What changed
This Update provides a summary of key changes that were introduced to the Cayman Islands beneficial ownership regime in order to comply with evolving international standards.
The Beneficial Ownership Transparency Act, 2023 (Act) and the Beneficial Ownership Transparency Regulations, 2024 (Regulations) were brought into force on 31 July 2024 (Commencement Date). Associated Guidance on Complying with Beneficial Ownership Obligations in the Cayman Islands (Guidance) was also published by the Cayman Registry. Together these form the basis for the New BOR Legislation.
Implementation
The Ministry of Financial Services for the Cayman Islands (Ministry) advised industry members to suspend filing beneficial ownership information for existing Cayman entities under the current framework until industry is notified to commence filing under the new beneficial ownership framework.
The Ministry has also advised that enforcement relating to the new requirements in the framework will be suspended until early next year, and will restart on 1 January 2025, giving entities a few months to prepare for these changes.
Key Changes to the BOR
The following changes have now been made to the Cayman Islands BOR as a result of the New BOR Legislation:
- Expanded the Scope of Application
- Currently, Cayman Islands companies, limited liability companies (LLCs), limited liability partnerships (LLPs) and Foundation Companies (Foundations) are in scope for the purposes of the BOR, and will continue to be subject to BOR.
- The New BOR Legislation has now brought into scope exempted limited partnerships (commonly used as closed-ended funds) and limited partnerships (together with companies, LLCs, LLPs and Foundations, Legal Persons).
- A Legal Person will need to comply with the obligation to identify and provide certain required information (or required particulars) relating to its registrable beneficial owners unless an alternative route to compliance is available.
- Trusts and registered foreign companies continue to fall out of scope of the BOR.
- Elimination of Exemptions
- Under the previous BOR regime, entities such as general partners, subsidiaries of regulated entities, certain SPVs, and entities registered under the Securities Investment Business Act or the Virtual Asset Service Providers Act that were exempt from the BOR.
- These previously exempted entities will now be required to identify their registrable beneficial owners (RBOs) and provide details of their RBOs to their Corporate Services Provider (CSP)
- Alternative Routes to Compliance (ARTCs)
The Act provides alternative routes to compliance for certain categories of Legal Person, which will replace the ‘exemptions’ to maintaining a beneficial ownership register under the current regime. The alternative routes to compliance will be available to the categories of Legal Persons identified in the table below, which will have the option to provide their CSP in the Cayman Islands with the following information instead of the BOR data:
- written confirmation of the category into which they fall; and
- which written notification must include the required particulars specific to the relevant category of legal person, as specified in the table below:
|
LEGAL PERSON |
REQUIRED PARTICULARS |
|
Listed (or subsidiary of entity that is listed) on CSX or an approved Stock Exchange |
The Name and Jurisdiction of the Stock Exchange |
|
Licensed under a regulatory law (Licensed, not just registered) |
The regulatory law under which the Legal Person is licensed |
|
A Fund registered under either the Mutual Funds Act or the Private Funds Act |
Contact Details of a) a licensed fund administrator, or b) another contact person licensed or registered under a regulatory law for providing beneficial ownership information located in the Cayman Islands |
|
Exempted by the Cabinet by virtue of the Act |
Such information as is prescribed under the exemption issued by Cabinet. |
- Certain additional UBO information
- Nationality(ies)
- Nature of ownership or control
- Senior Managing Officials, Trustees and Professional Advisors and Managers
If no individual meets the definition of a Beneficial Owner, the Act provides that a Legal Person’s “Senior Managing Official” (SMO) will be identified as the contact person. A Senior Managing Official includes a director or a chief executive officer of the Legal Person and the Guidance provides further clarity on who to identify as a SMO in this respect.
Where no individual meets any of the definitions of a Beneficial Owner but the trustees of a trust meets one of the definitions of a Beneficial Owner, the trustees of the trust will be the Beneficial Owners of the Legal Person if they have ultimate effective control over the activities of the trust other than solely in the capacity of a Professional Advisor or a Professional Manager.
Where an individual operates solely in the capacity of a “Professional Advisor” (which includes a lawyer, accountant, professional advisor or a financial advisor who provides advice or direction in a professional capacity) or a “Professional Manager” (which includes a liquidator, receiver or restructuring officer who exercises a statutory function), such individual will not be considered to meet the definition of a RBO under the Act.
More on Funds
Regulated investment funds will need to appoint a beneficial ownership principal point of contact (BO PPoC) who is responsible for responding to any request for beneficial ownership information received from the competent authority in relation to that Legal Person. As noted above, a BO PPoC must be either:
- a fund administrator which is licensed under the Mutual Funds Act; or
- another contact person located within the Cayman Islands who is licensed or registered under a regulatory law of the Cayman Islands.
The BO PPoC will be required to provide the requested beneficial ownership information to the competent authority within 24 hours of a request being made, or such other timeframe as may be stipulated in the request.
SIBA registered persons
‘Registered persons’ under the Securities Investment Business Act (as revised) will not have an alternative route to compliance under the Act and will therefore be required to maintain a beneficial ownership register as and when the relevant provisions of the Act are brought into force.
‘Beneficial Owner’ definition
An individual person will be a RBO if any of the following conditions specified in the definition are met:
(a) If the individual ultimately owns or controls (directly or indirectly) 25% or more of the shares, surplus property, voting rights or partnership interests in the relevant entity,
(b) If the individual otherwise exercises ultimate effective control over the management of the entity,
(c) The individual is identified as exercising control of the entity through other means, including as a senior managing official, where there is no individual who exerts ownership or control pursuant to (a) or (b).
Required Particulars
The required particulars which must be obtained in relation to RBOs and reportable legal entities (referred to as ‘relevant legal entities’ under the current beneficial ownership regime) will be as set out below.
Legal Persons must do the following:
- identify every RBO
- give written notice to those individuals or entities which have been identified as RBO’s and to any individuals or entities whom the entity reasonably believes may be a RBO. That notice requires each addressee to respond within 30 days of receipt, confirming whether the individual or entity is a RBO and, if so, to confirm or correct any of the information required to be inserted in the BOR
- establish and maintain an up to date beneficial ownership register which includes the RBOs of such Legal Person. The register must be kept at the Legal Person’s registered office and is typically maintained by the Legal Person’s CSP
- where it becomes aware that there has been a ‘relevant change’ to the information contained in the BOR, give notice as soon as reasonably practicable (and no later than 30 days after it becomes aware of the relevant change) to the RBO requesting confirmation of the change
- provide the required particulars of its RBOs:
- Full legal name
- Residential address
- Address for services of notices
- Date of birth
- Identification number, country of issue and dates of issue and expiry of an unexpired passport, driver’s licence or other government-issued photographic identity document
- The dates on which the person became and ceased to be a beneficial owner
- Nationality
- Nature in which the individual owns or exercises control of the legal person
Reportable Legal Entity
- Corporate or firm name
- Registered or principal office
- Legal form and the governing law
- If applicable, the register of companies in which it is entered and registration number
- The dates on which the entity became and ceased to be a relevant legal entity
- Nature in which the reportable legal entity owns or exercises control of the legal person
- The register in which it is entered and registration number
Verification obligation
Under the Act, a Legal Person without an alternative route to compliance will be required to provide the above required particulars relating to its registrable persons (ie, its RBOs and reportable legal entities) to the CSP which maintains that entity’s beneficial ownership register in the Cayman Islands.
The CSP will be required to:
- review those required particulars; and
- take reasonable measures to verify the identity of the registrable persons using information from reliable sources,
to be satisfied that they are adequate, accurate and current prior to entering them in the relevant beneficial ownership register.
Access to beneficial ownership information
Access to beneficial ownership information may be requested by a larger number of bodies under the Act, including:
- the Royal Cayman Islands Police Service;
- the Financial Reporting Authority;
- the Cayman Islands Monetary Authority;
- the Anti-Corruption Commission;
- the Tax Information Authority;
- the Maritime Authority of the Cayman Islands;
- the Civil Aviation Authority of the Cayman Islands;
- the Registrar of Lands;
- a licensed financial institution; and
- a designated non-financial business or profession under the Anti-Money Laundering Regulations (2023 Revision).
The competent authority may charge prescribed fees for access to beneficial ownership information.
Public Access: Currently, there is no public access to the beneficial ownership information, however, the Act authorizes Cabinet, in the future and subject to an affirmative resolution in the Parliament of the Cayman Islands, to make regulations empowering the competent authority to provide certain beneficial ownership information to members of the public.
Statutory Offences and Penalties
The Act includes various offences and penalties. Directors, managers, officers and partners of the Legal Person may also be liable to the same penalty as the Legal Person. The Competent Authority also has the power to impose administrative fines on any person who breaches the relevant provisions of the New BOR Legislation.
Next Steps and how can we help?
Legal Persons should be contacted by their CSP in the coming months to either a) update their BOR or b) complete a new BOR.
Legal Persons may wish to reach out to us or their usual legal contacts to determine what, if any, actions they need to take to comply with the Act. Clients should be aware that there are significant penalties set out in the Act for Legal Persons that fail to comply with the Act. CSPs have a range of obligations and legal tools at their disposal to handle non-compliant Legal Persons and will be expected to act quickly to ensure compliance. Therefore, it is essential that Legal Persons be prepared to act before the end of 2024.
For Funds, Listed and Licensed entities, if you require assistance in understanding your legal obligations under the Act, or to query whether we can provide BO PPoC services for a Legal Person, please reach out to your usual M Advisory contact or to one of the named contacts below.