The Cayman Islands (“Cayman”) is a British Overseas Territory located in the western Caribbean Sea and has a population of approximately 75,000. The Territory comprises the three islands of Grand Cayman, Cayman Brac and Little Cayman, located south of Cuba and northwest of Jamaica.
As demonstrated in our “Future of Offshore Services: 2020 and Beyond” report, Cayman is one of the leading offshore jurisdictions with a high quality reputation. It has a robust legal framework derived from English common law, supplemented by its own local legislation, which is internationally recognised and respected.
Cayman’s “firewall” legislation is seen as one of its major advantages, as it insulates trusts governed by Cayman Law from foreign law judgments and challenges on the basis of forced heirship, or a personal relationship with the settlor or any beneficiaries of the trust. The courts’ pragmatic approach sets them aside, through interpretation of the legislation, which has been gained through their extensive fiduciary experience. One of the world’s leading offshore business jurisdictions, Cayman has tax neutrality and no exchange controls. It has become a popular jurisdiction of choice for clients from the Far East and Latin American markets.
Cayman is also renowned for its modern maritime legislation. The Cayman Islands Shipping Registry, a division of the Maritime Authority of the Cayman Islands, is now the favourite location for registering pleasure yachts, with over half of the world’s super yachts on its register, as well as a fleet of well-maintained commercial vessels.
For over 20 years the Cayman Islands Monetary Authority has supervised and regulated providers of a wide range of financial services, including fiduciary, banking, insurance and investment management. Over 12,000 entities are regulated and the financial services sector produces over 30% of Cayman’s GDP, with more than 7,500 people in Cayman working in the industry, accounting for approximately 18% of total employment.
Many leading banks and the majority of offshore law firms have a presence in Cayman and it is particularly renowned for its establishment and formation of investment funds as well as the use of “STAR” Trusts, the legislation for which is unique to the jurisdiction.
As well as utilising Cayman as a proper law for trusts, taking advantage of its robust legal and regulatory framework, trustees can also use the “STAR” Trust regime, which was introduced in 1997 as a form of non-charitable purpose trust legislation called the Special Trusts (Alternative Regime) Law. This is now consolidated with and contained in Part VIII of the Trusts Law (2020 Revision).
The objects of a STAR Trust may be persons or purposes or both. The persons may be of any number and the purposes may be of any number or kind, charitable or non-charitable. At least one trustee must be a trust corporation licensed in Cayman, a controlled subsidiary or a private trust company registered as such in Cayman. There is also the requirement to have an Enforcer of the trust, an appointed party with a duty or right to enforce the proper execution of the trust.
The STAR Trust has become popular for use as a pure purpose trust with no individual beneficiaries, as a hybrid solution and as a substitute for traditional trust for persons, whilst restricting the enforcement and information rights of beneficiaries. They can also be used for international structured finance transactions, as a substitute for a charitable trust or to hold the shares of operating businesses, with the purpose of allowing the directors to continue to run the business for a designated period of time or until a specific event.
Private Trust Companies
Private Trust Company (“PTC”) structuring is a useful family governance planning vehicle, where family members can take on board responsibilities and the PTC can be structured with various shares and voting rights as per the family constitution, so that issues associated with succession of the PTC are avoided. One of the major benefits of utilising a PTC in Cayman is the ability to use a STAR Trust to hold the shares in the PTC. The purpose of the STAR Trust would be structured to establish (or acquire the shares in) the PTC and to ensure that the PTC carries out its role as trustee of a trust or series of related family trusts.
The Cayman Companies Act is internationally recognised as a modern and robust framework for businesses and encompasses the following characteristics: distinct legal personality; shares denominated in any currency; only one shareholder is required; no minimum capital requirement; a registered office is required in Cayman; dividends or other distributions are payable to investors from amounts standing to the credit of a company’s share premium account subject to solvency; management of a company is generally delegated to its board of directors; the constitutional documents must be registered with the Cayman Islands Registrar of Companies, but are not publicly available.
Furthermore, Cayman has committed to the Beneficial Ownership (Companies) Regulations (2019 Revision) which requires the majority of Cayman companies to establish and maintain registers of beneficial ownership. These registers are not accessible by the general public but could be viewed by relevant authorities upon reasonable request.
The Foundation Companies Law enacted in 2017 allows a foundation company to be established for a commercial, charitable/philanthropic or private purpose, or any combination of them. This was a notable advancement, as the legislation is drafted to allow the foundation company to be rooted in Cayman company law, but function like a civil law foundation. This only applies to companies that have been declared by the Registrar of Companies to be a foundation company, but opens up opportunities for clients in civil law countries who are looking for succession planning and estate planning solutions. If desired, individuals in control of a foundation company can mirror the board(s) of existing family enterprises. Also, there is the ability for beneficiaries to have different entitlements, which can be very useful for asset protection purposes
How we can help
Although Saffery Champness has been administering Cayman law trusts and Cayman companies from their Guernsey and Swiss offices for many years, the launch of its Cayman fiduciary offering in June 2020, allows for all administration and accounting requirements to be performed in Cayman, whilst drawing on over 40 years of experience within the trust industry.
Our proactive service, together with our transparent fee charging, makes Saffery Champness an outstanding choice for any fiduciary structuring needs.