What is the main source of law authorising this entity form?

Companies Act (as amended) of the Cayman Islands (the Companies Act).

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

An exempted company has separate legal personality.

(Maximum) period of existence

An exempted company has no maximum period of existence.

Governing document(s)

An exempted company is governed by its memorandum of association, which is required to contain certain basic information about the company (including its registered office, its authorised share capital and the objects for which it is incorporated), and its articles of association, which will set out the rights attaching to the company's shares and its internal rules of governance (including powers of directors, conduct of meetings, etc.). The articles of association are generally drafted so as to provide a permissive and flexible governance regime.

Liability of incorporators / shareholders

he liability of a member of an exempted company is limited to either the amount unpaid on the member's shares or such amount as the members undertake by the memorandum of association to contribute to the assets of the company in the event the company is being wound up.

(Governing) bodies

An exempted company is generally managed by its board of directors.

Other particularities

The exempted company has a number of advantages that make it a desirable vehicle for the purpose of engaging in business outside of the Cayman Islands. These advantages include: no requirement to keep its register of members open to public inspection; no requirement to hold an annual general meeting; no requirement for Cayman resident directors; no requirement to include the word 'Limited' or the abbreviation 'Ltd.' after its name; shares may be issued with nominal or no par value; capital may be expressed in any currency or in multiple currencies; flexibility to transfer the company by way of continuation from another jurisdiction to the Cayman Islands and vice versa; and flexibility to alter the memorandum and articles of association without restriction (although the Registrar (as defined below) must be notified of any changes).

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.)?

Yes.

Can this type of entity be publicly listed or held, or its securities be issued to members of the public?

Yes.

Can this type of entity be used for a non-profit or charitable organization?

Yes.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

• the memorandum of association;
• the articles of association; and
• a declaration signed by a subscriber to the memorandum of association to the effect that the operation of the proposed exempted company will be conducted mainly outside the Cayman Islands (unless the company has a specific licence), all of which must be filed with the Registrar.

Involvement of notary, company register, governmental authorities

The Registrar of Companies (the Registrar) is the governmental authority involved in the incorporation of exempted companies.

Timing (estimate)

An exempted company can be formed on a same day basis. No prior government consents or approvals are required. Incorporation documents will usually be returned by the Registrar within five to seven working days, although there is an express service available (for an additional fee) under which documents will be returned usually within one business day.

Main costs, including registration and similar fees (excluding legal fees)

The fees payable to the Registrar on incorporation start at US$853 (scaled by reference to the exempted company's authorised share capital). Typically, the exempted company's registered office provider will also charge an administrative fee for submitting the incorporation application and attending to ancillary filings with the Registrar.

The memorandum of association contains the objects for which the exempted company is incorporated. If no objects are specified or if objects are specified but the business of the exempted company is not restricted to the furtherance of those objects, then the company will have full power and the authority to carry out any object not prohibited by the Companies Act or any other law.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

Minimum number of incorporators / shareholders and residency requirements

Any one or more persons associated for any lawful purpose may, by subscribing their names to a memorandum of association, and otherwise complying with the Companies Act in respect of registration, form an incorporated exempted company. There are no residency requirements for the subscriber(s) to the memorandum of association, although in practice, and to streamline the incorporation process, the subscriber will often be the proposed exempted company's registered office provider in the Cayman Islands.

An exempted company must have at least one shareholder at all times. There are no Cayman Islands residency requirements for the shareholders.

Minimum number of directors (or other applicable officers) and residency requirements

An exempted company must have at least one director (except that an exempted company that is licensed or regulated in the Cayman Islands may be required to have a greater minimum number of directors pursuant to the relevant regulatory law). Directors need not be resident in the Cayman Islands nor have any specific qualifications.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

There is no minimum or maximum amount prescribed for authorised, issued or paid-up share capital (although at least one share must be in issue at all times). An exempted company may have share capital designated in various currencies and may issue fractional shares. There are no statutory requirements regarding exempted companies and bank accounts.

Is the physical presence of incorporators/directors/shareholders required in the jurisdiction for incorporation, formation, or organisation?

No, however each exempted company must have a registered office in the Cayman Islands. Any member of the public is entitled to be informed by the Registrar upon request of the location of the registered office of any company.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

No.

What is the title of the applicable company registry?

The Registrar of Companies.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles or other formation document, Articles or other formation document, Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)

• The memorandum and articles of association (and any changes to them) must be filed with the Registrar, but they are not open to public inspection. The following information (and any changes to it) must be filed with the Registrar and is open to public inspection for a fee: the name of the company (and, if applicable, the dual foreign name and translated name); the part of the Cayman Islands in which the registered office is situate; the company number; the dates of execution and filing of the memorandum of association; the names and addresses of the initial subscriber(s) to the memorandum (and the number of shares taken by each subscriber); the amount of capital of the company (and, in the case of a company having its share capital divided into shares of a nominal or par value, the number of shares into which it is divided and the fixed amounts thereof); the nature of the business; the date of the company’s financial year end; and if applicable, a statement that the company is limited by guarantee or is unlimited (such companies may omit any particulars in this list which are irrelevant or inappropriate).
• An exempted company is required to keep a register of members containing the names and addresses of the members of the company, a statement of the shares held by each member (which must confirm, among other things, the amount paid for, or agreed to be considered as paid on, the shares of each member and details as to the voting rights attached to shares), the date on which the name of any person was entered on the register as a member and the date on which any person ceased to be a member. The register of members need not be, but is usually, kept at the registered office. It is not filed with the Registrar or open to public inspection.
• An exempted company is required to identify and report certain particulars of its registrable beneficial owners to its corporate services provider who will use this information to establish and maintain the beneficial ownership register at the registered office. Certain entities including regulated investment funds, licensed entities and listed entities may, however, opt to utilise an alternative route to compliance, in which case they do not need to maintain a beneficial ownership register. For example, regulated investment funds may opt to appoint a licensed fund administrator or another person licensed or registered with the Cayman Islands Monetary Authority to act as a contact person responsible for responding to requests for beneficial ownership information which may be received from the competent authority. Registrable beneficial owners include: an individual 'beneficial owner' that (i) holds, directly or indirectly, 25% or more of the shares or voting rights in the company; (ii) that otherwise exercises ultimate effective control over the management of the company; or (iii) is identified as exercising control of the company through other means; or a 'reportable legal entity' (other than a foreign entity) which if it were an individual would be a beneficial owner of the company and (i) that directly holds a relevant interest in the company or otherwise exercises ultimate effective control over the management of the company; or (ii) through which any beneficial owner or reportable legal entity indirectly holds a relevant interest in the company.  The information contained in the beneficial ownership register may be accessed by certain official bodies or, on approval of an application to the competent authority, by a limited category of persons with a legitimate interest in accessing the information for the purpose of preventing, detecting, investigating, combating or prosecuting money laundering or terrorist financing.
• An exempted company is not required to file with the Registrar information with respect to group structure nor is this information open to public inspection.
• An exempted company is required to file with the Registrar details of the amount of authorised capital of the company and, in the case of a company having its share capital divided into shares of a nominal or par value, the number of shares into which it is divided and the fixed amounts thereof. This information is open to public inspection for a fee. An exempted company is not required to file with the Registrar details of its issued or paid-up share capital nor is this information open to public inspection.
• An exempted company must maintain a register of directors and officers at its registered office. A copy of the register of directors and officers (and any changes to it) must be filed with the Registrar, but it is not open to public inspection. However, the Registrar will maintain a list of the names of current directors, and any alternates, of an exempted company and this list is open to public inspection for a fee.
• An exempted company is not required to file its accounts with the Registrar (although if it is licensed or regulated in the Cayman Islands, it may be required to file its audited accounts with the relevant regulatory authority pursuant to the relevant regulatory law) nor is this information open to public inspection.
• Members of the public may conduct a search of the Register of Writs and Other Originating Process of the Ground Court of the Cayman Islands for actions or petitions pending in the Grand Court against an exempted company. However, that search will not reveal (among other things) if: proceedings filed with the Grand Court have not been entered in the Grand Court Register or if proceedings have been filed after the search;  any application to the Grand Court for a winding-up petition or for the appointment of a receiver in respect of any person or entity has been prepared but not yet filed; any proceedings against any person or entity have been threatened but not filed; any person or entity is in voluntary liquidation; a receiver had been appointed under a debenture or other security agreement in respect of the assets of any person or entity; or  any person or entity is a defendant or respondent to any arbitration proceedings. A certificate of good standing issued by the Registrar in respect of an exempted company may only be obtained by the company's registered office provider and is not open to public inspection. In connection with a voluntary winding up of an exempted company, the liquidator (or in the absence of a liquidator, the directors) must, among other things, file notice of the winding up with the Registrar and publish notice of the winding up and notice of the company's final general meeting in the Cayman Islands Gazette (which is searchable by the public).
• An exempted company is not required to file with the Registrar details of any liens or encumbrances on its shares nor is this information open to public inspection.
• An exempted company must maintain at its registered office a register of all mortgages and charges over its property. The company is not required to file this register with the Registrar but the register must be open for inspection by any creditor or member of the company at all reasonable times.
• An exempted company must file with the Registrar a copy of all special resolutions and notices of any increases in authorised capital but these documents are not open to public inspection.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

The board of directors is the executive body of an exempted company. The company's articles of association typically provide that the business of an exempted company will be managed by its directors.

How are the members of the executive body appointed, dismissed and replaced?

The first directors of an exempted company are typically appointed by the subscriber(s) to the company's memorandum of association. Thereafter, the procedure for appointing, removing and replacing directors is governed by the company's articles of association.

Is it possible to appoint corporate directors or must all directors be natural persons?

Yes, it is possible to appoint an entity as a director of an exempted company.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

There is no requirement for an exempted company to have non-executive directors.

The directors would be in a one tier board structure, unless otherwise provided in the exempted company's articles of association.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

Holders of shares are known as members. Under the Companies Act, a special resolution of the members is required for actions such as –

• amendments to the memorandum and articles of association;
• change of a company's name;
• approval of a plan of merger or consolidation; and
• voluntarily winding up the company.

An ordinary resolution of the members is required for actions such as –

• increase in share capital; and
• consolidation or sub-division of share capital.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

Typically, an exempted company's articles of association will provide that an ordinary resolution is a resolution passed by a simple majority of those members, as being entitled to do so, vote in person or by proxy at a general meeting. Pursuant to the Companies Act, a special resolution is a resolution passed by a two-thirds majority of those members as, being entitled to do so, vote in person or by proxy at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been given, unless a greater majority is specified in the company's articles of association. The quorum requirements will be set out in the company's articles of association. The articles of association may be amended by special resolution.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

There are no special governance regimes in respect of an exempted company (except that an exempted company that is licensed or regulated in the Cayman Islands may be required to comply with regulatory measures with respect to corporate governance, internal controls and other matters prescribed by the relevant regulatory authority).

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

An exempted company must maintain proper books of account that give a true and fair view of the state of the company's affairs and explain its transactions. However, an exempted company is not required to file its accounts with the Registrar or any other government or regulatory authority (unless it is licensed or regulated in the Cayman Islands and is required to file them with the relevant regulatory authority pursuant to the relevant regulatory law).

Is the entity permitted to determine its own financial year?

Yes.

Is the entity subject to any statutory (external) auditor obligations?

There is no requirement for an exempted company's accounts to be audited (unless the exempted company is licensed or regulated in the Cayman Islands and is required to have its accounts audited pursuant to the relevant regulatory law).

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

• There is no statutory requirement for an exempted company to appoint specific executive officers, a company secretary, an internal auditor/accountant or any other persons (unless the exempted company is licensed or regulated in the Cayman Islands and is required to have its accounts audited pursuant to the relevant regulatory law, in which case it would be required to appoint an auditor). To the extent any such persons are appointed, there are no residency requirements for such persons (except that if an exempted company is licensed or regulated in the Cayman Islands and is required to have its accounts audited, it may also be a requirement pursuant to the relevant regulatory law for the appointed auditors to have a presence in the Cayman Islands).
• If an exempted company engages in 'relevant financial business' within the meaning of the Proceeds of Crime Act (as amended) of the Cayman Islands, then the company must appoint natural persons to act as its anti-money laundering compliance officer, money laundering reporting officer and deputy money laundering reporting officer. There are no residency requirements for these persons
• If an exempted company is a 'Cayman Reporting Financial Institution' within the meaning of the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations (as amended) of the Cayman Islands and/or a 'Reporting Financial Institution' within the meaning of the Tax Information Authority (International Tax Compliance)(United States of America) Regulations (as amended) of the Cayman Islands then the company must appoint a principal point of contact for dealings with the Cayman Islands Tax Information Authority (TIA), an authorising person who is authorised to notify TIA of changes to the principal point of contact and a responsible officer for purposes of the US Foreign Account Tax Compliance Act (FATCA). There are no residency requirements for these persons.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Shares.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

It is possible for an exempted company to have different classes of shares (such as ordinary shares, management shares and preference shares) with different rights, restrictions, terms and conditions.

What documentation is required for the transfer of ownership interests?

Transfers of shares of an exempted company are governed by the company's articles of association. Typically, the company's articles of association will specify that transfers of shares require the consent of the board of directors and require the transferee (and sometimes the transferor) to execute a share transfer form in a form approved by the board of directors. The articles of association may contain additional or other requirements/restrictions for share transfers.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

Transfers of shares of an exempted company must be recorded in the register of members, but there are no other formal requirements or approvals (unless the exempted company is licensed or regulated in the Cayman Islands and is required to seek the prior consent of, or provide notice to, the relevant regulatory authority pursuant to the relevant regulatory law).

Are there any applicable stamp duties imposed when transferring ownership interests?

There is no Cayman Islands stamp duty payable on the transfer of shares of an exempted company unless the company holds an interest in land in the Cayman Islands. An exempted company may not hold an interest in land in the Cayman Islands without the consent of the Financial Secretary of the Cayman Islands.

How are shares issued? (including information on payment obligations, registration requirements)

Share issuances are governed by the articles of association. Typically, the directors have the power to issue shares to such persons for such consideration and on such terms as they determine. The new issue must be recorded in the register of members.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

• An exempted company may issue shares in exchange for non-cash consideration, subject to any restrictions in its articles of association. This non-cash consideration can include property, services, or other forms of assets. Cayman Islands law does not prescribe a specific method for valuing non-cash consideration.
• An exempted company may receive share premium contributions from shareholders without issuing new shares.
• An exempted company is permitted to issue partially paid (or unpaid) shares, subject to any restrictions in its articles of association. Under the Companies Act, no share may be redeemed or purchased by the company unless it is fully paid.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

• An exempted company may repurchase its shares in the manner authorised by its articles of association or, if the company's articles of association do not authorise the manner and terms of repurchase, then the company may only do so with the authorisation of an ordinary resolution. No repurchase may take place unless the shares are fully paid, or if as a result of the repurchase there would no longer be any other shares in issue. Shares may be repurchased out of profits, share premium or the proceeds of a fresh issue of shares made for the purposes of the repurchase and, if authorised by the articles of association, out of capital. If the shares are to be repurchased out of capital, a solvency test must be satisfied. Repurchased shares are cancelled automatically unless they are classified as treasury shares in accordance with the Companies Act.
• Subject to confirmation by the court, an exempted company may, if so authorised by its articles of association, by special resolution reduce its share capital by: extinguishing or reducing the liability on any of its shares in respect of share capital not paid up; either with or without extinguishing or reducing liability on any of its shares, cancelling any paid-up share capital which is lost or unrepresented by available assets; or either with or without extinguishing or reducing liability of any of its shares, paying off any paid-up share capital which is in excess of the needs of the company.

Any requirements with respect to distributions to shareholders?

Subject to its articles of association, an exempted company may pay dividends out of profits or, if the shares have been issued at a premium, out of the share premium account. However, no dividend may be paid out of the share premium account unless immediately following the payment the company is able to pay its debts as they fall due in the ordinary course of business.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

A minimum annual fee of US$1,128.05 (scaled by reference to the authorised share capital) is payable to the Registrar and an annual company licence fee of US$91.46 is payable to the Cayman Islands Monetary Authority. Additional administrative fees are typically payable to the exempted company's registered office provider.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The Cayman Islands has no corporation tax, income tax, capital gains tax, inheritance tax, wealth tax, or any tax applicable to exempted companies. An exempted company may apply for an undertaking from the Cayman Islands authorities that, in accordance with the Tax Concessions Act (as amended) of the Cayman Islands, for a period of up to 30 years from the date of issue of the undertaking, no law that is enacted in the Cayman Islands imposing any tax or duty to be levied on profits, income, gains or appreciations will apply to the company or its operations, and no such tax or any tax in the nature of estate duty or inheritance tax shall be payable on or in respect of its shares, debentures or other obligations or by way of withholding in whole or in part of any payment of dividend or other distribution of its income or capital to its shareholders or any payment of principal or interest or other sums due under its debentures or other obligations.

Summary of any specific matters, e.g. recent or prospective major legal developments

Every entity incorporated or registered in the Cayman Islands, including an exempted company, will be required to notify TIA annually, and as a prerequisite to filing the company's annual return, of whether or not it is carrying on a 'relevant activity' for the purposes of the Cayman Islands economic substance regime. The definition of 'relevant activity' includes banking business, fund management business, insurance business, distribution and service centre business, financing and leasing business, headquarters business, holding company business, intellectual property business and shipping business and excludes 'investment fund business' (meaning the business of operating as an investment fund), and entities that are tax resident outside of the Cayman Islands.