Cayman Islands Limited Liability Companies Law Update
21-07-2016
The Cayman Islands Limited Liability Companies Law, 2016 came into force on 8 July 2016.  As such it is now possible to: (a) form and register a new Cayman Islands limited liability company (an "LLC"); (b) migrate an entity organised in another jurisdiction into the Cayman Islands as an LLC; (c) convert an existing Cayman Islands exempted company into an LLC; and  (d) merge an existing Cayman Islands exempted company into an LLC.  The key features of the LLC are that it will be a legal entity with separate legal personality (like a company) and its members will have limited liability, while also providing flexible governance arrangements and capital account mechanics in a manner similar to a limited partnership.

 

The LLC represents a response by the Cayman Islands Government to requests from stakeholders for an additional structuring offering that is closely aligned with a Delaware limited liability company. It also recognises that an LLC may be preferable to existing vehicles for some types of transactions, including, for example, closed ended funds (including PE and VC funds, co-investment vehicles, and alternative investment vehicles) that need separate legal personality; general partner vehicles; preference share deals; employee incentive / plan vehicles; joint venture vehicles or in circumstances where a shareholders' agreement would otherwise be required in order to supplement an exempted company's articles of association. LLCs allow for more simplified and flexible administration than is required for the operation of a company and provide for more straightforward methodologies for tracking or calculation of the value of a member's investment in the LLC, as well as more flexible corporate governance concepts.