Cayman Islands: a respectable offshore and banking centre

Cayman is the largest offshore banking centre in the world and second largest insurance base after Bermuda, with assets worth $20 bn. Trusts and mutual funds are another growing sector of the economy of the Cayman Islands. In 1997 Stock Exchange was opened on the Cayman Islands.

The main advantages of Cayman are stable commercial infrastructure and flexible regulation rules. At the same time, this jurisdiction is respectable and, therefore, quite expensive. Currently there are more than 73,000 companies registered in the Cayman Islands. The types of company which may be registered in Cayman under the Companies Law are Ordinary Resident Company, Ordinary Non-Resident Company, Exempted Company and Exempted Limited Duration Company.

The law that generally governs companies' activities in the jurisdiction is Companies Law 1961 (as amended, in 1990 and 1995). It is based on English law and allows companies limited by shares, companies limited by guarantee, and unlimited companies. In practice, only companies limited by shares are registered.

Cayman trusts do not have to be registered, but must be licensed under the Banks and Trust Companies Law 1995. This rule, however, does not apply to individuals. Like companies and limited partnerships, trusts can be exempt, but must then be registered with the Registrar of Trusts and pay a fee in the amount of CI$400 (CI$100 annually thereafter). Then, a 50-year undertaking is given by the Governor to the Trustees, that no taxation will be imposed on the trust. The law governing trusts in the Cayman Islands is the Trusts Law 1996, which is based on English trust law.

Cayman Islands have very much developed banking industry, with 340 banks and deposits more than US$1 trillion. Cayman banks must obtain a licence under the Banks and Trust Companies Law 1995. The licences are divided into two classes: Class A licence gives permission to conduct both local and offshore business activities; only about 30 banks hold it. All the rest banks hold Class B licence, permitting only offshore business with only very limited transactions with Cayman Islands residents. Being able to provide asset protection, private banking is a major component of offshore industry.

Cayman has not joined the Hague Convention. There are some specific provisions for the non-recognition of foreign judgements and the exclusion of forced heirship.

There is no exchange control in the Cayman Islands. The Caymanian dollar is fixed against the US dollar at CI$1.00 to US$1.20.