If you are planning on terminating your Cayman entity, and wish to do so before incurring charges for 2025, then there are a number of steps that should be taken in the next two months to reduce or avoid annual fees for 2025. Note that if you do not take action in due time, you may not be able to avoid incurring charges for the new year.
In this note we briefly walk you through the options, and the key dates, available to Cayman entities that wish to terminate in 2024.
Voluntary Liquidation
Where an entity has operated or traded, and in that process generated liabilities and assets, the recommended process is to terminate it by way of a voluntary liquidation, as once it’s been liquidated it cannot be legally re-instated, except in limited circumstances such as fraud. A liquidation therefore offers the advantage of the most definitive termination process.
For entities not regulated by the Cayman Islands Monetary Authority (CIMA) or entities that have completed the CIMA de-registration process, they should start their liquidation by 1 December. That allows sufficient time to meet the statutory filing and notice requirements and to complete the voluntary liquidations by the deadline of 31 January to avoid annual registration fees for 2025.
Strike-off
Where an entity is dormant and/or has never traded, has no creditors or assets, it could instead be terminated by way of strike-off. This process is more cost effective and generally faster than voluntary liquidation, but it doesn’t have the same finality of a voluntary liquidation, and any interested party who is aggrieved by the strike-off may apply for the entity to be re-instated for a period of up to 10 years after the strike-off date. Action can then be taken against a former director, carrying the risk of personal liability for any unsatisfied claims.
To effectively strike-off an entity before 31 December, the entity should file the strike-off application via its registered office by 28 October, allowing them to be struck on 31 December. All operational and regulatory matters must be complete prior to submitting the application. If 28 October isn’t achievable then 2024 fees will fall due.
CIMA registrant
Investment funds in particular must note that, to avoid 2025 CIMA fees from falling due, both mutual and private funds must have completed all their termination obligations prior to submitting their formal deregistration application and for that application to be approved before 31 December 2024. Given the year end rush of applications, the sooner a fund completes this process, the better chances it will have of avoid the significant fees that carry into the new year, including the audit requirements.
This includes completion of the final audit, including settlement of the final holdback payments to investors, and submission of the related Fund Annual Return (FAR) to CIMA. We recommend being in a position to submit this application well before the 31 December deadline in order to deal with any issues upon filing. Whilst this may prevent CIMA fees from falling due, if the dates noted above for the filing of a voluntary liquidation or a strike-off aren’t met, then annual registration fees for 2025 will likely fall due.
Where a fund has ceased to trade or has terminated within 2024 but is either not able to return the proceeds to investors, or complete the final audit before the end of 2024, then 2025 CIMA license fees will be payable in full. Importantly, any continuation into 2025 includes a liability to produce audits for any period, which significantly raises the costs of carrying over into the new year.
If you have any questions let us know, we can accept voluntary liquidator appointments and would be happy to provide a fee quote for to terminate your Cayman entities.