Setting up a Holding Company in Cayman Islands

Cayman Islands Advantages

The Cayman Islands Exempted Company, including the segregated portfolio company, is widely preferred as the corporate entity for various activities such as series financing, mergers utilizing the Cayman merger regime, banking and finance transactions, investment funds, and other corporate dealings. The popularity of the Exempted Company is primarily attributed to the Cayman Islands’ reputation as a stable jurisdiction that fosters legal and commercial certainty, effectively managing reputational risks for both the Cayman Islands and its business counterparts.

Flexibility – The Cayman Islands Exempted Company (including the segregated portfolio company) stands out for its adaptable structure, making it highly attractive for various purposes. Notably:

Incorporation – The incorporation process for an Exempted Company is straightforward, with low incorporation fees and no requirement for regulatory authority approval. Companies can typically be incorporated within 5-7 business days under standard procedures or within 24 hours on an “express” basis.

Financial Assistance – There are no statutory restrictions on Exempted Companies providing financial assistance for the acquisition of their own shares. Directors are bound by fiduciary duties to act in the company’s best interests when agreeing to provide such assistance.

Use of Share Premium – Exempted Companies are allowed to utilize their share premium account to fund dividend payments to shareholders, provided the company remains solvent after such disbursements.

Stamp Duty on Share Transfer – The Cayman Islands does not levy stamp duty on share transfers, except in cases involving shares of companies holding real estate within the jurisdiction.

Tax Considerations – Shareholders are not subject to Cayman Islands taxes on distributions received from the company or on gains realized from the sale, redemption, or exchange of shares. There are no withholding taxes on dividends or other distributions to shareholders, and no gift, estate, or inheritance taxes on share transfers.

Mergers – Exempted Companies can engage in mergers with other corporate entities, whether Cayman Islands-based or from jurisdictions with comparable merger regimes. The resulting entity can be either a Cayman Islands Exempted Company or a company from another jurisdiction.

Commercial Confidentiality – The Cayman Islands legal framework ensures a high level of commercial confidentiality. The Register of Shareholders is not open to public inspection, and there is no requirement for public filing of the company’s accounts or financial statements.

Legal Framework – As a British Overseas Territory, the Cayman Islands’ legal system is based on English common law, supplemented by local statutes conducive to international and local business. The jurisdiction is committed to robust regulation to combat money laundering, tax evasion, and other criminal activities, while maintaining a business-friendly environment.

Business Climate and Infrastructure – The Cayman Islands boasts a sophisticated business environment with a comprehensive range of financial services, including banking, legal, accounting, and insurance services. The jurisdiction is home to numerous banks and trust companies, facilitating a conducive ecosystem for international finance transactions.

The recent conclusion of the Financial Action Task Force plenary further solidifies the Cayman Islands’ position as a premier jurisdiction for international investments and finance transactions, with anticipated removal from monitoring lists by international bodies.