George Town, Grand Cayman
On 21st May, the Cayman Islands published new legislation entitled the Directors Registration and Licensing Law, 2014. Broadly, the effect of the law is to require all directors, of Cayman regulated funds (see below) to register with CIMA, and to update those details on an annual basis.
After a period of consultation with the funds industry, Cayman Islands Monetary Authority (“CIMA”) has advised that there is strong support for further fund legislation enhancing investor protection. With this in mind the captioned bill, together with the attendant Regulations (which have yet to be published and which will contain the form of the registration applications, and the various prescribed fees) is expected to be passed into law by Cabinet within the next few weeks.
Who Needs to Register?
The new law affects all directors of “covered entities”, this means any regulated Cayman fund (including a master or feeder) and Cayman management companies, including those that are SIBL-exempt. It does not apply to funds which are exempt and therefore not registered. It applies to all directors including corporate entities and individuals, wherever in the world they are incorporated or resident. Once the law is enacted, there will be a three month transition period to comply for individuals, and a six month period for corporate directors. Note that the new law applies to all directors of covered entities, whether executive or non-executive.
Types of Directors and Registration
Directors are classified under the new law into three categories; individual, professional and corporate. It’s important to note that registration are not automatic; CIMA will grant a license to a director only if it is satisfied that the applicant has sufficient capacity to carry out the role and duties of a fund director. CIMA will also assess the fitness and probity of directors prior to approving any individual or firm. In the case of professional or corporate directors CIMA attach conditions to the licence.
In the event that a licence is not granted, the Law contains procedures for an appeal to be heard.
An “individual” registered director is a natural person acting on the boards of less than twenty covered Cayman entities. The classification of “professional director” under the Law is a natural person sitting on twenty or more covered entity boards.
One of the consequences of the individual / professional director distinction, is that a professional director (but not an individual registered director) shall be required to maintain civil liability insurance covering his/her role as a fund director, in an aggregate amount and per claim of CI$ 1 million (approximately US$ 1,250,000). Evidence of this must be provided to CIMA periodically. Corporate directors are also required to maintain such insurance.
Annual Returns and Fees
Each director must, on or before the 15th of January each year, provide to CIMA such information as will be contained in the Regulations and pay an annual (yet to be determined) fee. A surcharge of one-twelfth of the annual fee is payable for every month or part of every month after the 15th of January in each year that the fee is not paid.
Change in Information
If there is any change to the information upon which CIMA relied for the registration or licensing of a director, the director must inform CIMA within 21 days of the date of the change.
Exemptions from Registration as a Professional Director
The Law provides, in certain limited circumstances, for individuals who would otherwise be classified as professional directors to simply register as individual directors, as follows;
- an individual director of a covered entity who is a director, employee, member, officer, partner or shareholder of an investment manager or adviser of a licensed or registered fund where that investment manager or adviser is registered or licensed by an approved regulatory authority (according to the Schedule contained in the Law) is not required to be licensed as a professional director if that person acts as a director of a covered entity by virtue of their relationship to that fund manager or adviser; and
- A director of a covered entity who is a natural person and is a director, an employee, a member, an officer, a partner or a shareholder of a holder of either a Companies’ Management license or a Fund Administration license issued pursuant to the Cayman law
It is envisaged that each covered entity’s Cayman registered agent will administer and facilitate the registration process. Once the Regulations are published, and the required registration information and fees are known KB Associates will issue a further advisory note.
Any immediate queries should be addressed to Mike Parton (Email mike.parton@kbassociates.ky; Tel +1 345 9464244) or to your normal KB Associates contact.