New Legislation on Cayman Islands Ownership Structure Strengthens Now
The Cayman Islands have implemented the Beneficial Ownership Transparency Act (BOT Act) and its accompanying regulations, marking a significant shift in the island nation's approach to beneficial ownership transparency.
Under the new legislation, legal persons, including companies, limited liability companies (LLCs), limited liability partnerships (LLPs), exempted limited partnerships (ELPs), and foundation companies, must begin preparing for compliance with the BOT Act by 1 January 2025. This includes reviewing their beneficial ownership registers and ensuring they are in line with the Act's requirements.
The BOT Act provides for administrative fines for breaches of the Act or the Regulations. In-scope entities will need to provide information in respect of their beneficial owners to the corporate service provider that maintains their beneficial ownership register, including certain additional information such as the nationality of any individual beneficial owners.
Registered funds have the option to take an "alternative route to compliance," which requires them to provide details of a contact person at a licensed fund administrator or another person in the Cayman Islands that is licensed or registered under a regulatory law. Investment funds registered with the Cayman Islands Monetary Authority (CIMA) will need to decide whether to take this route or establish and maintain a beneficial ownership register.
Key changes to note in respect of Cayman Islands investment fund vehicles are that all partnerships are within the scope of the BOT Act, and exemptions available under the previous beneficial ownership regime have been removed. This means that general partners, blockers, special purpose vehicles, entities registered under the Securities Investment Business Act or Virtual Assets (Service Providers) Act, and investment fund vehicles, which were previously out of scope or exempt, must now assess how the BOT Act applies to them.
Legal persons should determine their obligations under the BOT Act, including any necessary revisions to their beneficial ownership registers. Those not in scope or exempt under the previous beneficial ownership regime should also determine their obligations under the BOT Act.
The Cayman Islands Government has committed to providing a legislative framework for public access to beneficial ownership information at a later date, in line with a 2019 commitment to the UK government. Enforcement relating to the new requirements in the BOT Act framework will be suspended until early next year.
Industry members are to suspend filing beneficial ownership information under the previous reporting framework until further notice. The definition of "beneficial owner" under the BOT Act has been amended to align more closely with the definition used under the Cayman Islands Anti-Money Laundering Regulations, but the relevant ownership and control percentage threshold under the BOT Act will remain at 25% or more, whereas for the purposes of the AMLR it is 10% or more.
In summary, the new Beneficial Ownership Transparency Act in the Cayman Islands requires legal persons to review and assess their beneficial ownership registers, and all in-scope entities should familiarize themselves with their enhanced obligations under the Act and the additional information required for beneficial owners. Legal persons should work with their legal counsel and other service providers to prepare for compliance with the BOT Act by 1 January 2025.
