All Cayman Islands funds (other than unit trusts) are required to identify “required particulars” in relation to their investors and provide those particulars to the Cayman Islands Ministry of Financial Services under the Beneficial Ownership Transparency Act (the Act). Once identified the required particulars must be kept up to date and can be made available to certain government agencies in the Cayman Islands and the United Kingdom but not, as yet, to the public. Our general briefing on the Cayman Beneficial Ownership Regime can be found here.
Registered Funds
Funds that are registered under the Mutual Funds Act (Revised) or the Private Funds Act (Revised) can opt to follow an alternative route to compliance. This option involves the provision of required particulars and other information only when requested by the Cayman Ministry of Financial Services and Commerce (the Authority). That information needs to be provided by a contact person that is registered or licensed under a regulatory law[1] and within 24 hours or at such other time as the Authority may specify. To opt in to this alternative requires the fund’s registered office to confirm to the Authority that the fund is registered and to confirm the contact details of the person who will comply with the Authority’s requests.
Unregistered Funds and Funds Opting to Comply
Where a Cayman fund is not registered or where it opts to comply with the Act’s obligations to maintain a beneficial ownership register its registered office will need to file the required particulars with the Authority at least once each month. This option may be preferable to engaging the fund’s Cayman administrator or registered office to comply with the Authority’s requests within 24 hours.
The required particulars relate to every individual and every Cayman entity (other than trusts) that directly or indirectly holds or controls 25% or more of the equity interests or voting rights of the fund or otherwise controls the fund or its management (excluding professional advisors and managers). If there are no individuals but there is a trust with such a holding or control required particulars of the trustees should be filed if they have ultimate effective control over the activities of the trust other than as professional advisors or managers. Where the trustee is a foreign corporation only its name and details of its contact persons need be filed. If there are no such individuals and no such trustees, contact details of a director of the fund should be filed with the Authority.
The particulars to be filed with the authority for individuals are the name, address, address for service, date of birth, nationality, identity document details, nature of control and the date they became registerable under the Act. For entities these are their name, address, legal form, nature of control, registration number and date they became registerable. Corporations sole, government departments, international organizations of governments and public authorities are treated as individuals for the purposes of the Act and their particulars are their name, address, legal form, jurisdiction and date on which they became registerable.
Guidance issued by the Authority on compliance with the Act provides that where the required particulars of a Cayman entity are included in a fund’s beneficial ownership register there is no need to include any information on the beneficial owners of that Cayman entity which will make its own filings under the Act. Percentages of equity interests are calculated by reference to beneficial owners’ rights to share in the capital or profits of the fund and not by reference to the number of equity interests held. We would expect that investor registers of Cayman funds will generally include the percentage of the fund’s capital held by each investor but in some cases investor registers may need to be updated to include this information and account may need to be taken of the differing net asset values of different classes and series and whether there are distributing and accumulating classes in the fund. A fund may also be applying simplified due diligence for some investors under their anti-money laundering procedures and will need to reach out to those investors in order to obtain the information required for the fund’s beneficial ownership register.
Before filing the required particulars with the Authority, the fund’s registered office is required to verify the required particulars from reliable sources. Where an investor is required to be added to the beneficial ownership register after their initial subscription this may require the provision of updated certified copy identification and address verification documents to the fund’s registered office.
Steps Required to Comply with the Act
The Act came into force on 31 July 2024 and its provisions will be enforced from 1 January 2025. To prepare for compliance with the Act in time for that deadline funds should ensure that they engage with their registered office service providers and administrators as early as possible to confirm that those service providers are aware of the fund’s responsibilities under the Act and the roles that they will need to fulfil to ensure that the required information is filed with the Authority.
Administration agreements and registered office services agreements may need to be updated to incorporate the provision of beneficial ownership services. Those services might include obligations to obtain required particulars from investors, to provide persons to act as points of contact with the Authority, to give notices under the Act including restrictions notices, to maintain a current register of required particulars for the fund, to monitor changes in investor’s equity holdings and control of the fund, to report on any missing required particulars and to file required particulars or to provide these with supporting evidence to the fund’s registered office.
Subscription documents should be updated to include details of registered particulars of investors and where applicable their beneficial owners, an obligation to notify the fund’s administrator of any changes to those particulars and representations around control exercised over the fund.
For existing investors where the required particulars are not already held as part of the anti-money laundering due diligence collected for those investors, notices should be sent by the fund’s administrator requiring the provision of the relevant details and verification documents.
Exemptions
Cayman funds that are listed on a recognized stock exchange [2] or that are a subsidiary of an entity listed on such an exchange need only confirm the name and jurisdiction of that exchange to the Authority and are not required to collect, maintain or file required particulars of their investors. A subsidiary for these purposes will have a listed entity (i) holding 75% or more of its shares or voting rights, (ii) exercising ultimate effective control over it (including indirect control through a chain of ownership) or (iii) controlling it by other means. To avail of this exemption requires that the fund’s registered office confirms to the Authority that the fund is listed or is a subsidiary of a listed entity and the name and jurisdiction of the relevant stock exchange.
Cayman funds that are licensed under the Mutual Funds Act (Revised) or any other Cayman regulatory law need only confirm the regulatory law under which they are licensed. The use of licensed Cayman funds is rare and these currently account for less than 0.4% of regulated Cayman mutual funds. To avail of this exemption requires that the fund’s registered office confirms to the Authority the regulatory law under which the fund is licensed.
Notwithstanding the availability of any exemption the Authority is entitled to request information or documents from the fund for the purposes of carrying out its functions under the Act, verifying beneficial ownership information, assisting with the prevention or detection of crime, furthering interests of national security or enabling certain law enforcement, regulatory and other government departments in the Cayman Islands to fulfil their statutory obligations. Notices from the Authority for these purposes must be complied with within the period and manner specified in the notice.
Availability of Beneficial Ownership Information
The Authority will operate a search platform by means of which certain law enforcement, regulatory and other government departments in the Cayman Islands may be provided with access to information on all beneficial ownership registers maintained under the Act. In addition, the Authority may search that platform on a formal request of the Financial Crime Unit of the Cayman Islands Police where a senior official of that unit certifies that the search is at the request of a UK law enforcement official in accordance with the agreement entered into between the Cayman Islands and UK governments respecting the sharing of beneficial ownership information.
Beneficial ownership information will not be available to the public under the Act but the Act does allow the Cayman Islands government to make regulations allowing the Authority to provide the public with access to the name, country of residence, nationality, month and year of birth and nature of control of any individual beneficial owner and the name, registered office, legal form, registration number and nature of control of any Cayman entity whose details are maintained on their search platform.
Our Funds and Regulatory Support in the Cayman Islands
Our funds and regulatory teams regularly assist our clients to ensure that they are up to date with current and developing regulation in the Cayman Islands. Our board support services can provide an essential tool to ensure that our funds clients and their directors are kept up to date with and are appropriately addressing all regulatory developments in the Cayman Islands.
For further information, please contact:
Matt Mulry, Partner, Appleby
mmulry@applebyglobal.com
