Registrable Beneficial Ownership Regime In The Cayman Islands: Key Obligations

Overview of Beneficial Ownership Regime in the Cayman Islands

In the Cayman Islands, regulations concerning beneficial ownership were previously dispersed across various legal provisions. To enhance its reputation as a leading financial center and establish a unified, sustainable legal framework aligned with international standards, the Cayman Islands has introduced a new regulatory regime.

This Regime aims to strengthen cooperation and information exchange between governments worldwide while combating financial crime. It requires relevant parties, namely in-scope entities, the beneficial owners, and Corporate Service Providers (CSPs) to work together and with the relevant authority to ensure transparency in beneficial ownership information.

Its implementation is detailed in the following key documents:

• Beneficial Ownership Transparency Act, 2023 (BOTA): Coming into force on July 31, 2024, this Act sets out foundational obligations for identifying and reporting beneficial ownership.
• Beneficial Ownership Transparency Regulations, 2024: Effective immediately after the BOTA’s enactment, these regulations provide detailed guidance for compliance.

The scope of the Regime

The Regime introduces the concept of a “Legal Person,” bringing a wide array of entities under its scope. The following entities are subject to the regulations:

• Companies
• Limited Liability Companies (LLCs)
• Limited Liability Partnerships (LLPs)
• Foundation Companies
• Exempted Limited Partnerships
• Limited Partnerships

The definition of a “beneficial owner” has also been revised to synchronize with the Cayman Islands’ AML Regulations, which is an individual who:

• ultimately owns or controls, whether through direct or indirect ownership or control, twenty-five per cent or more of the shares, voting rights or partnership interests in the Legal Person;
• exercises ultimate effective control over the management of the Legal Person; or
• is identified as having control of the legal entity through other means.

Following that, the introduction of “reportable legal entity” (“RLE”) also helps finalize the comprehensive duty of the Legal Person in identifying and maintaining the information of “registrable beneficial owner” which includes:

• The individual identified as beneficial owner based on the aforementioned criteria; and/or
• The RLE which, other than a foreign company/entity/limited partnership, either:
  • directly holds a relevant interest in the Legal Person or meets one or more or more aforementioned conditions; or
  • acts as an intermediary through which a beneficial owner or another RLE indirectly holds a relevant interest in the legal entity.

For precise definition of registrable beneficial owner in relation to a Legal Person, entities must refer to the Beneficial Ownership Transparency Regulations, 2024.

Key obligations under the Regime

Duties of Corporate Service Provider (“CSP”)

Under the new framework, Corporate Service Providers (“CSP”), also known as Registered Agents play a pivotal role in maintaining the accuracy and transparency of beneficial ownership information. Their primary duties include:

• Maintaining registers: CSP must create and regularly update a beneficial ownership register for every Legal Person under their purview. Additionally, they must submit the collected information about the Legal Person and its registrable beneficial owners to the competent authority at least once a month.
• Ensuring compliance: CSP must actively monitor the accuracy of information, identify discrepancies, and promptly notify entities to resolve any incomplete or incorrect details.
• Issuing notices: In cases of non-compliance, CSP are obligated to issue formal reminders to legal entities, prompting timely corrective actions to meet their obligations.

Duties of Legal Persons and Beneficial Owners

To comply with the Beneficial Ownership Regime, Legal Persons and their beneficial owners meet specific obligations:

• Identify the Registrable Beneficial Owners (“RBO”) within their organization; and
• Provide the CSP with accurate and up-to-date information about these RBOs.

Specifically, Legal Persons within the scope of the Regime must:

• Toward Beneficial Owner
  • Identify and notify all individuals and entities who may qualify as beneficial owners. Once identified, they must request confirmation of each individual’s status within 30 days of notification.
• Toward CSP
  • Share and regularly update beneficial ownership information with the CSP. Any changes to beneficial ownership must be reported promptly to ensure the accuracy of the beneficial ownership register.
  • Actively monitor information to identify any changes. Upon discovering a change, the Legal Person must promptly collaborate with the relevant registrable beneficial owner to gather updated information and ensure the CSP is notified of the change within the required time frame.

Beneficial owners, on their part, must:

• Toward Legal Persons
  • Proactively notify the legal entity of their beneficial ownership status, even if they have not been directly contacted. They must provide all required details, including the date they became a beneficial owner.
  • Notify the Legal Person of any changes to their information within 30 days of becoming aware of the change.

Consequences for non-compliance

Failure to meet the obligations outlined in the Regime can result in financial penalties of thousands of dollars for individuals, legal entities, or CSP, as well as potential deregistration and imprisonment.

The regime’s enforcement is particularly stringent for Legal Persons who fail to provide the requisite beneficial ownership information.

• Restrictions notices: Entities that repeatedly fail to provide accurate and adequate information will eventually receive a Restriction Notice from their CSP. This notice limits their ability to perform certain transactions. A copy is also sent to the Competent Authority and may be reviewed by the Court if necessary.
• Termination of relationships: Continued non-compliance may lead a CSP to terminate their relationship with the legal entity in accordance with Anti-Money Laundering (AML) provisions.

What are the next steps for entities?

Entities within the scope of the Regime must take necessary actions to comply with beneficial ownership obligations. This includes:

• Identifying all beneficial owners and gathering the required details
• Keeping accurate and up-to-date records
• Reporting any changes in beneficial ownership promptly

Additionally, entities should respond quickly to any requests from their CSP and ensure ongoing compliance with the Regime.

If you have questions or need assistance, feel free to contact our support team at service@bbcincorp.com for practical guidance.

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