A company that intends to conduct the majority of their business outside of the Cayman Islands would register as an exempted company.
A company that intends to conduct most of its business outside of the Cayman Islands would typically register as an exempted company. The key elements of an exempted company are that it is not required to keep a register of members open for public inspection (or hold an annual general meeting in Cayman), it is entitled to receive a tax-free guarantee from the Government of the Cayman Islands for up to 30 years, it can offer shares to the public in the Islands if listed on the Cayman Islands Stock Exchange (CSX), and finally, it may issue shares without nominal or par value. The company is a corporate body with separate legal personality and is able to enter into contracts and own property, as well as incur liabilities. A shareholder in a company has a liability to the company limited to the amount unpaid on the shares held by that shareholder and cannot be liable for the liabilities of the company itself. The company may distribute profits to shareholders by paying dividends, and a shareholder can only get their capital investment in the company back by selling the shares they have or by the company following certain formalities under Cayman Islands law required to return capital to the shareholder. Company formation and operation are governed by the Companies Act and under common law rules in the Cayman Islands.
The Cayman Islands also permits the formation and the registration of Limited Liability Companies (LLC). An LLC is a unique vehicle that blends key features of a Cayman Islands ELP with those of a Cayman Islands exempted company. Most notably, an LLC is not the typical company vehicle whereby the liability of shareholders is limited by shares or by guarantee, but instead operates by reference to members’ capital accounts and capital commitments, with freedom of contract among members determining the internal workings of the company similar to an ELP. Yet, unlike an ELP, an LLC is a corporate body with a separate legal personality and whose members enjoy limited liability. An LLC is, therefore, a hybrid between an exempted company and an exempted limited partnership. It was developed to meet the demands of various global client bases that wish to operate a vehicle that offers the greatly increased flexibility of partnership capital accounting capability but within a corporate vehicle with separate legal personality. This hybrid approach is useful in a variety of investment spaces (such as investment funds, joint ventures and holding vehicles for a variety of assets, including ships) where some investors and service providers find the share capital accounting structure of a company somewhat cumbersome for certain transactions.
