All-in-One Solution for the Cayman Islands Exempt Companies

DETAILED GUIDE

Everything You Need to Know

Helps you get comprehensive understanding of incorporating and managing your company

What are the available company Types?

The Cayman Islands offers multiple entity structures that cater to individuals and businesses from all parts of the world. Each structure comes with its own unique requirements in terms of share capital, nationality of members, compliance, etc.

The following are the legal entity types that are open to foreign ownership:

1. Exempted Company

Exempted Companies in the Cayman Islands are designed for offshore business activities and are prohibited from conducting business locally within the islands. They benefit from no taxation on income, capital gains, or dividends and offer strong privacy protections, with no requirements to disclose members' identities publicly. Exempted Companies are flexible with minimal compliance requirements, making them popular for international trading, investment holding, and fund management.

2. Limited Liability Company (LLC)

The Cayman Islands Limited Liability Company (LLC) is similar in structure to a U.S.-style LLC, designed primarily for international investors. LLCs provide a high degree of asset protection, as members’ liability is limited to their contributions. LLCs are not taxed locally and are free from many annual filing requirements, making them an appealing choice for fund management, joint ventures, and holding structures in cross-border investments.

3. Foundation Company

Foundation Companies in the Cayman Islands are unique entities that can be established for charitable, private, or commercial purposes. Unlike other company types, Foundation Companies can operate without members, making them suitable for long-term asset holding, succession planning, or philanthropic activities. They have limited liability, are free from local taxation, and enjoy a robust framework for preserving assets and purposes beyond individual ownership.

Comparison: Exempted Company vs. LLC

Purpose and Structure:

Exempted Companies are ideal for businesses seeking offshore investment or global trade, while LLCs are often chosen for holding companies or funds, especially in structures involving U.S.-based investors.

Taxation and Reporting:

Both are exempt from local taxes, but Exempted Companies generally have lighter compliance needs. LLCs, however, offer a U.S.-compatible structure with more flexible internal governance.

Member Liability:

In an LLC, members have limited liability based on their contributions, similar to an Exempted Company; however, the LLC allows greater operational flexibility in managing capital contributions and distributions.

What is the structure of a company?

In the Cayman Islands, both Exempted Companies (EC) and Limited Liability Companies (LLC) have straightforward structural requirements tailored for offshore businesses.

Directors:

A Cayman Islands company requires at least one director, and while ECs permit both individual and corporate directors, LLCs typically require at least one manager to oversee operations, which may also be a corporate entity. Directors or managers do not need to reside in the Cayman Islands, allowing foreign nationals and entities to hold these positions, which enhances flexibility for international owners. Additionally, nominee directors are permitted, which can be useful for privacy purposes.

Shareholders:

A minimum of one shareholder is required, with no restriction on nationality or residency, meaning foreign individuals or corporate entities can hold shares in a Cayman company. Nominee shareholders are permitted, adding a layer of privacy protection. Both types of companies allow for corporate shareholding, making them ideal for holding companies and investment structures.

Share Capital:

Exempted Companies typically have a standard authorized share capital of KYD 50,000 to streamline the registration process, though no actual share capital minimum is mandated by law, which offers flexibility for structuring investments. While LLCs do not require share capital in the traditional sense, members contribute to the company in the form of capital accounts, which allows for flexible allocation and distribution of profits.

Registered Agent:

A licensed registered agent in the Cayman Islands is mandatory for both ECs and LLCs, ensuring companies meet all compliance obligations. The registered agent manages key filings, annual renewals, and communications with the regulatory authorities, ensuring that the company remains in good standing.

Registered Address:

Both Exempted Companies and LLCs are required to maintain a physical registered office address in the Cayman Islands. This address serves as the official location for receiving legal documents and government communications, which are managed by the registered agent.

Corporate Secretary:

Although not legally required, appointing a corporate secretary is recommended for managing administrative duties such as keeping minutes, maintaining statutory books, and ensuring timely filings. Many businesses appoint a secretary to streamline corporate governance and compliance responsibilities.

Documents required for Company Incorporation

To incorporate a company in the Cayman Islands, you need to organise and submit several important documents. These documents are essential to comply with the Cayman regulations and ensure your business operates legally. The documents will be used in KYC due diligence procedures, application preparation, and stage of document submission to the authorities.

Proposed Company Details:

Provide three to five preferred company name options along with name ending such as Limited, Ltd., Corporation, Corp., Incorporated, Inc., etc.
A detailed description of your business and business activities (but not limited to products and services, sectors, and major operating countries)
Share Details: Number of shares, share classes (if any), rights attached, and nominal value. You can always go ahead with a standard share capital size.

Personal KYC Documents of Directors, Shareholders, UBOs, and Officers:

Passport as the proof of identity:
- It must be a certified true copy.
- It must have a validity of at least 6 months.
- The copy must be in colour and show the face of the individual clearly
Proof of address document:
- It must be a certified true copy.
- It can include a bank statement or an utility bill (e.g., electricity, gas, water, internet, cable, waste management, and sewage).
- Must clearly show the holder's full name and a physical address written in English.
- P.O. Box addresses are not accepted.
- It must be issued within the last three months
A comprehensive resume, CV, or LinkedIn profile.
National identity card, driver's license, or voter ID.
Recent passport-sized photo with a red background. (can be waived).
Proof of source of funds (optional, but might be requested at a later date): Any one of the following;
- copies of the last two tax returns.
- a letter of employment.
- a letter from an accountant certifying your annual income.
- financial statements or bank statements from the last 2 years.

Corporate Documents for Corporate Members:

Scan of Certificate of Incorporation.
Scan of M&AA or Memorandum & Articles of Association/Constitution and Amendments.
Certificate of Incumbency.
Proof of the registered address.
Scan of Registers of Directors, Shareholders, and Beneficial Owners
Board of Directors structure and corporate chart.
Corporate representative details and board resolution.
Confirmation letter of business activity.
Scan of any related documents.

Additional Requirements:

Written confirmation that directors, shareholders, and other key individuals are not Politically Exposed Persons (PEPs).
Principal place of business address.
Expected location of the company’s customers and suppliers.
Information and documents of the beneficial owner(s) if different from the named shareholder.

How to Set Up a Company in the Cayman Islands?

Incorporating a company in the Cayman Islands involves a series of steps that ensure compliance with local regulations. This guide walks you through the essential steps required to establish your Exempted Company or LLC in the Cayman Islands, from name reservation to securing any industry-specific permits.

Step 1 - Check for Company Name Availability

To start, ensure your desired company name is unique by verifying its availability in the Cayman Islands' company registry. You can reserve a name by paying a reservation fee for a period of 30, 60, or 90 days, depending on your preference.

Step 2 - Due Diligence and Paperwork Completion

Due diligence is a critical, mandatory requirement for incorporating in the Cayman Islands. This step involves performing background checks on all company members to comply with local and international regulatory standards. After successful due diligence, you’ll need to prepare corporate documents. For an Exempted Company, this includes the Memorandum and Articles of Association, and registers of directors, shareholders, and beneficial owners. For an LLC, documents like the registration statement, LLC agreement, and registers of members and managers are required.

Step 3 - Submit the Application and Liaise with the Registry

Once all documents are ready, submit your incorporation application, accompanied by the requisite government fee, to the Cayman Islands registry. The registry typically takes 3 to 5 business days to review applications. During this time, they may request additional information or clarification. Upon approval, your company receives its official Certificate of Incorporation, confirming your business's legal establishment.

Step 4 - Secure Additional Licenses and Permits

Certain industries, such as banking, insurance, and fund management, require additional permits or licenses from relevant Cayman authorities. Each license has unique requirements, application processes, and annual compliance obligations.

Timeline for Company Formation

The entire process of company incorporation in the Cayman Islands typically takes between 1 and 3 weeks. Here is a rough breakdown:

Due diligence and paperwork: 8 to 10 business days
Review by the registry: 3 to 5 working days

Please note that this timeline can vary based on your business and members risk profiles, business models, experience in your field, etc.

Compliance requirements post-incorporation

After successfully incorporating a company in the Cayman Islands, maintaining compliance with ongoing local regulations is essential for good standing and smooth operations. Compliance involves a range of responsibilities, from annual renewals to timely filings, which help ensure adherence to Cayman Islands’ regulatory standards. Below is an overview of key compliance requirements that companies, including Exempted Companies and LLCs, must fulfill post-incorporation:

1. Annual Company Renewal and Government Fees

Each year, companies are required to renew their registration with the Cayman Islands Registry. This process includes submitting an annual return and paying a renewal fee based on the company’s authorized share capital. Timely renewal is crucial to avoid penalties and maintain good standing with the Cayman government.

2. Economic Substance Report (ESR) Filing

For certain types of business activities, the Cayman Islands requires companies to demonstrate “economic substance” within the jurisdiction. Companies engaged in relevant activities must file an annual Economic Substance Report, providing evidence of local operational presence, such as physical office space, employees, and core income-generating activities.

3. Beneficial Ownership Filing

Both Exempted Companies and LLCs must maintain an accurate beneficial ownership register, which must be updated as changes occur in the ownership structure. Regular filings with the Registrar are required to reflect any updates, ensuring compliance with local regulations and global standards.

4. Maintenance of Registers

The Cayman Islands mandates that all companies maintain several registers at their registered office. These include registers for directors, shareholders, beneficial owners, and, for LLCs, members and managers. These registers must be diligently updated to accurately reflect any changes.

5. Financial Records and Bookkeeping

While there is no mandatory requirement for audited financial statements in the Cayman Islands, companies must maintain accurate books of accounts that reflect the financial position of the business. Records must be retained at the company’s registered office, ensuring transparency and alignment with local rules.

6. Annual Return Filing

As part of the annual renewal, companies must file an annual return confirming the current structure and state of the company. Any amendments to the Memorandum and Articles of Association or changes in company structure must be disclosed through proper filings with the registry.

7. Registered Agent and Address Maintenance

Companies in the Cayman Islands must maintain a local registered agent and a registered office address. The registered agent acts as the main point of contact for official government communications, ensuring all compliance requirements are promptly addressed.

What are the tax considerations?

The Cayman Islands provides a truly tax-neutral environment, free of various direct and indirect taxes that are often associated with company earnings, assets, and ownership transfers in other jurisdictions. The Cayman Islands does not impose a VAT or sales tax on goods and services, making it advantageous for businesses dealing in international transactions.

1. No Dividend Tax

Companies in the Cayman Islands are not subject to dividend tax, meaning that shareholders can receive dividends from their companies without incurring any tax liabilities locally. This policy applies to dividends paid both domestically and internationally, making the Caymans especially attractive for companies aiming to distribute profits to global shareholders without tax complications.

2. No Withholding Tax on Payments Abroad

The Cayman Islands imposes no withholding taxes on payments of dividends, interest, royalties, or other income sent outside the jurisdiction. This allows companies to remit funds globally without facing the tax burdens or reductions that withholding tax policies typically require in other countries, enhancing profit repatriation efficiency.

3. No Inheritance or Estate Tax

In the Cayman Islands, there is no inheritance or estate tax applied to assets transferred upon an owner’s death. This tax-free policy on inheritance and estate transfers makes it advantageous for high-net-worth individuals and business owners to structure their assets in the Cayman Islands.

4. No Capital Gains Tax

Offshore companies are not subject to capital gains tax on the appreciation of their assets. Whether the company’s earnings come from property sales, stock investments, or other capital assets, gains are not taxed, allowing for efficient asset growth and increased capital returns over time.

5. Absence of Corporate Tax

The Cayman Islands’ policy against corporate income tax is a cornerstone of its tax system, meaning companies do not pay taxes on profits, regardless of the revenue generated within or outside the jurisdiction. This policy is especially beneficial for multinational corporations, private equity funds, and other investment entities that seek tax-free growth on their investments.

6. No Wealth or Net Worth Tax

The Cayman Islands does not impose taxes on an individual’s or a company’s wealth or net worth, eliminating annual tax assessments on total asset values. This lack of taxation is beneficial for high-net-worth individuals and companies holding significant assets, as there are no wealth-related deductions.

Tax Exemption Certificate

To guarantee a tax-neutral environment for a fixed period, Exempted Companies can apply for a Tax Exemption Certificate. This certificate, issued by the Cayman Islands government, assures companies that no taxes will be imposed on their income or capital gains for up to 20 years. This certificate provides added security and long-term tax planning assurance for businesses.

Why the Cayman Islands?

Zero Tax

No Auditing

Privacy

No Residency

Company Incorporation Package

1-Layer Structure

Cayman Operating Company

2-Layer Structure

Top Layer: Cayman Holding Company

Bottom Layer: Operating Company

3-Layer Structure