James Bergstrom November 3 2022 Cayman Islands funds and regulatory update: third quarter of 2022 Ogier | Private Client & Offshore Services - Cayman Islands James Bergstrom Private Client & Offshore Services Summary of recent legal and regulatory developmentsCIMA publishes revised regulatory procedures for deregistration of Cayman regulated fundsCIMA consultation on corporate governanceProtecting the name of a fund as a trademarkUK register for certain Cayman entities holding UK propertyCayman introduces reforms to restructuring regimeThis article provides a round-up of the Cayman legal and regulatory developments during the third quarter of 2022 that may be of interest to funds clients. It should be noted that there is nothing critical or requiring immediate action at this time.Summary of recent legal and regulatory developmentsUpdated regulatory procedures for deregistration of Cayman Islands regulated fundsFollowing consultation with industry, the Cayman Islands Monetary Authority (CIMA) has issued new regulatory procedures for Cayman Islands regulated funds regarding their deregistration with CIMA, either at the end of the life of the fund or in certain limited circumstances where their regulatory status may have changed.CIMA consultation on corporate governanceCIMA has issued a consultation draft of proposed rules to enhance corporate governance requirements for regulated entities, including investment funds, in the Cayman Islands. The intention is to adopt relevant corporate governance elements from the existing corporate governance framework and make enhancements as needed based on a review of international standards, jurisdictional comparison and regulatory or supervisory needs.Protecting the name of a fund as a trademarkFund names may become valuable commercial assets when they are successfully registered as trademarks. Without trademark protection, rights against third parties who may use and/or register a similar or identical fund name as a trademark, may be limited. Formation of a fund vehicle does not ensure that the owner can exclusively use the fund name.UK register for certain Cayman entities holding UK propertyCertain Cayman registered entities, such as property funds or private funds holding UK property, will need to register in the UK to provide details of the beneficial owners of the UK property under the UK's recently enacted Crime (Transparency and Enforcement) Act 2022.Cayman introduces reforms to restructuring regimeOn 31 August 2022, the Cayman Islands brought into force the much-anticipated reforms to its restructuring regime which will facilitate the efficient restructuring of distressed companies for the benefit of their stakeholders.These updates are discussed in detail below.CIMA publishes revised regulatory procedures for deregistration of Cayman regulated fundsFollowing consultation with industry, CIMA has issued new regulatory procedures for Cayman Islands' open-ended funds regulated under the Mutual Funds Act and for closed-ended funds registered under the Private Funds Act regarding their deregistration with CIMA, either at the end of the life of the fund or in certain limited circumstances where their regulatory status may have changed.The principal changes introduced in the new deregistration procedures relate to the timing of the deregistration process and the elimination of the option to place a fund in "License under Termination" (LUT) or "License under Liquidation" (LUL) status with CIMA. Under the old procedures, filing the deregistration documents with CIMA and, as a result, placing a fund in LUT or LUL, prior to the fund's final distribution and audit could, in certain circumstances, reduce or eliminate CIMA's annual fund registration fees for the following year. Under the new procedures, the fund must complete and file its final audit (or seek and be granted an audit waiver from CIMA) and be in good standing (including payment of all fees) before the deregistration documents may be filed.The new procedures apply to any new deregistration applications made on or after 17 August 2022. CIMA have confirmed that any funds that had previously submitted LUT or LUL applications under the old procedures will still be able to take advantage of the fee concessions under those procedures, provided that they meet the filing requirements associated with their LUT or LUL status.CIMA consultation on corporate governanceCIMA has issued a consultation draft of a proposed "Rule on Corporate Governance for Regulated Entities" (rule) and "Statement of Guidance on Corporate Governance for Mutual Funds and Private Funds" (SoG) to private sector associations in the Cayman Islands for industry feedback. The intention of the rule and the SoG is to adopt relevant corporate governance elements from the existing corporate governance framework and make enhancements as needed based on a review of international standards, jurisdictional comparison, and regulatory or supervisory needs.CIMA has stated that:the proposed measures and consequent expansion of scope are not anticipated to create any undue burden for regulated entities as these entities should already be implementing a comprehensive corporate governance framework suitable for the size, complexity, structure, and risk profile of its operations. It is important to state that corporate governance is core to financial entity soundness and prudence. Additionally, the proposed Rule and SOG do not fundamentally deviate from key corporate governance principles already required and/or guided by the current Cayman Islands corporate governance framework.In addition, CIMA has clarified that, notwithstanding the proposed rule being applicable to all regulated entities, CIMA would expect (and explicitly outlines) that the established corporate governance framework for regulated entities should correspond with the size, complexity, structure and risk profile of its operations.Protecting the name of a fund as a trademarkFund names may become valuable commercial assets when they are successfully registered as trademarks. It is a common misconception that once a fund vehicle is formed the owner can exclusively use the fund name in respect of financial services and prevent third parties from using the same name.The mere formation of a fund vehicle with a particular legal name does not provide the owner with trademark protection and should not be taken as an indication that the fund name is available for use and registration as a trademark. A third party may have already used and/or registered a similar or identical fund name as a trademark, which could pose threats to the use of the owner's chosen fund name and their ability to protect it.A fund name will serve to identify and distinguish the fund and attract investors. Without trademark protection comes risk. If a fund is not secured with trademark protection, the rights against third parties will be limited.UK register for certain Cayman entities holding UK propertyWith the United Kingdom's register of overseas entities effective since 1 August 2022, certain legal persons established in Cayman, such as property funds or private funds holding UK property or the trustees of Cayman law trusts (eg, property unit trusts), will need to register with the UK Companies House and provide information on beneficial owners, namely on any individual or entity having significant influence or control over the entity. Entities that have made relevant disposals of land since 28 February 2022 must also provide information about their beneficial ownership immediately prior to the disposal.The register is a requirement of the Economic Crime (Transparency and Enforcement) Act 2022 (Economic Crime Act), which is aimed at improving transparency in ownership of UK real estate and allowing for more effective investigation of suspicious wealth.Entities already holding UK property should be aware that they must file the required information during the six-month transitional period, which is open now and runs to the end of January 2023.The overseas entity and its officers will be responsible for providing information for registration purposes and annual updates or confirmations that no reportable changes will be required.Failure to comply with the Economic Crime Act's requirements is a criminal offence and will affect an entity's ability to deal with UK property (though there are some exceptions for those in limited circumstances).Cayman introduces reforms to restructuring regimeThe Cayman Islands insolvency and restructuring industry welcomes the introduction of the much-anticipated reforms to the jurisdiction's restructuring regime. These came into force on 31 August 2022. The reforms, which were originally published in 2021, will facilitate the efficient restructuring of distressed companies for the benefit of their stakeholders.The increased accessibility and flexibility introduced by the new restructuring regime will enable Cayman Islands companies to reorganise efficiently for the benefit of their stakeholders while ensuring that robust protections remain in place to provide creditors and shareholders with confidence in the restructuring process. It also demonstrates the Cayman Islands' commitment to developing and adapting its legislative regime to meet the ever-changing needs of large-scale cross-border restructuring arrangements.For further information on this topic please contact James Bergstrom at Ogier by telephone (+1 345 949 9876) or email ([email protected]). The Ogier website can be accessed at www.ogier.com.