Cayman Islands Beneficial Ownership – Introduction
On 31 July 2024, the Cayman Islands introduced the Beneficial Ownership Transparency Act 2023 (BO Act) along with the Beneficial Ownership Transparency Regulations, 2024 (BO Regulations).
Alongside these regulations, guidance titled Guidance on Complying with Beneficial Ownership Obligations in the Cayman Islands (BO Guidance Notes) was also made available on the General Registry’s website.
This new framework, known as the New BO Regime, revises the rules for entities registered in the Cayman Islands.
For those involved in private client structures, especially with trust arrangements and underlying companies incorporated in the Cayman Islands, these changes may have significant implications.
This article explores what the New BO Regime entails and how it may impact trusts and other wealth management entities.
Key Changes in the New BO Regime
The New BO Regime broadens the types of Cayman Islands entities required to comply with beneficial ownership reporting obligations.
Under the new rules, some entities that were previously exempt now fall within scope, meaning more wealth structuring vehicles, including foundation companies and private trust companies (PTCs), must adhere to these requirements.
While trusts themselves are exempt from registration, companies or other entities under a trust, known as “Trust Underlying Entities,” must comply with beneficial ownership reporting if they meet certain criteria.
Defining a “Legal Person”
Under the New BO Regime, several types of entities are classified as “Legal Persons” and fall within the scope of the regulations, including:
- Companies,
- Limited liability companies,
- Limited liability partnerships,
- Limited partnerships,
- Foundation companies,
- Exempted limited partnerships, and
- Any other entity prescribed by future regulations.
Entities designated as Legal Persons must maintain a Register that identifies their beneficial owners.
Who Qualifies as a “Registrable Beneficial Owner”?
The BO Act sets out who qualifies as a “Registrable Beneficial Owner.” This includes individuals or legal persons who:
- Hold 25% or more ownership or control in the Legal Person,
- Exercise control over the management of the Legal Person, or
- Have control through indirect means or other arrangements.
In the absence of a Registrable Beneficial Owner, a senior managing official, like a director or CEO, must be listed as the contact person on the Register.
Information Requirements
For each Registrable Beneficial Owner, the following information must be provided:
- Full name,
- Residential address and address for service,
- Nationality,
- Date of birth,
- ID details,
- Nature of control or ownership, and
- Date of change in beneficial ownership status.
The Register needs to be updated monthly to ensure compliance.
Compliance Responsibilities
The responsibility for maintaining and filing the Register lies with the Legal Person itself, typically in collaboration with a corporate services provider (CSP). Failure to comply with these reporting requirements may lead to civil or criminal penalties.
Timing for Compliance
The New BO Regime enforcement begins in January 2025, providing a grace period for entities to meet compliance obligations.
Impact on Trusts
Trustees of trusts with a Trust Underlying Entity may need to report beneficial ownership details if there are no other identifiable Beneficial Owners.
Trustees must meet specific criteria, demonstrating ultimate control over the trust’s activities, unless this control is limited to advisory or managerial functions.
Foreign trustees also need to report details of a nominated individual within their organisation.
Foundation Companies and Private Trust Companies
Foundation companies commonly used in private wealth structuring may also require review.
Depending on the constitutional documents, a Registrable Beneficial Owner could be the Supervisor, founder, or another individual with control.
For PTCs, previously exempt unlicensed PTCs now fall within scope, requiring identification of Registrable Beneficial Owners.
Privacy and Future Changes
Currently, beneficial ownership information is not publicly accessible.
However, draft regulations are under consultation, exploring a possible framework for public access in the future.
If public access is introduced, requests will be subject to a “legitimate interest” test to safeguard against risks like extortion or violence.
Cayman Islands Beneficial Ownership – Conclusion
The New BO Regime places a significant regulatory responsibility on entities and individuals managing trusts and wealth structures in the Cayman Islands.
With the January 2025 deadline approaching, private clients, trustees, and wealth management advisors should carefully assess their current structures to ensure compliance.
Final Thoughts
If you have any queries about this article on beneficial ownership, or tax matters in the Cayman Islands, then please get in touch.
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