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Are you looking to register your company in the Cayman Islands? The Cayman Islands has succeeded in attracting businesses from all over the world but the company registration process might make you feel daunting due to the complex steps involved.
In this article, you will gain a detailed understanding of the step-by-step procedure to successfully incorporate a company in the Cayman Islands. You will learn about the conditions and requirements to satisfy for a company formation in the Cayman Islands, including documents and information required about the business nature and activities, residency requirements for directors and shareholders, share capital requirements, entity structure, etc.
In short, this article will address everything you need to know to set up your company in the Cayman Islands.
Why choose the Cayman Islands?
Nearly 10,000 companies get incorporated in the Cayman Islands every single year. This jurisdiction has been a hotspot for businesses worldwide to set up their companies to reap the benefits offered by this self-governing British Overseas Territory. One of the common reasons for company formation in the Cayman Islands is to utilise the zero tax system. There is no corporate income tax, capital gains tax, or withholding tax. On top of this, shareholders are not subject to estate or inheritance taxes on their shares or dividends received from those shares. This taxation environment makes it very lucrative for businesses from all parts of the world.
The Cayman Islands also has super-strict privacy laws, which makes it a preferred jurisdiction for businesses that do not want to disclose their personal or financial details to the general public or third parties. The non-existence of a public directory acts as a cherry-on-top for directors and shareholders of a Cayman business. Other benefits include a strong international reputation, a well-established financial ecosystem, fewer compliance requirements, a white-listed offshore jurisdiction, etc.
Step 1 - Review the eligibility
The first and foremost step in registering your company in the Cayman Islands starts with reviewing if you and/or your business are eligible to be incorporated in the country as per the rules and regulations prescribed under the Cayman Islands Companies Act. The following are a few to consider:
Directors: At least one director is required. Directors can be individuals or corporate entities. There are no residency requirements for directors.
Shareholders: A minimum of one shareholder is required. Shareholders can be individuals or corporate entities. There are no residency requirements for shareholders.
Authorised Share Capital: There is no minimum authorised share capital. The typical authorised share capital for an exempted company is USD 50,000.
Paid-up Share Capital: The paid-up share capital can be as low as one share of par value or no par value. Share capital can be in any currency.
Memorandum and Articles of Association: The company must have a Memorandum of Association outlining the company's structure and purpose. Articles of association detailing the internal governance must also be submitted.
Company Secretary: There is no mandatory requirement for a company secretary. However, appointing one is advisable for administrative purposes.
Step 2 - Check name availability
Before you begin the company formation procedure in the Cayman Islands, checking if your preferred company name is available to be used for your company is very important. No two or more companies can have the same or similar names and no company can have words that are exempt from being used, such as "royal," "bank," etc., without seeking prior approval from the relevant authorities for certain restricted business industries. To avoid application delays and future legal complications, you can check if your name is available in the Cayman Islands company registry's company name search database.
While doing the name search, be sure to check the other forms of your name, such as alternative pronunciation, same-sounding words, etc., to ensure that your company name is distinct and original from its core. Ensure that the name that you are choosing is available to get copyrighted to have sole rights over the usage of your company name, as your preferred company name could have already been copyrighted by a different entity, even though they may not have incorporated a company using it.
The registry allows you to reserve your preferred company name(s). Once reserved, you will be required to register your company within the 30-day, 60-day, and 90-day window from the date of name reservation confirmation, depending on the tier that you choose during the name reservation application stage. Do not forget to read our blog on how to name your Cayman Islands company and the name reservation process.
Step 3 - Decide company structure
Your preferred entity structure accompanies you throughout your Cayman business journey. While you can take advantage of your chosen structure, you might also have to deal with certain limitations associated with it. The types of companies in the Cayman Islands include exempt companies, limited liability companies (LLCs), resident companies, non-resident companies, association not-for-profits, foundation companies, overseas companies, special economic zone companies, and unlimited companies.
Exempt Company:
An exempt company is a type of company that is registered in the Cayman Islands but has no physical or operational presence within the jurisdiction. An exempted company is the most commonly used entity type in the Cayman Islands. This structure is similar to that of the International Business Company (IBC) type in other jurisdictions such as the British Virgin Islands, Seychelles, Marshall Islands, etc. An exempt company in the Cayman Islands is a traditional entity type that offers flexibility in terms of share capital and corporate governance. It has directors who look after the day-to-day operations of the company and shareholders who hold shares in the company.
Exempted companies registered in the Cayman Islands cannot directly deal with the residents of the Cayman Islands and cannot have business activities in the country unless they obtain a separate local trading license or relevant licenses. This structure is chosen by global businesses that have a presence and operate exclusively outside the Cayman Islands.
Exempt companies enjoy zero corporate tax, withholding tax, and inheritance tax. Global businesses can enjoy privacy-friendly laws. On the other hand, exempt companies may face reputational risk associated with the Cayman Islands, just as international businesses might face the heat of direct or indirect restrictions put forth by other countries or international organisations against the Cayman Islands.
Limited Liability Company (LLC):
LLC is another type of company that can be registered in the Cayman Islands, where shareholders are protected from personal liability for the company's debts and liabilities. Thanks to the legal personality given to the entity in this structure, it provides certain measures of protection for the investors. We can find this entity type in other offshore jurisdictions such as St. Kitts and Nevis, Belize, St. Vincent and the Grenadines, etc.
An LLC is a hybrid entity type that carefully manages to combine the model and characteristics of an exempted company and a partnership. LLC has members, unlike shareholders in an exempted company in the Cayman Islands. Since share capital doesn't exist in an LLC, members get into an agreement that outlines terms such as profit sharing and management.
Similar to an exempt company, LLCs are mandated not to deal with Cayman residents and not to operate within the jurisdiction. LLC's primary operations and business activities must be excusively outside the Cayman Islands and hence it is most suited for global businesses. LLCs enjoy the same level of benefits as an exempted company, such as a zero-tax environment and strict privacy laws that benefit the company and its members.
If you are interested, learn in detail about the various types of companies in the Cayman Islands available for registration.
Step 4 - Organise Documents
Organising the required information and documents would be very tedious and is a very important step in company formation in the Cayman Islands. Not following the document guidelines set forth by the registry as per the Companies Act will delay the application review and result in rejection in some cases. The documents required for company formation in the Cayman Islands are notarized passport copies, notarized address proof copies such as a bank statement or utility bill, work experience documents such as a CV or LinkedIn profile, business descriptions, and proof of source of funds.
Below are the documents required for all the directors, shareholders, ultimate beneficial owners, and contact persons of your new Cayman Islands company to begin with its registration procedure:
Notarized Passport Copies
Every member of the company must produce a scanned version of the notarized copies of their passports to act as a proof of identity document. Passports must be valid for at least 6 months from the date of application submission.
Notarized Address Proof
Scanned versions of notarized copies of address proof are required. Address proof documents include a bank statement or utility bill (e.g., electricity, gas, water, internet, cable, waste management, and sewage). It must clearly show the holder's full name and a physical address written in English. Post Office (P.O.) Box addresses in the address proof documents are strictly not accepted.
Work Experience Proof
A document outlining detailed work experiences is required. The commonly accepted work experience proof documents include a comprehensive curriculum vitae (C.V.) or LinkedIn profile. This document acts as solid evidence to show the registry during their application review step that the member is capable of performing the business activities for which the company is being incorporated in the Cayman Islands.
Business Description
A detailed description of your business activities must be submitted to the registry with the application for your company's registration in the Cayman Islands. This description should be very detailed and information-oriented and generally includes products and services that the business is or would deal in, sectors of the business activities, major operating countries, customer regions, and business model.
Proof of Source of Funds
Even though proof of source of funds is not required initially to submit the application for your company's incorporation, often the registry requests it in their follow-up. The proof of source of funds includes copies of the last two tax returns, a letter of employment, a letter from an accountant certifying your annual income, or financial statements or bank statements from the last two years.
If the documents are not in English, then they must be translated by a certified translator before submitting them to the registry. These are the documents required initially to begin with your company's formation procedures in the Cayman Islands. If the registry requests additional documents or information about the business and/or members, you should fulfil such requirements on time.
Step 5 - Appoint a registered agent
A registered agent is a party that will act as a bridge between a company and the official registry to comply with local laws and maintain the company's good standing. Appointing a registered agent is mandatory for a company in the Cayman Islands. Having a registered agent is required for not only the company's incorporation but also perpetually until the company's existence.
The registered agent will act as your key point of contact when you receive any official mail from the registry relating to your company. They will help you comprehend the content in the mail and guide you on the best possible courses of action to stay compliant with the rules and regulations. The registered agent will take care of your company's annual renewal procedures, including renewal filings, government fee payments, register updates, etc.
They will be your guide not only with essential compliances but also with add-on specialised services based on your requirements for an efficient legal administrative pathway. If your business falls under certain regulations, they will assist you in complying with them, such as filings and disclosures under the Economic Substances Act for companies established in the Cayman Islands.
Step 6 - Submit the application
Having understood all the requirements and documents, now it's time to begin the application preparation required as prescribed by the registry with all the information about the members of the company, which includes directors, shareholders, and ultimate benefical owners (UBOs), and the business itself, which includes the business and revenue model. You might find the application complex and feel overwhelmed by the legal jargon, and hence it is like the norm to work with an expert provider in this space, like Vepapu. Once the application is prepared, it is now time to submit it with the supporting documents to the registry with the government's prescribed fee for a company's incorporation in the Cayman Islands, which is based on the chosen share capital size.
The government fee for the formation of a Cayman Islands exempted company is CI$700 (approximately US$855) for companies with a share capital of less than CI$42,000. The government fee for an LLC registration in the Cayman Islands is CI$900, which is approximately US$1,100.
Step 7 - Follow-up and approval
Now the registry will start to review your submitted application. In this official process, the registry usually takes 2–4 business days to review the application and approve the company's incorporation if all the information and supporting documentation are present.
If the registry requests further documentation or additional clarifications in its application review stage, it is the responsibility of the members to provide them on time. A few of such requests include proof of the source of funds, notarized copies of certain submitted documents, information about the members' capacities to conduct the business mentioned, etc. The approval timeline for your application is most likely going to extend at this stage.
Once the registry is satisfied with the submitted application, you will be issued a certificate of incorporation, which marks the official approval of your company's incorporation in the Cayman Islands. The following is the immediate consequence of incorporation as mentioned in the Companies Act:
Upon the filing of the memorandum of association a company shall be deemed to be registered, and the Registrar shall issue a certificate under that person’s hand and seal of office that the company is incorporated with effect from the date of the registration of the memorandum of association and, in the case of a limited company, that the company is limited.
Step 8 - Open a bank account
There is no requirement to open a bank account once you successfully incorporate your company in the Cayman Islands. If you wish or your business requires one, you can open a business account (also known as a current account or checking account). You can open your bank account in any country, as the company's law doesn't restrict you from going outside the Cayman Islands for your banking needs. You can also open multi-currency bank accounts without restrictions from the regulatory side.
Opening a bank account might be a bit tricky due to the complexities and uncertainties involved in the process. You can consider traditional brick-and-mortar banks such as Caye International Bank, Bank One, First Caribbean Bank, etc. for your company in the Cayman Islands, where they usually require you to visit their office at least once during the application stage. If you don't want to travel anywhere and are comfortable with digital-only banks, you can widen your options with Airwallex in Hong Kong as well as Payoneer. The time taken by banks to open a bank account widely varies, ranging from 4 business days to nearly a month.
Step 9 - Company maintenance
Vepapu strongly advocates that company incorporation is just the next step in any business journey. It is the responsibility of the members of the company to comply with all the laid-out rules and regulations, thereby maintaining their companies in good standing with the laws. In the Cayman Islands, you will need to perform several activities annually to keep your company legally active.
The primary compliance requirement is to renew your company by filing along with the government fees stipulated for company renewals based on the company's share capital size. Along with this, the company should always meet the requirements that it had while incorporating, such as an active appointment of a registered agent and registered address, at least one director and shareholder, etc.
Annual General Meeting: There is no requirement to hold annual general meetings. Meetings, if held, can be conducted anywhere in the world.
Accounting Records: Companies must maintain proper accounting records. Records must be kept for at least five years.
Audit Requirements: There is no requirement for an annual audit unless the company is a regulated entity. Voluntary audits can be conducted.
Beneficial Ownership Register: Companies must maintain a beneficial ownership register. This information is not public but must be accessible to local authorities.
Business Licenses: Specific licenses may be required depending on the business activity. Financial services, for instance, require additional licensing.
In addition to these, a company in the Cayman Islands must also file its financial report. If your business falls under the economic substance regulations, you are also liable to submit a declaration and file under the Economic Substance Act in the Cayman Islands.
I recommended that you read our detailed guide on the annual compliance requirements for a company in the Cayman Islands.
In conclusion, establishing a business in the Cayman Islands can be profitable and come with a number of benefits, like tax efficiency, regulatory flexibility, and access to a sound financial system. Businesses can build a solid base for their company by carefully examining the company form, choosing a registered agent, and satisfying every legal requirement to be eligible to setup and maintain their companies in the Cayman Islands. To maintain legal compliance, transparency, and adherence to international standards, it is imperative to emphasise the necessity of continuing corporate maintenance and compliance requirements.
