THE DIRECTORS REGISTRATION AND LICENSING LAW, 2014
The Directors Registration and Licensing Law, 2014 came into force on 4 June. This law has introduced a new registration regime for directors of hedge funds registered with the Cayman Islands Monetary Authority (“CIMA”) under the Mutual Funds Law (as revised) and also for directors of companies registered with CIMA as excluded persons under the Securities
Investment Business Law (as revised). There is also a separate licensing regime for professional directors, who serve on 20 or more relevant boards, and for corporate directors. Further information on the new law can be found in our June update.
EXEMPTED LIMITED PARTNERSHIP LAW, 2014
The Exempted Limited Partnership Law, 2014 came into force on 2 July. The new law allows for additional flexibility in a number of areas, such as default provisions and the fiduciary duties of general partners, whilst providing more certainty for limited partners and advisory board members on the limits of their liability and for creditors on their ability to enforce security over partnership assets. Further information on the updated law can be found in our April update.
On 1 July the Tax Information Authority Law (as revised) (the “TIA Law”) was amended to permit the automatic exchange of tax information, as required by the intergovernmental
agreements entered into between the Cayman Islands and the United States and between the Cayman Islands and the United Kingdom (the “FATCA IGAs”); and on 4 July regulations were introduced under the TIA Law implementing the registration, due diligence and reporting requirements of the FATCA IGAs. Further information on these requirements can be found in our February update.
On 22 July the Tax Information Authority released version 1.0 of its Guidance Notes on the FATCA IGAs. Along with general guidance, these guidance notes bring together useful additional information on, among other things, the differences between common defined terms used in the FATCA IGAs, the US Treasury Regulations and the OECD’s Common Reporting Standards (any of which can be used by entities subject to the FATCA IGAs), as well as the additional categories of non-reporting entity that are available pursuant to the US Treasury Regulations.
In the first six months of 2014 a total of 5,391 new companies were incorporated (2,718 in Q1 and 2,673 in Q2) and 1,342 new exempted limited partnerships were registered (642 in Q1 and 700 in Q2) in the Cayman Islands. The rate of company incorporations is back to 2006 levels and exempted limited partnerships are being registered at record levels. The second quarter also saw the first increase in the underlying number of hedge funds registered with CIMA since 2008. Ignoring master funds, the number of registered funds increased from 8,064 to 8,116 in Q2. The aggregate number of hedge funds regulated by CIMA increased from 11,205 to 11,296 in the same period. These statistics suggest that the Cayman Islands is seeing the benefits of a more upbeat US economy and increased confidence among fund managers and investors following the finalisation and implementation of new regulatory regimes such as FATCA and AIFMD, after several years of uncertainty.