This long awaited and much anticipated piece of legislation is a welcome addition to the existing structuring options currently on offer to clients keen on using the Cayman Islands as their jurisdiction of choice and has a wide variety of possible applications.
As discussed in our e-alert in December, the FC Law will allow certain companies to be registered as foundations, either at the time of their incorporation or at a later date. Except as otherwise set out in the FC Law, these companies would also be governed by the Cayman Islands’ Companies Law (2016) Revision.
The Foundation Company (“FC”)
The FC Law creates a form of non-profit corporate entity, rather than the more traditional foundation seen under the foundations’ laws already in existence in the Crown Dependencies of Jersey, Guernsey and the Isle of Man, which establish more of a hybrid structure between a trust and a company akin to the civil law foundation.
Much like a company, an FC has a distinct legal personality from that of its members, directors, officers, supervisors and founder. An FC has the capacity to sue and be sued and to hold property in its own name. The model articles of association at Schedule 2 to the FC Law provide that the liability of its members is limited. The distinguishing feature from a Cayman company is that an FC is prohibited from paying dividends to its members.
Unless expressly provided for in the constitution documents (the memorandum and articles of association), the duties and rights under the constitution are owed to, and are enforceable against, the FC only. This distinguishes the FC from a trust, because a trust has no separate legal personality and is essentially a relationship between trustees and beneficiaries. In the case of a trust, beneficiaries’ rights of recourse are against the trustees rather than the trust itself.
Another distinguishing feature of the FC as compared with a trust is that beneficiaries have no powers or rights relating to the FC, its management or its assets.
