the assumption or control of risk referred to in paragraph (b).

However, it does not include banking business, financing and leasing business, fund management business, intellectualproperty business, holding company business or insurance business.

 

Definitions – Distribution and Service Centre Business

 

means the business of either or both of the following:

a)  purchasing from an entity in the same group (i) component parts or materials for goods; or (ii) goods ready for sale, and resellingsuch component parts, materials or goods outside the Cayman Islands;

b)  providing services to an entity in the same group in connection with the business outside the Cayman Islands.

However, it does not include any activity included in any other Relevant Activity except holding company business.