After much anticipation in the market, we are pleased to report that the Limited Liability Companies Bill 2015 (LLC Bill) was published in the Cayman Islands on 18 December 2015. The LLC Bill is expected to be in force this month making Cayman Islands Limited Liability Companies (LLC) available for the first time in the jurisdiction.
What is an LLC
The introduction of the LLC responds to requests made by the US financial services industry for a LLC vehicle. As a result the LLC Bill takes many key features of the current Delaware Limited Liability Companies Law and those familiar with the Delaware concepts will recognise many of these characteristics, with certain modifications to conform with Cayman Islands law and concepts. Essentially, the Cayman LLC is a hybrid entity, merging certain characteristics of a Cayman Islands exempted company with characteristics of a Cayman Islands exempted limited partnership.
Key Features of an LLC
i. An LLC is a body corporate with separate legal personality and limited liability, like a Cayman exempted company, without the constraint of having share capital.
ii. Exempted companies will be able to convert into an LLC.
iii. An LLC may merge or consolidate with exempted companies or any foreign entity with separate legal personality.
iv. Members of an LLC may have capital accounts and make capital contributions, with profits and losses allocated amongst those members as provided in the LLC agreement.
v. The management of the LLC shall either vest in its members acting by a majority in number or, if the LLC agreement provides, by one or more managers. The LLC agreement may provide for classes of managers having such rights, powers and duties for the relevant class as specified therein.
vi. Subject to the provisions of the LLC agreement, a manager shall not owe a duty (fiduciary or otherwise) to the LLC or any member or any person except a duty to act in good faith, and such duty of good faith may be expanded or restricted by the express provisions of the LLC agreement.
vii. The registration of an LLC is simple – registration requires the filing of a registration statement and payment of the appropriate fee. The LLC agreement is not required to be filed with the Cayman Islands Registrar of Companies (Registrar).
viii. An LLC may apply for a 50 year tax undertaking certificate from the Cayman Islands Government.
ix. An LLC is required to maintain a register of members, a register of managers and a register of mortgages and charges however only the register of managers is required to be filed with the Registrar.
x. Transfers by way of continuation into or out of the Cayman Islands are also permitted for LLCs.
Implementation
Appleby will provide further updates as the LLC Bill moves through the legislative process, and once the commencement date for the new law is set.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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