Overview

The Cayman Islands Exempted Limited Company (ELC) is what most people refer to as the Limited Company. In general the Cayman Islands are famous for being a sophisticated offshore where many international investment funds are registered. While it is seen as a light touch regulations jurisdiction it is becoming more regulated with annual reporting requirements.

While the Cayman Islands has become very favourable for crypto projects, issuing a token is not the best use case for a Cayman ELC un their current VASP law.

a corporate structure suited to overseas trading or for holding assets. Exemption refers to this fact that there is no activity or revenue within the jurisdiction and for this reason the company is exempted from paying tax and enjoys a lighter touch regulation regime. The company needs to make an annual confirmation to the registrar that they are not operating within the jurisdiction. The company’s articles of association are also not publicly visible.
Use Cases The Cayman Islands Exempted Limited Company (ELC) is a corporate structure suited to overseas trading or for holding and protecting assets or for making overseas investments. It is used when the company’s revenue comes from activities outside of the Cayman Islands.

Use Cases

Investment Fund

Offshore funds are often registered in the Cayman Islands. In recent years howeber, this has really only been attractive for investment funds with an AUM of 100 million+ due to the heavy requirements to run and maintain an investment fund. For a lower barrier of entry we guide our clients to setting up a fund in the BVI.

Holding Company

The Cayman ELC lends itself very well for holding purposes. It allows for holding securities, ownership in other companies, property etc. The vehicle is therefore great for protecting assets and overseas investments.

Revenue Center

Due to it's tax status, a Cayman ELC is also used commonly to book revenue from activities overseas.

Share Option Plan

If you would like to reward loyal employees with share option plans, a Cayman ELC is a great setup to keep this offshore.

Tax status

Tax is not levied in any form on revenue into an ELC by the Cayman authorities. The ELC may not conduct business with individuals within the Cayman area, other than to pay for essential utilities and supplies, and there is a requirement to file a declaration to this effect. The company will require a local business address to be registered.

Privacy

The level of privacy offered by a Cayman ELC is good as there is no requirement to make the register of members publicly visible. The company is required to maintain a register of the beneficial owners’ details and not visible to the public. However, directors details are publicly accessible. For this there is the option to appoint a Nominee Director.

Onboarding

Getting onboarded to register your Cayman ELC is a quick and straight forward process. We will need to know some information regarding the new company as well as a KYC and KYB check for all natural and corporate participants.

The following documents are required:

A shareholder and a director are required, and they can be the same individual as a sole director. There is no restriction on the location of the directors. An ELC may be fully owned outside Cayman, and the shareholders enjoy limited liability.

Online Form

After the Cayman ELC is ordered you will receive a link to login to the Otonomos Dashboard. When you enter the dashboard you can start filling out the company application form to stage your company. In the company application form we will ask information about the new company.

• Company Name Options
• Purpose of the entity
• Country
• Source of Funds
• Financial Year End
• Legal Opinion (optional)
• Org Chart (optional)
• Nominee Participants (if applicable)
• Corporate Participants (if applicable)
• Natural Participants
• Share Capital
• Business activities
• GNB Category
• Responsible person for submitting the ESN (if your entity carries out relevant activities)
• Corporate Participant Information

Once this is all declared, you move on to the KYC verification process.

KYC Verification Process

The Cayman authorities are compliant with international money laundering regulations and the KYC (Know your Client) process is mandatory. Documents used as proof of identity and address will need to be certified. There are different levels of KYC which can be applied according to the level of perceived risk, the one most commonly encountered is the Simplified Due Diligence process.

We use a digital KYC Verification tool called SumSub to gather all KYC details and documents for each natural participant of the new entity. Each person will receive a dedicated link to provide all the documents and details in a secure way.

Learn more about how SumSub works here.

Entity Maintenance

Your Cayman ELC requires annual maintenance. Part of this is paying renewal fees to the government as well as for the registered address of your entity. Additionally, it is required to make some declarations to determine the level of economic substance your entity has as well as whether it carries out relevant activities.

Annual Renewal

There is an annual renewal that needs to be paid for the registered office and agent, ESA, Due Diligence, Annual Return as well as an annual government fee.

You can pay for your entity renewal in the Otonomos Dashboard under the Entity Maintenance section.

Renewal Periods

Entities registered in the Cayman Islands have 1 renewal date which fall on January 1 of each year. This means that it does not matter what the incorporation date of the entity is.

Reporting

Aside from the annual renewal payments there are a couple of reporting requirements in the Cayman Islands for your Cayman ELC.

Economic Substance Notification (ESN)

The Economic Substance Notification is to state that the company’s business does or does not fall within the ‘Relevant Activities’. An entity which conducts ‘relevant activities’ is subject to a higher level of scrutiny and submissions. The relevant activities list includes insurance, banking, fund management, financing, leasing, shipping and a number of other more highly regulated categories.

Annual Return

Annual filings are required for entities that carry out relevant activities. Audits of these annual filings are not required, but effective bookkeeping records should be available for inspection were it ever required. Finances may be conducted and recorded in any currency. AGMs are not mandatory, and if they are held, they can be conducted outside of Cayman. It is possible to amend the Articles of Association by notifying the registrar.

All the renewal requirements can be actioned straight from the Otonomos Dashboard. You can access them by either clicking the to do items in the To Do list or by navigating to the Entity Maintenance section of your entity.

Once you actioned the item you will see the status update of the requirement so you know you are good to go.

Shutting down your entity

When shutting down an entity there are two options to follow:

• Formal Dissolution
• Strike off

Dissolution

Please note to dissolve an entity, it must be in Good Standing status which requires any outstanding obligations to be settled as per the Registry’s requirements.

Once all in order to proceed, the Registry will require a one time payment to start the process prepare the required documentation. Please allow between 15-45 days for the dissolution process to complete depending on the entity's jurisdiction. Once completed, a Certificate of Dissolution will be provided as proof and uploaded to the entity’s dashboard.

Strike Off

Alternatively, depending on the jurisdiction. Strike Off would be an option to close an entity at a lower cost than dissolution/liquidation. This option while lower in cost will usually take longer to process as it’ll be based on specific periods of the year. Example: Filing the Strike Off in quarter one will be dissolved in quarter two.