CAYMAN ISLANDS – Termination of Companies & Partnerships 2020
As we approach the last quarter of 2020, operators of Cayman Islands entities (corporates as well as partnerships) which have ceased operations, reached the end of their life-cycle, or are no longer required, should consider taking steps to terminate such entities so as to avoid regulatory filings (such as annual returns and declarations) and payment of annual fees which fall due in January 2021.
Termination Methods
There are two methods by which a Cayman entity may be terminated: strike off and liquidation.
Strike Off. This is a quick and cost-effective method of termination. However, strike off is only recommended where an entity has not conducted business, as liabilities continue after the strike off date and the entity may be reinstated by creditors for some time after strike-off.
Strike off involves the filing of a request with the Registrar of Companies or the Registrar of Exempted Limited Partnerships (as appropriate) (the "Registrar") for the entity to be struck from the relevant register. This request will be supported by operators' resolutions confirming that the entity is no longer conducting business and has no assets or liabilities. This process may be done within a single day (for express applications) or within 3-5 business days for applications not filed on an express basis.
Where strike off is appropriate, in order to avoid 2021 annual filings and fees, the application for strike off must be submitted to the Registrar by noon 31 December 2020.
Liquidation. Where the entity has conducted business, liquidation is the recommended termination method. Liquidation generally takes six (6) weeks from the date of the passing of resolutions to place the entity in voluntary liquidation, to the date on which the Registrar issues a certificate of dissolution which will provide that the entity will be dissolved three (3) months from the date of the issuance of the certificate of dissolution.
The Registrar will not charge annual fees for 2021 where the Final General Meeting of the entity has been held by 31 January 2021.
Where the Cayman entity is a regulated fund pursuant to the Mutual Funds Law (2020 Revision) or the Private Funds Law, 2020, the operators should also take steps to cancel the entity's fund registration so as to avoid paying annual fees to the Cayman Islands Monetary Authority (CIMA). Where this is to occur, additional termination processes will be required, including filing termination affidavits and resolutions with the Cayman Islands Monetary Authority (CIMA) and the completion and filing of required audited financial statements with CIMA.
The operators of an investment fund may avoid payment of all annual fund registration fees to CIMA in January 2021, where the entity has terminated operations and appointed a liquidator prior to 31 December 2020. In the event that operations have ceased but a liquidator has not yet been appointed, an application may be made to CIMA to place the fund in License Under Termination (LUT) status so that only one half of the annual CIMA registration fees will be payable in January 2021.
Cayman entities which are registered pursuant to the Securities Investment Business Law (2020 Revision) ("SIBL") will also have similar de-registration requirements.1
It should be noted as well that where the Cayman entity is a reporting financial institution under FATCA or CRS, it will be required to continue reporting to the Tax Information Authority if the entity is existing in 2021.
Action Required
Where a Cayman entity is no longer required, it is recommended that steps be taken to terminate the entity as soon as possible during the last quarter of 2020 so as to avoid regulatory fees and filings in 2021. Where the entity is regulated, advice should also be sought regarding the termination of regulatory approvals or registrations.
This note is intended to be a general guide only and should not be relied upon as a substitute for specific legal advice. If you would like further information on any aspect of this note or on any other Cayman Islands legal issue please contact:
Janet Francis Partner FrancisGrey
D. +1345 815 2807
E. Janet.Francis@francisgreylaw.com
1 Directors of registered investment funds and entities registered under the SIBL, if no longer serving any such entities in Cayman, will also be advised to terminate their registration under the Directors Registration and Licensing law , 2014 so as to avoid annual fees payable by such directors in January of each year.
