Cayman Islands updates to the Beneficial Ownership Regime (“BOR”)
Regulations and Guidance Notes to support the BOTA are expected to be issued by the Cayman Islands authorities shortly, following which the new BOTA provisions are anticipated to be introduced in a phased approach throughout 2024, with full implementation and compliance with the new BOR (under the BOTA) to be required by 1 January 2025. The current BOR will remain in effect until the BOTA comes into force.
The key changes for Cayman Islands entities to take note of are:
- The BOR is currently enacted through several different pieces of legislation. The BOTA has consolidated the BOR under a single act, and it will be accompanied by Regulations and Guidance Notes
- The definition of a ‘beneficial owner’ has been updated
- The BOTA brings limited partnerships (“LPs”) and exempted limited partnerships (“ELPs”) into scope
- The BOTA removes the exemptions that applied to the majority of investment funds in respect of the BOR. These exemptions are to be replaced with ‘alternative routes to compliance’
- Subject to Parliament making further regulations, the BOR may require the Registrar to provide public access to beneficial ownership registrars.
These developments aim to streamline compliance and enhance transparency in line with global standards. Further details on these changes are provided below for your reference.
Changes to the definition of a ‘beneficial owner’
An individual will be considered a beneficial owner if they meet any of the following conditions:
- (a) the individual ultimately owns or controls (directly or indirectly) 25% or more of the shares, surplus property, voting rights, or partnership interests in the entity
- (b) the individual exercises ultimate effective control over the management of the entity
- the individual is identified as exercising control of the entity through other means, including as a senior managing official, where no individual exerts ownership or control as described in (a) or (b)
- a person operating solely in the capacity of a ‘professional advisor’ or ‘professional manager’ (both terms defined in the BOTA) will not be considered a beneficial owner.
Expanded scope of beneficial ownership legislation
The current beneficial ownership legislation in the Cayman Islands applies to companies, limited liability companies (“LLCs”) and limited liability partnerships (“LLPs”). However, the BOTA introduces a broader definition of legal persons required to comply with the BOR, adding LPs and ELPs.
Legal persons falling under this definition will be required to identify and provide certain required information (or required particulars) regarding their beneficial owners unless they are eligible for an alternative route to compliance.
Alternative routes to compliance
The BOTA provides alternative routes to compliance for certain categories of legal persons, replacing the exemptions from maintaining a beneficial ownership register under the current regime. These alternatives are available to specific categories of legal persons, as outlined below. Each category must provide their corporate services provider in the Cayman Islands with:
- written confirmation of the category into which they fall
- the required particulars specific to their category, as specified below.
Categories and required particulars
- Legal person listed on an approved stock exchange
Required particulars: name and jurisdiction of the stock exchange, and, where applicable, details of the relationship to the listed entity. - Legal person licensed under a regulatory law
Required particulars: identification of the regulatory law under which the legal person is licensed. - Investment fund registered under the Mutual Funds Act or the Private Funds Act
Required particulars: contact details of a licensed fund administrator or another person licensed or registered under a regulatory law.
Compliance for Mutual Funds and Private Funds
Regulated Mutual Funds and Private Funds must appoint a Beneficial Ownership Principal Point of Contact (BO PPoC) to respond to requests for beneficial ownership information from the competent authority. The BO PPoC must be either:
- a fund administrator licensed under the Mutual Funds Act; or
- another contact person located within the Cayman Islands who is licensed or registered under regulatory law.
The BO PPoC is required to provide the requested beneficial ownership information to the competent authority within 24 hours of a request or within any other timeframe specified in the request.
Compliance for SIBA Registered Persons
‘Registered Persons’ under the Securities Investment Business Act (“SIBA”) will be required to maintain a beneficial ownership register once the relevant provisions of the BOTA are in force. There will be no alternative compliance routes available under the BOTA for these entities.
Waystone’s regulatory compliance solutions
Waystone is monitoring the Regulations and Guidance Notes to align its current suite of Cayman Islands regulatory and compliance services to support Cayman Islands entities and will provide further updates as to specific actions to be taken once the Regulations and Guidance Notes have been issued.
How Waystone can help
If you have any questions about the BOR or require assistance with any aspect of Cayman Islands regulatory compliance, please reach out to your usual Waystone representative or contact us below.