What Is The New Beneficial Ownership Regime?

Under recently passed legislation (the “Regime”), Cayman Islands companies and Cayman Islands limited liability companies (“LLCs”) are now required, unless an applicable exemption applies, to maintain a beneficial ownership register that records details of the individuals who ultimately own or control more than 25% of the equity interests or voting rights of the company or LLC or who have, directly or indirectly, rights to appoint or remove a majority of the company directors or LLC managers. The register is also required to include details of certain intermediate holding companies through which such company or LLC interests are held.

The new Regime codifies a commitment agreed upon between the Cayman Islands and the United Kingdom to enhance existing, robust arrangements on the exchange of beneficial ownership information to assist law enforcement agencies in combating tax evasion, money laundering and the financing of criminal enterprises.

Whilst there are specified exemptions to the Regime (which broadly seek to exempt those entities already subject to a certain level of regulatory oversight), those companies and LLCs that fall within the Regime’s ambit (each, an “In-Scope Entity”) will be required to maintain a beneficial ownership register. Each InScope Entity is required to take “reasonable steps” to identify certain information including whether there is any individual who qualifies as a beneficial owner under the Regime and whether any legal entities that are registered in the Cayman Islands (including foreign companies) would meet the definition of a beneficial owner if they were an individual.

Why Is It Important to Fund Finance Market Participants?

It is important for lenders in any financing transaction to assess the relevance of the new Regime to the transaction, and in particular, the potential impact of the issuance of a restrictions notice by an In-Scope Entity (which...