Within the investment industry, the good news announced recently has been the eagerly awaited introduction of a new type of vehicle in the Cayman Islands, namely the Limited Liability Company.
The Cayman Islands Government has announced that the anticipated Limited Liability Companies Law, 2016 (“LLC Law”) will come into force as from 13 July 2016 and with it will further enhance the Cayman Islands as the jurisdiction of choice for offshore investment funds.
The new LLC Law is similar to that which governs Delaware limited liability companies, but will provide for more of a hybrid type of entity that incorporates some of the Cayman’s exempted company features.
This will allow clients to establish a fund within a structure they will be more familiar with, closely resembling a US LLC vehicle, providing the ability to manage the fiduciary risk of the members managing the LLC and also avoiding the technical issues of par value and share capital of a company
Important features of the LLC
- It is a body corporate with separate legal personality and limited liability for its members, like a Cayman Islands exempted company, but without the need for share capital.
- the LLC may be formed for any lawful business, purpose or activity
- Only one member is required to register an LLC, by filing with the Registrar a registration statement. Registration is effected by payment of a fee and filing a certificate of formation;
- The LLC must maintain a register of members, a register of managers, a register of security interests and a register of mortgages and charges.
- An LLC will have the ability to be member managed or managed by a manager or managers, set out in the LLC Agreement.
- Members have capital accounts and make capital contributions rather than subscribing for shares. Members can agree in the LLC agreement how the profits and losses of the LLC are to be divided and how and when distributions are to be made (similar to a Cayman Islands exempted limited partnership).
- There are no fiduciary obligations on members when exercising their rights or authorities or performing any of their obligations under the LLC Agreement