There’s So Much to Know When Incorporating A Company In Cayman Islands
The Cayman Islands is a destination like no other. Usually, tourist hotspots are also considered “tax havens” due to their promising income potential. However, these set of islets follow international tax guidelines, contrary to the usual stereotype. This has kept the state away from being under the global Financial Action Task Force and Economic Cooperation and Development’s list of blacklisted areas. As a result, incorporating a company in Cayman Islands is very safe, yet feasible for every entrepreneur.
Forming and incorporating a company in Cayman Islands allows for flexibility options. Due to the state’s stable government and economy, any foreign investor would greatly profit from many business opportunities. The Cayman Islands boasts its tourist attractions, but it also has a powerful banking system for offshore corporations.
In this article, we will expand further the benefits of incorporating a company in Cayman Islands. Additionally, we will also discuss the application process that you will encounter. Initially, you already have a corporate structure in mind. However, Cayman Islands has certain company types which may not fit your specifications. Knowing these details will provide you an idea on how you’re going to form your business.
Benefits of a Cayman Islands Company
There are many reasons why foreign investors prefer incorporating a company in Cayman Islands among other places. Some of the advantages Cayman corporations get include:
Rapid and Affordable Incorporation: The procedure can only take for only a minimum of one day to a maximum of four days. This is due to having no requirement for government regulatory authority consent. Also, the primary corporate registration and yearly renewal fees are lower than other jurisdictions.
Privacy: The law does not mandate businesses to register certain corporate documents. Examples of these include shareholders registry or meeting minutes. Consequently, there’s no requirement to conduct an annual shareholder meeting and even audit reporting. Furthermore, business accounts remain secluded in the Cayman Islands. As such, the public may not view The Register of Directors and Officers or the Register of Shareholders.
Capital: There is no obligation to deposit authorized capital in a bank or in escrow when incorporating a company in Cayman Islands.
No Shares Transfer Tax: Generally, there are no taxes or duty stamps for the corporate transfer of shares to third parties. The only exception is when such shares are real estate investments.
Mergers Are Permissible: Businesses may merge with other corporations, either in the Cayman Islands or in other countries. As a result, the final merger can enable the corporation to exist in any jurisdiction. Nevertheless, merging corporations often choose to remain in the Cayman Islands jurisdiction due to the benefits they receive.
Single Director: Incorporating a company in Cayman Islands with only one person is possible. That individual will then act as both the sole director and shareholder of the business.
Cayman Islands Company Types
Here are the general characteristics of an exempted company in Cayman Islands:
- Exempted companies are prohibited from trading in the Cayman Islands.
- They may enter into contracts that are necessary for carrying out business operations outside the jurisdiction.
- They can attain an authorization by the government for its tax-free status for a period of 20 years.
Exempted Limited Duration Company (ELDC)
This corporate structure is a division of an exempted company. However, there are differences that make it entirely unique from the latter. These are the following:
- The corporate life of an Exempted Limited Duration Company lasts for 30 years.
- Upon a company’s formation, the law considers the commencement of the business’ voluntary winding up and dissolution procedures.
- Similar to an Exempted Company, an ELDC cannot trade in the Cayman Islands. However, it may participate in contracts within the Cayman Islands that pertain on business operations outside the jurisdiction.
- It preserves the limited liability of members while having a few partnership characteristics. For instance, ELDC has a limited duration and non-transferability of interest qualities. These attributes allow advantageous tax treatments for the business and its members in certain foreign authorities.
Exempted Limited Partnership (ELP)
This corporate structure is also a category under the exempted company. Like the ELDC, there are attributes that make it unique from others. These are the following:
- An ELP cannot trade in the Cayman Islands. However, it may partake into contracts within the Cayman Islands that relate on business operations outside the jurisdiction.
- They can obtain an authorization by the government for its tax-free status for a period of 50 years. In fact, there are no Cayman Islands laws enacting any imposition of tax levied on profit, income, gain, or appreciation that applies to the partnership or to any partners.
Ordinary Non-Resident Company
Here are the general qualities of an ordinary non-resident company in the Cayman Islands:
- Corporations falling under this category cannot trade in the Cayman Islands. However, they may join into contracts within the Cayman Islands as long as they are business operations outside the jurisdiction.
- Business owners treat this corporate structure as an alternative to the Exempted Company. Many offshore operations and transactions involve this company type.
- An Ordinary Non-Resident Company can convert to an Exempted Company by simply applying.
Segregated Portfolio Company (SPC)
A Segregated Portfolio Company is a sole legal entity. Additionally, it is a variant of the Exempted Company.
The law keeps apart an SPC’s assets and liabilities. Further, each segment is protected from each other. This means the creditors of a segregated portfolio cannot pursue recourse from the assets of other separate portfolios or from its core. Assets which are not assigned to a definite segregated portfolio are deemed to be general properties of the core.
As stated, incorporating a company in Cayman Islands can take as little as a day to complete. Here are the steps:
- Reservation your company name with the Registrar. Make sure the name is lawful and comprehensible. You may check out the Registrar’s website to see whether your name has already been taken by other entities.
- Prepare the memorandum and articles of association. These will include company and shareholder details and a list of board of directors. Other stipulations include activities, partialities, privileges, voting rights, limitations and other conditions set by your BoD.
- Submit all the necessary documents for application at the Registrar. Further, you have to pay the applicable incorporation fee to the Cayman Islands Government.
- Draft an affidavit confirming that your company will operate mainly outside the Cayman Islands.
- The Registrar will list your business on the Registry of Companies and issue the company’s Certificate of Incorporation.
Every company must register a physical office with the Registrar in Cayman Islands for easier communication and accessibility. After issuing the address of your registered office, the Registrar will record the information and publish it via Public Notice. The public may submit a request to the Registrar regarding the location of your business address.
The name of your company must be easily comprehensible on the outside of your office.
You can change the site of your company’s registered office to another location in the jurisdiction. However, you need to deliver to the Registrar a certified copy of the resolution from the directors authorizing the move.