As we approach the last quarter of 2021, operators of Cayman Islands companies 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 2022.
TERMINATION METHODS
There are two methods by which a Cayman company 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 (the "Registrar") for the entity to be struck from the register of companies. This request will be supported by directors' 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 2022 annual filings and fees, the application for strike off must be submitted to the Registrar by noon 31 December 2021.
Liquidation. Where an entity has conducted business, liquidation is the recommended termination method. Liquidation of a Cayman Islands company 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. Bearing in mind the actual dissolution date, where directors wish for a Cayman entity to have a dissolution date in 2021, it would be advisable to commence dissolution proceedings as soon as possible.
Where the Cayman company is a regulated fund pursuant to the Mutual Funds Act (2021 Revision) orWhere the Cayman company is a regulated fund pursuant to the Mutual Funds Act (2021 Revision) or Where the Cayman company is a regulated fund pursuant to the Mutual Funds Act (2021 Revision) or the Private Funds Act (2021 Revision), the directors should also take steps to terminate the entity's registration so as to avoid paying annual fees to the Cayman Islands Monetary Authority (CIMA). Where this is to occur, additional steps will be required to effect the entity's termination as a CIMA registered fund, including filing termination affidavits, resolutions and audited financial statements with CIMA.
The directors of an investment fund may avoid payment of all annual fund registration fees to CIMA in January 2022, where the entity has terminated operations and appointed a liquidator prior to 31 December 2021. 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 2022.
Cayman entities which are registered pursuant to the Securities Investment Business Act (2020 Revision) ("SIBA") 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 for as long as it remains in existence.
ACTION REQUIRED
Where a Cayman company is no longer required, it is recommended that steps be taken to terminate the company as soon as possible so as to avoid regulatory fees and filings in 2022. Where the company 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
