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Cayman Islands Exempted Company (CIEC).

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Cayman Islands Exempted Company (CIEC)

For professionals and investors seeking a tax-efficient and internationally recognised business structure, a Cayman Islands Exempted Company (CIEC) is a popular choice. But what exactly constitutes a CIEC, and what renders it appealing?

Below, we summarise the leading legal requirements and general principles applicable to the incorporation, operation and maintenance of exempted companies in the Cayman Islands.

Key takeaways

  • CIECs offer a high degree of flexibility in structure and operations, allowing for a single shareholder and director with no nationality or residency restrictions. Additionally, the Cayman Islands upholds strict confidentiality laws, ensuring the privacy of shareholders and directors.
  • The Cayman Islands have a well-established reputation as a leading offshore jurisdiction, providing credibility and security to CIEC owners. The incorporation process for a CIEC is relatively quick and straightforward, making it a viable option for those seeking to establish a company promptly.
  • CIECs can be utilised for various purposes, including serving as a holding company for international investments, managing intellectual property rights, facilitating international trade, and potentially incorporating them into estate planning strategies to minimise inheritance taxes.

Cayman CIEC overview

A CIEC is a type of company incorporated in the Cayman Islands that, unlike resident companies, is exempt from corporate income tax, capital gains tax, and stamp duty on issuing shares, making them ideal for international business activities and investment holding.

Benefits of a CIEC

  • Tax efficiency: As mentioned, CIECs enjoy significant tax exemptions, making them attractive for maximising profits and minimising tax burdens.
  • Flexibility: CIECs offer a high degree of flexibility regarding their structure and operations. They can be formed with a single shareholder and director; these positions have no nationality or residency restrictions.
  • Confidentiality: The Cayman Islands upholds strict confidentiality laws, ensuring the privacy of shareholders and directors.
  • Reputation: The Cayman Islands boasts a well-established reputation as a leading offshore jurisdiction, offering credibility and security to CIEC owners.
  • Speed and efficiency: The incorporation process for a CIEC is relatively quick and straightforward, making it a viable option for those seeking to establish a company promptly.

To establish a CIEC, navigating and adhering to the specific regulatory and operational aspects governing these entities is essential. The following are crucial considerations:

Capital and currency restrictions

Shares can be issued in any currency with or without par value and are also freely transferable. There are no minimum capital requirements.

Trading restrictions

Exempted companies cannot trade in the Cayman Islands, only abroad.

Foreign ownership and governance

A CIEC allows 100% foreign ownership, and there is no requirement to be physically present at the time of company incorporation.

Incorporation process

To initiate the incorporation process, a signed memorandum of association and articles, appropriate fees, and a signed declaration must be submitted to the registrar. Standard registration takes three to seven business days, but an express service at USD 988 allows registration in one to two business days.

Requirements for incorporating an exempted company

  • Name and activity restrictions – The registrar will not approve a company name that is identical or misleadingly similar to an existing one. Certain sensitive words may require consent or be disallowed. Abbreviations like ‘LLC’ are not permitted.
  • Local requirements (registered office and agent) – An exempted company must have a registered office in the Cayman Islands provided by a licensed service provider. The directors’ resolution can change the office location.
  • Shareholder requirements – A CIEC must have at least one shareholder responsible for determining the company’s capital structure. Registered shares are the only authorised shares. Different classes of shares with varying rights are allowed.
  • Director obligations – A company must have at least one director, who may be a natural person or body corporate. Directors are not required to be residents of the Cayman Islands and can be of any nationality.
  • Secretary role – While not mandated, it’s customary to appoint a company secretary, whether a natural person or a corporate body.

Compliance requirements

  • Records and documentation – Every exempted company must maintain proper books of account covering assets, liabilities, sales, purchases, and receipts. Accounts must give an accurate and fair view and be kept for at least five years.
  • Annual return filing – Exempted companies without a business license in the Cayman Islands must file an annual return with the registrar in January, confirming compliance with the Companies Act.
  • Beneficial ownership and economic substance – Exempted companies must maintain a beneficial ownership register and comply with economic substance requirements.
  • Licenses and operations – No specific licenses are required to start operating – a CIEC can start its operations once it has received its certificate of incorporation from the registrar.
  • Annual accounting requirements and taxation – No annual accounts filing is required. However, the company should maintain sufficient and proper records to enable the financial position of the company to be determined with reasonable accuracy. Exempted companies are not subject to income, withholding, or capital gains taxes. Shareholders are also exempt from such taxes in the Cayman Islands, with no estate or inheritance taxes, exchange controls, or double taxation agreements.

Conclusion

A Cayman Islands Exempted Company presents a compelling option for businesses and investors seeking an offshore structure with tax efficiency, flexibility, and international recognition. However, it’s essential to carefully consider the legal and compliance implications before incorporating a CIEC and ensure its activities align with ethical and regulatory standards.

Set up a Cayman Exempted Company with Acclime

Consulting with experienced legal and financial professionals specialising in offshore structures is crucial before forming a CIEC. They can guide you through the process, assess your eligibility, and ensure compliance with regulations. In tandem with this, Acclime is a valuable partner for entrepreneurs and businesses looking to navigate the intricate process of setting up a CIEC. With a comprehensive understanding of the legal, financial, and regulatory aspects involved, Acclime offers tailored solutions to ensure the seamless establishment and management of a CIEC. To learn more about how Acclime can empower your business through the strategic establishment of a CIEC, we invite you to connect with our experienced team.