A Guide to Cayman Islands Exempted Company Law

The Cayman Islands is often called a tax haven because it does not impose a corporate tax, something that makes it an ideal location for multinational companies to shield some or all of their income from taxation.

Moreover, the Caymans have no income tax, no property taxes, no capital gains taxes, no payroll taxes‌ and no withholding tax. 

To cap all of that off, it’s also a good place to live if you want to enjoy beautiful scenery, amazing beaches‌ and some of the highest living standards in the Caribbean. 

Sounds enticing?

It is, so the Nomad Capitalist team has put together this in-depth guide to examine exactly how the Cayman Islands’ Exempted Company Law works, its main features‌ and practical considerations. 

Before we get into the details, it’s important to note that this article is a general guide, and is not intended to be professional tax advice. 

At Nomad Capitalist, we don’t believe in hiding money. We promote fully legal and transparent strategies for offshore tax planning that are tailored to our individual client’s needs. To find out more, get in touch here. 

Financial Action Task Force (FATF) Update

In the past, incorporating in the Cayman Islands brought a degree of reputational hazard. But that is changing. 

In July 2023, FATF recommended that the Cayman Islands had successfully fulfilled all 63 recommended actions in its anti-money laundering measures. 

The Cayman Islands have, in fact, been removed from FATF’s greylist jurisdictions under increased monitoring as of October 2023. 

So, not only does the Cayman Islands offer ideal tax benefits, and one of the most beautiful beach destinations in the Caribbean, the reputational hazard of incorporating a company here is declining. 

Benefits of a Cayman Islands Exempted Company

Aside from non-existent corporate tax, the other main reason the Cayman Islands is an attractive destination for overseas companies is the flexibility of its company law. 

As a leading offshore financial centre, the Cayman Islands places significant emphasis on its company law, which plays a crucial role in its thriving economy.

Today, the most common type of offshore company in the Cayman Islands is an exempted company. 

A Cayman Islands exempted company is limited by shares and is a flexible and multi-purpose vehicle. Setting up this kind of company in the Cayman Islands is relatively quick and straightforward, and once done, easy to maintain.

Under the Exempted Company law (2021 Revision), a Cayman company should conduct business outside the borders of the Cayman Islands.

If it wishes to carry out business within the Cayman Islands borders, the exempted company must hold a licence to do so, and provide a signed declaration. 

Companies that are not registered as exempted companies are known as ordinary resident or non-resident companies.

Key Legal Aspects of Cayman Islands Exempted Companies

Cayman Islands Exempted Companies are governed by the Companies Law of 2013, which allows annual general meetings to be held anywhere in the world, without requiring physical presence in the Cayman Islands.

An exempt company can be a ‘foreign company’ with all foreign owners. As such, no audits, accounting standards or shareholders or directors meetings are officially required. 

At all times, however, every exempted company must maintain a registered office in the Cayman Islands and provide evidence of such to the Registrar of Companies (ROC). 

If you change the registered office, your directors must adopt a resolution authorising such a change. You’ll also need to pay a small fee. 

An exempted company must file an annual return with the ROC at the start of each year, together with paying an annual fee. The fee payable depends on the authorised share capital of the company, as follows:

• Below CI$42,000 (approx. US$50,400): US$1,110
• CI$42,001 to CI$82,000 (approx. US$50,401 to US$98,400): US$1,470 
• CI$82,001 to CI$1,640,000 (approx. US$98,401 to US$1,968,000): US$2,651 
• Over CI$1,640,000 (approx. US$1,968,001): US$3,352.

Although penalties will only begin to accrue by 31 March of each year, ROC will not issue a Certificate of Good Standing unless the annual return and annual fee are submitted by 31 January. 

To make all of this easier, the official language of the Cayman Islands is English. 

Segregated Portfolio Company

In the Cayman Islands, an exempted company can specifically choose to be registered as a segregated portfolio company (SPC). This segregates the assets and liabilities of shares from each other and from the general assets of the Cayman company.

To do this, 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

To be set as a Limited Duration Company in the registered office, the exempted company must have ‘LDC’ at the end of its name. Special economic zone companies are required to include ‘Special Economic Zone Company’ or ‘SEZC’ in their name.

The exempted company should also have at least two shareholders or subscribers and have a clause 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 as a Limited Liability Company (LLC). In simple terms, LLCs are an exempted company and a limited partnership. LLCs do not have shareholders or share capital. And, like a partnership agreement, are run by the majority vote of their members.

Main Features of a Cayman Islands Exempted Company

The Memorandum of Association (MoA) must contain all key particulars of the company, including its name, purpose, registered office address, subscribers’ names, and authorised share capital, as required by Cayman Islands company law.

The company’s constitution also includes the Articles of Association (AoA), which outline the procedures for appointing and removing officers and directors, as well as their responsibilities and liabilities.

The Articles of Association typically cover the following internal rules and regulations:

• Shares: Details on the issuance, types‌ and transfer of shares, including procedures for repurchase or redemption.
• Shareholders meetings: Rules governing shareholder meetings, including frequency, notice requirements‌ and voting procedures.
• Shareholders voting rights: Specification of shareholder voting rights and any special voting provisions.
• Officers and directors: Procedures for appointing and removing officers and directors, their powers, meeting protocols and compensation.
• Dividends: Rules regarding the declaration and payment of dividends.
• Winding-up: Procedures for dissolving the company.

Registered Office

Every exempted company must maintain a registered office in the Cayman Islands, the physical address of which must be filed with the Registrar of Companies. The ROC requires two signed copies of the AoA and the MoA to issue a Certificate of Incorporation.

Shareholders and Directors

An exempted company must have at least one shareholder, who can also serve as a director. There is no residence requirement for shareholders or directors – they can reside 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 review. The only exception is when an order for production is issued under the Tax Information Authority Law.

Shares may be issued accordingly:

• 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
• Bearer shares (except when the company owns Cayman real estate).

Share certificates are proof of ownership, but shares can sometimes be issued without them. It’s also possible to buy registered shares. Shares can be transferred or prohibited by the AoA. 

Accounting and Bookkeeping

While the accounting and bookkeeping records are not physically obligated to be in the Cayman Islands, they should be available upon the tax authorities’ request. There is also no requirement for any audits or the appointment of auditors.

Cayman Islands Exempted Company: FAQs

Tax Planning Beyond the Cayman Islands

Setting up an offshore company under the Cayman Islands Exempted Companies Act can optimise your tax obligations and protect your assets legally.

However, expats can still be subject to taxes in their home country, such as US expats who must report their worldwide income to the IRS. 

The Cayman Islands also has agreements with several countries to prevent double taxation, including the US, UK and Canada.

If you no longer want to pay taxes in the US, you can do so legally by renouncing your US citizenship.

As we at Nomad Capitalist always say, go where you’re treated best. If you’re interested in legally paying less tax and maximising your financial freedom, reach out here.