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

Companies Act (2021 Revision)

Summary of the entity form

Does the entity possess separate legal personality?

An exempted company has separate legal personality.

Maximum period of existence

There is no maximum period of existence. However, an exempted company may be established as a limited duration company (LDC). An LDC continues until the time or event specified in its memorandum of association, but its duration must not exceed 30 years.

Governing document(s)

An exempted company is governed by its memorandum and articles of association.

Liability of incorporators / shareholders

The liability of a member is limited to the amount unpaid on the member's shares.

Governing bodies

An exempted company is managed by its board of directors.

Other particularities

N/A

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

Under the Companies Act (2021 Revision) it is possible for an exempted company to enter into a merger or consolidation.

Merger means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company. Consolidation means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies in the consolidated company.

Can this type of entity be publicly listed or held?

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 main documents required for incorporation are:

• a memorandum of association; and
• articles of association.

Involvement of notary, company register, governmental authorities

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

Timing (estimate)

It takes approximately one week to incorporate a company with the Registrar of Companies but the process can be expedited for an additional fee.

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

There is an incorporation fee to incorporate a company with the Registrar of Companies which, depending on the share capital of the company, will start at US$733. Typically there are also administrative costs for the registered office provider to make the incorporation application and make filings with the Registrar of Companies.

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

The memorandum of association will contain the objects for which the company is incorporated. If no objects are specified or if objects are specified but the business of the 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 (2021 Revision) or any other law.

Minimum number of incorporators / shareholders and residency requirements

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. There are no Cayman Islands residency requirements for the directors.

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

There is no minimum or maximum share capital (although at least one share must be in issue at all times).

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

Each exempted company must have a registered office in the Cayman Islands. Directors are not required to be resident in the Cayman Islands.

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

There is no requirement for an exempted company to have a tax identification number in the Cayman Islands.

What is the title of the applicable company registry?

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.:

The memorandum and articles of association and any special resolutions must be filed with the Registrar of Companies but are not publicly available. The register of directors and officers, which must also be filed with the Registrar of Companies, is open to inspection by the public for a fee.

Changes to a company's memorandum and articles of association, register of directors and officers or share capital must be filed with the Registrar of Companies.

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 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 are appointed by the subscriber(s) to the memorandum of association. Thereafter the appointment/removal of directors is governed by the articles of association.

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

Yes.

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?

Yes, an exempted company can have non-executive directors.

The directors would be in a one tier board structure, unless otherwise provided in the 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 (2021 Revision), 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?

An ordinary resolution is a resolution passed by a simple majority of those members voting in person or by proxy at a meeting in which a quorum is present. A special resolution is a resolution passed by a two-thirds majority of those members voting in person or by proxy at a meeting at which a quorum is present unless a greater majority is specified in the articles of association. The quorum requirements are set out in the articles of association.

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

The Cayman Islands Monetary Authority has issued a statement of guidance on corporate governance for regulated entities. The guidance highlights the board's functions, its relationship with senior management and the duties of individual directors.

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 accounts at its registered office. Books of accounts must give a true and fair view of the state of the company's affairs and explain its transactions.

If an exempted company is regulated by the Cayman Islands Monetary Authority, it will be required to file audited accounts with the Cayman Islands Monetary Authority annually.

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 accounts to be audited unless an exempted company holds a licence or is regulated under Cayman Islands law.

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

If registered as a regulated mutual fund or registered private fund with the Cayman Islands Monetary Authority, an exempted company must appoint an auditor and an administrator. The auditor must have a presence in the Cayman Islands but there is no residency requirement for the administrator.

If an exempted company engages in 'relevant financial business' within the meaning of the Proceeds of Crime Act (2020 Revision) of the Cayman Islands, then the company must appoint natural persons to act as the anti-money laundering compliance officer, money laundering reporting officer and deputy money laundering reporting officer. Further, 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 (2021 Revision) then the company must appoint a principal point of contact for dealings with the Cayman Islands Tax Information Authority and an authorising person who is authorised to notify the Cayman Islands Tax Information Authority of changes to the principal point of contact.

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 to have different classes of shares such as ordinary shares, management shares and preference shares.

What documentation is required for the transfer of ownership interests?

Transfers of shares are governed by the articles of association. Typically, a share transfer form is required and this must be approved by the board of directors. The articles of association may contain additional requirements/restrictions for share transfers.

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

The transfer must be recorded in the register of members.

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

Not unless the exempted 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?

It is possible for a member to pay non-cash consideration for shares if this is not prohibited by the company's articles of association.

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

Share repurchase: 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 following receipt of an ordinary resolution of its members. 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 out of 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, the solvency test must be satisfied. Shares that are repurchased shall be cancelled automatically unless the directors resolve otherwise.

Reduction of share capital: the articles of association must authorise the reduction of share capital. A special resolution reducing the share capital and confirmation by the Court are required.

Any requirements with respect to distributions to shareholders?

Subject to the articles of association, dividends may be paid out of profits or the share premium account if the shares have been issued at a premium, 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$854 (scaled by reference to the authorised share capital) is payable to the Registrar of Companies and an annual company licence fee of US$91 is payable to the Cayman Islands Monetary Authority. Additional 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).

No, Cayman Islands corporate tax is payable by exempted companies.

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

None.