The Cayman Islands is one of the hotspots of the offshore business world to this day.
These island nations not only provide gorgeous scenery; they’re perfectly happy to let you earn all the money you want without dipping their hand into the pot.
When businesses are treated well in a country, investors flock to the country. It’s really simple. People want to go where they are appreciated and where they are treated best.
And the Cayman Islands law offers an exceptional professionally-nurtured environment in the international business world.
A business owner in the Cayman Islands today does not have to pay corporation tax, no personal income tax, no capital gains tax or wealth tax, and other tax.
If you also wish to buy a property on the Cayman Islands, the tax authorities will not ask you for a regular property tax either.
Merely a 7.5% one-time stamp duty fee paid on the newly purchased unit price and customs duties, if you are not a resident.
And when you think of opening an offshore bank account, the Cayman Islands is probably one of the first offshore banking countries that come to mind.
Which is really attractive to foreign investors. The Cayman Islands offers a combination of ideal corporate benefits in one of the most beautiful beach destinations in the Caribbean in our Nomad Beach Index.
Now that’s a full package for foreign investors.
The Corporate Tax Haven: Exempted Companies Law
One of the main reasons the Cayman Islands is prominent in the international business scene is the flexibility of its companies laws: The Companies Act.
In 2021 the most common type of offshore companies in the Cayman Islands are Exempted Companies. The constitution of exempted companies is in the Memorandum of Association and the Articles of Association.
A Cayman Islands exempted company limited by shares is a flexible and multi-purpose company. Setting up this kind of company in the Cayman island is quick, straightforward, and easy to maintain… which is really attractive to foreign investors.
The most attractive part is the corporate tax haven this country is.
Imagine your company does not have to pay corporation tax, personal income tax, capital gains taxes or wealth tax. In addition, there is no property tax on your residential home either if you choose to reside there.
The Cayman Islands company laws offer a combination of ideal corporate benefits which makes the Cayman Islands a very attractive destination to set overseas companies.
Under the Exempted Company law 2020 (Revision), a Cayman company should conduct business outside the borders of the Cayman islands.
If a Cayman Islands company wishes to carry out its business within the Cayman Islands borders, the exempted company must hold a license to do so.
But how can a Cayman Islands exempted company be registered as one?
According to the Cayman Islands’ law, a Cayman company can apply to a registered office to have a license if its operations will take place mainly outside the Cayman Islands or in accordance with the license to carry on business in the Cayman Islands.
Exempted companies should provide the Registrar of Companies registered office with a signed declaration to that effect.
Companies that are not registered as “exempted companies” are known as ordinary resident or non-resident companies.
Cayman Islands Exempted Companies Act Benefits
A Cayman Islands Exempted Company is governed by the Companies Law of 2013.
Governed by the Companies Law, the exempted companies offer greater flexibility when compared to ordinary resident or non-resident companies.
According to which, annual corporate general meetings are not required to be physically present in the Cayman Islands and can be held anywhere in the world.
Additionally, exempted companies can change their Memorandum of Association and Articles of Association with no restrains compared to ordinary resident or non-resident companies. The latter have to notify the Registrar of changes.
An exempted company has less restrains from the Registrar in which the Registrar cannot strike an exempted company right away from its register of companies for not paying renewal fees. It will have to provide at least a one-month notice period before taking such actions.
An exceptional benefit is that an exempt company can be a “foreign company” of all foreign owners.
There is also no required audits, no required accounting standards, and no required shareholders or directors meetings.
Not to mention again the tax haven that spares the company and its shareholders. But if you are a US citizen, you are still subject to tax.
All United States residents must declare all global income to the IRS. If you want to no longer pay taxes in the US, you should do so legally by renouncing your US citizenship.
To make all of this easier too, the official language of the Cayman Islands is English. No language barrier or even hassle.
Segregated Portfolio Company
In the Cayman Islands, an exempted company can choose in the registered office to be specifically registered as a segregated portfolio company (SPC): segregating the assets and liabilities of shares from each other and from the general assets of the Cayman company.
But to be registered as a Segregated Portfolio Company, the exempted company applicant must declare that no business will be conducted inside the Cayman Islands.
Only exempted companies can apply to become Segregated Portfolio Companies.
Exempted Limited Duration Company
For an exempted company to be set as a LDC in the registered office, the exempted company must have “LDC” or “Limited Duration Company” at the end of its name.
Special economic zone companies are required to include “Special Economic Zone Company” or “ SEZC” in their name.
Limited Duration Companies in particular have many aspects of corporate existence. This includes separate legal personality and limited liability.
The exempted company should also have at least two shareholders or subscribers and have a clause in the in its Memorandum of Association limiting the duration of the exempted company to 30 years or less.
Exempted Limited Liability Companies Act
You can also register the exempted company at the registered office for Limited Liability Companies (LLCs) under the Limited Liabilities Companies Act (as amended).
The Cayman Islands company vehicle known as the limited liability company (LLC agreement) is a corporate vehicle closely aligned with the Delaware limited liability company.
In simple terms, LLCs are a mixture between an exempted company and a limited partnership. Similar to companies, LLC do not share capital.
And, similar to a partnership agreement, LLCs are run by the majority vote of their membership.
Cayman Islands Exempted Company Share Capital
Any exempted company may hold the shares of another exempted company, by an exempted limited partnership.
An exempted company shares may be held by another Cayman Islands exempted company, or a Cayman Islands exempted limited partnership, or by an LLC.
A Cayman Islands exempted company has its own legal personality capable of employing all the functions of a natural person of full capacity regardless of any question of corporate advantage with perpetual succession.
Main features of A Cayman Islands Exempted Company
If you want your company to go offshore, there are main features to exempted companies in the Cayman Islands that you can’t miss.
The constitution of an exempted company is contained in the memorandum of association and the articles of association.
The Memorandum of association
The Memorandum of Association has to have all your corporate details. Companies law entails that you provide your proposed exempted company details to relevant entities including your proposed exempted company name, purpose, registered office address, and subscribers’ name and authorized share capital.
The Memorandum of association has to include the following:
- The exempted company name
- The exempted company purpose
- The company’s registered office address
- The initial subscribers’ names agreeing to form the exempted company and take at least one share in it each and confirming the limited liability for all of its shareholders
- Authorized share capital
The Articles of Association
The corporate constitution of a private company registered under the Cayman Islands companies law consists of not only the mentioned memorandum of association, but also Articles of Association. The Articles of Association entails that according to the Cayman Islands companies law, the information below about an exempted company should be provided by service providers upon request.
Addition and removal of officers and directors must be in accordance with the Articles of Association. The directors’ liabilities might be limited or unlimited in accordance with the Articles of Association.
The Articles of Association is also responsible for providing all the powers, duties, and responsibilities for the directors and officers.
The Articles of Association include internal rules and regulations:
- Information should be available upon request: issuance, types, they way they were transferred, repurchased, or redeemed
- Shareholders meetings
- Shareholders voting rights
- Appointment of officers and directors as well as their powers, meetings, compensation
- Payments of dividends
Every exempted company must have a local registered office with a registered office with its physical location filed with the Registrar of Companies.
The Registrar of Companies should receive two signed copies of the Articles of Association and the Memorandum of Association and issue a Certificate of Incorporation.
According to the Memorandum and Articles of Association, any exempted company must have a registered office.
The exempted company registered office must later be published by public notice.
Even changing the registered office address must be done in a formal resolution. A certified copy of the change of location resolution should be filed with the Registrar within 30 days of the resolution.
Shareholders and Directors
At least one shareholder is required, who can also be the director, in an exempted company.
It is not compulsory for the shareholder or director to physically reside in the Cayman Islands. They can live in any country.
A Registry of Members, or shareholders, is required. It does not have to be physically present at the registered office, nor does it have to be available for authoritative or public reviewing. The only exception is when an order for production is issued under the Tax Information Authority Law.
Shares may be issued:
- With or without nominal or par value
- Negotiable or non-negotiable
- Premium over par value
- Issued in fractions of shares (with corresponding fractions of rights and liabilities)
- Issued with deferred, preferred, or other special rights; and
- Bearer shares (except when the company owns Cayman real property).
Share certificates are proof of ownership, but shares can sometimes can be issued without them. It’s also possible to buy registered shares.
Shares can be transferred or prohibited by the Articles of Association.
If the Articles of Association stated so, dividends may be paid.
Accounting and Bookkeeping
While the accounting and bookkeeping records are not physically obligated to be in the Cayman Islands, but they should be available upon the tax authorities’ request.
There is also no requirement for any audits or the appointment of auditors.
Minimum Authorized Capital
While not longer required, maximum exempted corporations select a certified capital of $50,000 CI due to the fact that is the most capital an agency can qualify for the bottom authorities registration fee.
File an Annual Return
Filing an annual return with the registrar is necessary. Conducted business outside of the Cayman Islands must be presented in the filing.
Starting A Cayman Islands Company
Setting up an offshore company under the Cayman Islands exempted companies act will optimize your taxes and protect your assets, legally.
As we at Nomad Capitalist always say, go where you are treated best.
And this definitely applies to setting up your business and taking advantage of the flexible exempted companies laws to your favor.
Reach out to the team and we will help you head your business in the right direction while paying less.