The Companies Law 1961 (as amended, chiefly in 1990 and 1995) is based on English law and is the main law governing companies in Cayman. There are four company types which are commonly registered in Cayman under the Companies Law: Ordinary Resident Company, Ordinary Non-Resident Company, Exempted Company and Exempted Limited Duration Company.

The Companies Law, true to its English origins, permits companies limited by shares, companies limited by guarantee, and unlimited companies; but in practice only companies limited by shares are used. Incorporation and registration of limited companies takes a day, and it can be less. Shelf companies are available but are unusual.

There is a Registrar of Companies, and registration involves submission of the Memorandum of Association; for companies limited by shares the Articles of Association can follow - 'Table A' applies if no Articles are registered.

There needs to be one shareholder of record (of any nationality); there are no rules regarding minimum capital, par value etc.

There is no statutory requirement for audit or for annual filing of accounts. All companies must maintain registered offices in Cayman.

An ordinary resident company is usually formed for the purposes of carrying on local business. In addition to the Companies Law, it is subject to the terms of the Local Companies (Control) Law 1995 which requires licensing, and the annual submission of a list of shareholders. Only registered, and not bearer, shares are allowed. 

An annual general meeting must be held, and a register of members must be kept at the registered office, open to public inspection. The name of the company must end in Ltd or Limited. 

The list of shareholders of the company must be filed with the Registrar of Companies in January each year; the Immigration Board should also receive a similar list showing those shares beneficially owned by Caymanians. Registration fees are payable on incorporation and annually: CI$150 for capital not exceeding CI$42,000, CI$250 otherwise.

An ordinary non-resident company is subject to the same rules as a resident company, but under the terms of the Local Companies (Control) Law 1995, must not conduct any business within the islands. 

This form or that of the exempt company is the usual choice for offshore operations. The Financial Secretary will grant a certificate of non-residence if he is satisfied that the company does not and does not intend to trade onshore. The company is then relieved of the licensing requirement and the need to provide lists of shareholders to the Immigration Department. An annual list must still be provided to the Registrar, but it is quite usual to appoint proxies.

The normal minimum capital requirement is CI$40,000, and the minimum capital duty levied on incorporation of a nonresident company and annually thereafter is CI$400. There are no restrictions on the location of general meetings or of directors or the secretary, if there is one, except that one shareholders' meeting must be held in Cayman each year.

Records of members, directors, mortgages and charges must be kept. Financial records must be maintained although no audit is necessary and there are no filing requirements.

Ordinary non-resident companies can apply to convert to exempted companies.

The differences between a non-resident company and an exempted company are as follows:

An exempted Caymans company does not have to use Ltd or Limited in its name;

it may issue bearer shares in addition to registered shares;

it has to hold one directors' meeting a year in Cayman (but may use proxies); it does not have to hold a shareholders' meeting in Cayman;

it need not file a list of shareholders annually, and does not even have to keep such a list;

it may obtain a Certificate of Tax Exemption (ie against any future Cayman taxation)

An exempted company (or limited duration exempted company) is the normal form of choice for collective investment vehicles. Incorporation fees depend on capital as follows:

CI$410 for capital less than CI$42,000

CI$574 for capital up to CI$1.7m

CI$1,435 thereafter

Limited duration exempted companies are like exempted companies except that:

the Memorandum of Association must limit the life of the company to 30 years or less;

certain events are specified which automatically precipitate its voluntary winding-up and dissolution;

it must at all times have not fewer than two members;

the Articles may provide that no shares may be transferred without the agreement of all shareholders;

management may be carried out by the shareholders or may be delegated to a board of directors.

Fees are as for exempted companies, plus $200.

Foreign companies are companies incorporated outside the Cayman Islands which establish a place of business, or carry on business in Cayman (which includes the sale by or on behalf of the company of its shares or debentures). 

Under the Companies Law a foreign company must register, providing the following information:

a copy of its incoporation documentation in English;

the names and addresses of its directors; and

the name of a person in Cayman who can accept service on the company's behalf.

There is a fee of CI$850 on registration, and CI$500 annually thereafter.

A company can also transfer its domicile to the Cayman Islands 'by way of continuance' which obviates the need to incorporate afresh. The reverse process is also possible.

Cayman Islands partnership law is based on English law, with recent amendments. Limited Partnerships are formed under the Partnership Law 1995. 

One or more general partners have unlimited liability and are responsible for management; limited partners are liable only to the extent of their contributions.

To form a limited partnership a declaration must be filed with the Registrar of Limited Partnerships which describes all the partners and gives other information; this declaration is also published in the Cayman Gazette.

A limited partnership may become an exempted limited partnership, or one can be formed de novo, by filing a statement with the Registrar. 

Unlike the Limited Partnership declaration, this does not need to include the names of the limited partners or the amounts of their contributions.

An exempted limited partnership must not do business with the public in Cayman. An exempted limited partnership may obtain a 50-year Certificate of Tax Exemption (ie against any future Caymans taxation).

Trust law in the Cayman Islands is based on English trust law, with some recent modifications in the Trusts Law 1996.

  Other recent changes include the Perpetuities Law 1985 which increased the perpetuity period to 150 years, the Special Trusts (Alternative Regimes) Law which introduced purpose trusts, the Trust (Foreign Element) Law 1987 which provided inter alia for the importation and exportation of trusts, and the Fraudulent Dispositions Law 1989 which includes specific asset protection provisions.

Trusts do not have to be registered; a company offering trust services must obtain a licence under the Banks and Trust Companies Law 1995; individuals do not have to do so.

Trusts can be exempt, like companies and limited partnerships, but must then be registered with the Registrar of Trusts, and pay a fee of CI$400 (CI$100 annually thereafter). The Governor gives a 50-year undertaking to the Trustees that no taxation will be imposed on the trust.

The Hague Convention has not been implemented in Cayman. Specific provisions exist for the non-recognition of foreign judgements and the exclusion of forced heirship.

Cayman is well-developed as an international financial centre. For 25 years the Government has welcomed offshore business, and has created a world-standard regulatory structure to avoid money-laundering and other criminal activity.

The Cayman Islands has the world's largest offshore banking sector, and is second only to Bermuda as a captive insurance centre. Mutual funds have been a more recent success story, assisted by the establishment of a stock exchange. Trust management has always been a significant activity. The islands also offer a shipping registry.

Cayman banks must be licensed under the Banks and Trust Companies Law 1995. The astonishing Cayman Islands banking industry has 600 such licensed banks, of which about 30 hold Class A licenses permitting local and offshore business activity, while the remainder hold Class B licenses, permitting only offshore business - a local office is allowed, but only very limited transactions can be carried out with Cayman Islands residents. 

Banks do not need to be incorporated locally: a foreign bank can register as a foreign company and then obtain a license. For further details of licensing requirements and procedures and fees payable.

The assets of Cayman banks exceed US$500 bn. A very wide range of services is offered: the 30,000 offshore companies registered in Cayman include many treasury management or investment management subsidiaries of multinationals taking advantage of the excellent banking environment and absence of taxation. 

Evidently, private banking is a major component of the industry: asset protection rather than tax avoidance as such is the driving force, so that the stability of Cayman alongside stringent banking secrecy and its sophisticated investment environment are very attractive to wealthy individuals, particularly those from the US where Cayman has a very good reputation.

Cayman Islands' banks are supervised by the Cayman Islands Monetary Authority (CIMA), which concentrates on 110 banks for which Cayman is the home-country supervisor. CIMA recently extended its bank inspection programme to on-shore subsidiaries of Cayman banks.

Cayman signed a Memorandum of Understanding on cross-border banking supervision with Brazil in 1999, and intends to create a network of such agreements with all the countries whose banking supervisors evince interest in Cayman's banking sector.

Cayman Islands' banks are supervised by the Cayman Islands Monetary Authority (CIMA), which concentrates on 110 banks for which Cayman is the home-country supervisor. CIMA recently extended its bank inspection programme to on-shore subsidiaries of Cayman banks.

The Cayman Islands ceased issuing licences for shell banks in 1992 but there are still a number of banks in existence which have no offices and employees to speak of and do not offer accounts locally. 

CIMA ruled in February 2001 that such banks have just nine months from that date to open physical offices, employ staff and give Cayman financial regulators regular access to their operations - otherwise CIMA will revoke their licences.

Trust Management has been a major activity in the Cayman Islands for 30 years or more, and trust assets in Cayman now equal or exceed banking assets. Originally the trust was used primarily by wealthy individuals from the major common law countries, but it is now accepted as a major technique of asset protection in all parts of the world. Over the last 25 years the Cayman Islands, perhaps more than some other jurisdictions, have extended and adapted their trust laws to accommodate this wider market, which is not necessarily interested so much just in tax avoidance, but also in the efficient management of wealth in a more general sense.

There is a large and sophisticated community of professional advisers on trust matters in Cayman. Individuals can provide trust services in the Cayman Islands without registration, but companies offering trust services must be licensed under the Banks and Trust Companies Law 1995. 

Foreign or Cayman-resident companies may obtain licenses. These are issued by the Governor, after the Monetary Authority has accepted an application giving comprehensive information about the applicant.

A licensed trust company may be 'restricted' or 'unrestricted'. 'Restricted' companies require less capital, but are more strictly controlled.

Private trustee companies have recently become popular. In this arrangement, the trust itself remains uncluttered by control arrangements, which are exercised by the private trustee company, which in turn can be administered by a licensed trust company. This form is particularly suited to the larger type of family trusts with multiple beneficiaries and objects.

The Cayman Islands operates Registers of Shipping and Civil Aircraft. George Town is a Port of British Registry. Over the years, Cayman has been included in most English merchant shipping acts, with the result that it is a Category 1 registry, entitled to register all classes of vessel.

The Cayman Islands Shipping Registry administers Cayman registration, and has a full professional staff for this purpose. The Registration of Merchant Ships Law 1991 governs Cayman registration and lays down fee levels according to tonnage.

Aircraft are registered under the (English) Aircraft Navigation (Overseas Territories) Order 1989. The Civil Aviation Authority of the Cayman Islands maintains the register. The UK Civil Aviation Authority has discretion over Cayman registration, and in practical terms limits it to private aircraft.

The Cayman Islands Government has constructed a regulatory regime that is highly favourable to offshore operations, especially since there is no taxation in Cayman other than stamp duty and import duties.-

There are about 30,000 companies registered in Cayman, along with 600 banks and 450 insurance companies.

In June 2000, the Cayman Islands was identified by the FATF as non-cooperative in the fight against global money laundering. The result of this is that the Cayman Islands was one of fifteen tax jurisdictions placed on a blacklist. Each offending tax haven had a year in which to correct its tax regulations and legislation.

The FATF released its next annual report in June 2001, in which the organisation revised its list of countries and territories deemed non-cooperative. Only four were removed from the list, including the Cayman Islands (the other three being the Bahamas, Liechtenstein and Panama).
The Cayman Islands was praised by the FATF for its substantial efforts to conform to forty recommendations set out by the FATF in a code of good practice governing money laundering.

Offshore entities may take the following forms (click on a form for a description of the legal regime under which it is constituted):

Banks, insurance companies, mutual funds, trust management companies and other financial institutions use an appropriate corporate form from the above list; in addition they are subject to registration or licensing.-

Banks and Trust Companies (ie companies providing trust services) are licensed under the Banks and Trust Companies 

Law 1995 and pay annual fees as follows:

Class A License (unrestricted domestic and offshore banking): CI$42,000

Class B License (offshore banking; and trust companies): CI$12,600

Class B Restricted Banking License (business dealings restricted to a list of specified persons): CI$6,000

Class B Restricted Trust Company License (ditto): CI$1,640

Insurance companies are licensed under the Insurance Law 1979 as amended and pay annual fees as follows:

Class A License (Domestic insurance business): CI$5,000

Class B License (Offshore insurance and reinsurance): CI$4,500

Class B Restricted License (Captives): CI$4,500

Mutual funds and their administrators are licensed under the Mutual Fund Law 1996 and pay annual fees as follows:

A licensed mutual fund administrator pays CI$5,000 plus CI$500 for each mutual fund actually administered;

A restricted mutual fund administrator (limited to a small number of funds) pays CI$2,000 plus CI$500 for each fund actually administered;

A self-administered or single-fund administrator pays CI$200.

The fees for listing on the Cayman Islands Stock Exchange are as follows:

On application for listing and annually thereafter: CI$1,640

Umbrella funds with more than 8 sub-funds: CI$8,200 (there is a sliding scale for umbrella funds with fewer than 8 sub-funds).

Secondary listings pay a fee on application and annually thereafter: CI$820

Fees charged by listing agents are a separate matter; the above fees are simply set annual dues. The charges of a listing agent are likely to be in the CI$5,000 neighbourhood.