At a glance 

  • Fast tracked changes to definition of private funds to give greater certainty and clarity
  • Broad acceptance and compliance with new requirements
  • Increasing numbers of registrations ongoing in advance of 7 August hard deadline

On 7 February the Cayman Islands Government published the Private Funds Law, 2020 and the Mutual Funds (Amendment) Law, 2020 in order to enhance the oversight of both open-ended and closed-ended funds in the jurisdiction and to respond to EU requirements with respect to transparency, best market practice, enhanced anti-money laundering procedures and other key regulatory standards (please refer to our previous update here). Further fast tracked amendments, to provide greater certainty and clarity, have been introduced in the Private Funds (Amendment) Law, 2020.

Application

In summary, the Private Funds Law applies to companies, unit trusts or partnerships that offer or issue or have issued investment interests, the purpose or effect of which is the pooling of investor funds with the aim of enabling investors to receive profits or gains from such entity’s acquisition, holding, management or disposal of investments, where (a) the holders of investment interests do not have day-to-day control over the acquisition, holding, management or disposal of the investments; and (b) the investments are managed as a whole by or on behalf of the operator of the private fund, directly or indirectly. Private funds do not include, however, single investor funds; regulated mutual funds under the Mutual Funds Law (as amended); persons licensed under the Banks and Trust Companies Law or the Insurance Law; persons registered under the Building Societies Law or the Friendly Societies Law; or, importantly, any non-fund arrangements – the list of which is extensive and includes:

pension funds; securitisation special purpose vehicles; contracts of insurance; joint ventures; proprietary vehicles; officer, manager or employee incentive, participation or compensation schemes, and programmes or schemes to similar effect; holding vehicles; individual investment management arrangements; debt issues and debt issuing vehicles; structured finance vehicles; preferred equity financing vehicles; a fund of whose investment interests are listed on a specified stock exchange; sovereign wealth funds; or single family offices.

Changes

The main changes introduced by the Private Funds (Amendment) Law, amend the definition of a private fund by removing the reference to spreading investment risk meaning closed ended funds making only a single investment may constitute a private fund, provided they satisfy all of the remaining requirements of the definition. Further, the inclusion of funds that have issued investment interests at some point during their life, removes the uncertainty around funds that have issued interests in the past but are no longer actively offering or issuing. All are required to register.

Registrations

Existing private funds and private funds formed after 7 February must register with CIMA no later than 7 August 2020. Registrations are being conducted apace as the industry successfully absorbs these new requirements.

As previously observed, the new regime seeks to strike a balance in achieving the dual purpose of strengthening investor confidence in Cayman Islands investment funds and ensuring that the Cayman Islands remains the preeminent jurisdiction for investment fund formation. The new regime also addresses EU suggestions for investment fund oversight and the Cayman Islands Government worked closely with industry stakeholders and fund professionals, including accounting, audit, administration, governance and legal firms in drafting the laws.

Key Contacts
More News
23 Oct 2020 | News

Offshore Business Update

This is an update for our clients on how the authorities in our core jurisdictions are responding to...

21 Oct 2020 | News

Safe Haven Found: The Cayman Islands introduces Global Citizen programme for digital nomads

On 16 October 2020, the Cayman Government gazetted regulations bringing into effect its Global Citiz...

Contributors: Esmond Brown
14 Oct 2020 | News

Sally Penrose and Jennifer Parsons speak on Regulatory webinar panel to New York State Bar Association members

The New York State Bar Association is hosting a virtual webinar entitled ‘Bermuda and Cayman Islan...

Contributors: Jennifer Parsons
6 Oct 2020 | News

The Cayman Islands removed from the EU’s blacklist

Appleby is pleased to advise that the Council of the European Union confirmed on 6 October 2020 that...

25 Sep 2020 | News

Appleby advises Chi Kan Holdings Limited on its HKD 130 million listing on the Main Board of the Hong Kong Stock Exchange

Appleby acted as Cayman counsel to Chi Kan Holdings Limited in relation to its listing on the Main B...

Contributors: Minnie Choi
23 Sep 2020 | News

Appleby shortlisted ‘Offshore Firm of the Year’ by The Lawyer

Leading offshore firm Appleby has been shortlisted in The Lawyer Awards 2020, ‘Offshore Firm of th...

28 Jul 2020 | News

Tax Information Authority publishes ES Guidance Notes Version 3.0

On 13 July 2020, the Cayman Islands Tax Information Authority issued long-awaited version 3.0 of its...

14 Jul 2020 | News

Appleby Receives High Rankings in Chambers’ Annual High Net Worth Guide

Lawyers from Appleby’s Bermuda, Cayman Islands and Jersey Private Client & Trusts practices ha...

8 Jul 2020 | News

Appleby releases Offshore Data Protection Guide

Leading offshore law firm Appleby announces today it has launched an Offshore Data Protection Guide ...