Director Registration and Licensing

The initial deadline of 4 September for individual directors of "covered entities" to register under the Directors Registration and Licensing Law, 2014 ("DRLL") was extended to 30 November by the Cayman Islands Monetary Authority ("CIMA"). The deadline for corporate directors of "covered entities" to become licensed under the DRLL expired on 4 December.  Covered entities include hedge funds registered with CIMA under the Mutual Funds Law (as revised) and companies registered with CIMA as excluded persons under the Securities Investment Business Law (as revised).  Any director of a covered entity not yet registered with CIMA is likely to be acting in breach of the law.


OECD Multilateral Agreement

The reality that FATCA and its equivalents are here to stay was reinforced on 29 October when 51 countries, including the Cayman Islands, signed the OECD's multilateral competent authority agreement providing for the automatic exchange of financial account information among those jurisdictions in accordance with the OECD's common reporting standard.  The signatories pledged to work towards implementation by 2017, with the first reporting to take place in 2018.


In the meantime, the 22 December 2014 deadline for existing Cayman Islands Financial Institutions (such as investment funds, structured finance SPVs, banks and custodians) ("FIs") to register on the IRS FATCA portal for a GIIN in time to be issued a number in January's list is now upon us.  Any FIs that have not yet registered should do so as soon as possible unless they qualify for one of the limited exemptions.

It appears likely that the deadline for Cayman Islands FIs to register  with the Tax Information Authority in the Cayman Islands (the "TIA")  will be pushed back from 31 March 2015 to 30 April 2015, but this has yet to be approved. 

On 15 December, the TIA issued version 2.0 of its FATCA Guidance Notes.  The changes clarify a number of issues, such as how FATCA applies to Cayman Islands Investment Entities in liquidation and to Private Trust Companies.


Singularis Holdings Limited v PwC

The Privy Council gave judgment on 10 November 2014 in this case and a related case, Saad Investments Company Limited v PwC, both appeals from the Bermuda Court of Appeal.  The liquidators of the two plaintiff companies were seeking information and documents from the companies' former auditors, PwC in Bermuda.  The liquidators had obtained orders of the Grand Court of the Cayman Islands pursuant to section 103 of the Cayman Islands Companies Law requiring PwC to provide information and documents and they sought orders from the Bermudan Courts to compel PwC to do so.  By a three to two majority the Privy Council decided that there is, in principle, a common law power to assist a foreign Court by ordering the production of information and documents to assist liquidators, but this power is not exercisable in circumstances where the liquidators could not have obtained similar relief in their home jurisdiction.

RMF Market Neutral Strategies (Master) Limited v DD Growth Premium 2X Fund

In a judgment dated 17 November 2014, the Grand Court of the Cayman Islands addressed a claw back claim by liquidators of a fund that turned out to be a Ponzi scheme against "innocent" redeemed investors.  A number of investors had redeemed from a Fund in December 2009.  The Fund was subsequently wound up and the liquidators discovered a fraud, as the Fund was essentially a Ponzi scheme.  The liquidators attempted to claw-back the redemption payments on the basis that they were: (a)  unlawful as being payments made out of capital at a time when the Fund was insolvent (section 37(6)(a) of the Companies Law); and (b) voidable preferences (section 168 of the Companies Law).  Chief Justice Smellie rejected both of these claims.  He rejected the section 37 claims on the basis that the payments were not made out of capital.  He rejected the section 186 claims on the basis that it was not proved that the dominant purpose of the payment to the redeemed investors was to prefer those creditors.

Amendments to the Grand Court Law

Legislation which came into force on 24 November 2014 gives statutory force to the jurisdiction of the Cayman Islands Courts to grant interim relief in support of foreign proceedings where there is no substantive claim in the Cayman Islands.  This change follows the Cayman Islands Court of Appeal decision in VTB Capital v Universal Telecom which confirmed the availability of free standing freezing injunctions (including against third parties) in support of foreign proceedings.


In the first eight months of 2014 the Cayman Islands Registry handled the incorporation of 6,521 exempted companies (up from 5,631 during the same period of 2013) and the registration of 1,808 exempted limited partnerships (up from 1,503 during same period of 2013).  The numbers of entities regulated by CIMA have remained fairly stable across the board during the first three quarters of 2014, with regulated hedge funds at approx. 11,000, licensed insurance companies at approx. 800, banks at approx. 200.  The increasing rate of entity formation combined with stable numbers of regulated entities implies that most of the year's activity has been in the unregulated sector, which could include fundraising by closed-ended funds, the establishment of holding vehicles for M&A transactions or of debt issuing vehicles for securitisations among many other possibilities.