For the purposes of the Private Funds Law, a ‘private fund’ is a company, unit trust or partnership whose principal business is the offering and issuing of its investment interests, the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and 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, for reward based on the assets, profits or gains of the fund.  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; funds whose investment interests are listed on a specified stock exchange; sovereign wealth funds; and single family offices.

Registration and Audit

A private fund will need to register, pay an annual fee, and file prescribed details with the Cayman Islands Monetary Authority (CIMA) within 21 days following the fund’s acceptance of capital commitments from investors for the purposes of investments.  However, the private fund may not accept capital contributions from investors in respect of investments until it is registered.  The registration date of a fund is expected to be the date that a complete application is filed with CIMA, assuming that the application is fully compliant with the law.  A private fund must also have its accounts audited annually by an approved auditor and signed off on and filed with CIMA by a local auditor within six months of its financial year end along with an annual return (in the same manner as for mutual funds). An offering document need not be prepared or filed.


A private fund must have appropriate and consistent procedures for the purposes of proper valuations of its assets to be carried out at a frequency that is appropriate to the assets held and, in any event, at least annually (e.g. as part of the audit process).  Valuations of the assets of a private fund may be performed by independent third parties appropriately professionally qualified to conduct valuations; by the manager or operator of the private fund, or a person who has a control relationship with the manager of the private fund (provided that the valuation function is independent from the portfolio management function or potential conflicts of interest are properly identified and disclosed to the investors of the fund); or by an administrator appointed by the fund.  CIMA may exempt a private fund from the valuation requirements either absolutely or subject to such conditions as it may deem appropriate.


A private fund must also appoint a custodian to hold in custody, in segregated accounts opened in the name, or for the account, of the fund, the custodial fund assets; and verify, based on information provided by the fund and available external information, that the private fund holds title to any other fund assets and maintain a record of those assets.  A private fund shall not be required to appoint a custodian, however, if it has notified CIMA and it is neither practical nor proportionate to do so, having regard to the nature of the fund and the type of assets it holds.  Where a private fund so notifies CIMA, the fund must appoint one of the following to carry out the title verification: an administrator or another independent third party; or the manager or operator, or a person with a control relationship with the manager of the fund (provided that the title verification function is independent from the portfolio management function or potential conflicts of interest are properly identified and disclosed to the investors of the fund).

Cash Monitoring

A private fund must appoint an administrator, custodian or an independent third party or the manager or operator to monitor the cash flows of the fund; ensure that all cash of the private fund has been booked in cash accounts opened in the name, or for the account, of the private fund; and ensure that all payments made by investors to the private fund in respect of investment interests have been received.

Identification of Securities

A private fund that regularly trades securities or holds them on a consistent basis must maintain a record of the identification codes of the securities it trades and holds (e.g. ISIN codes).

Alternative Investment Vehicles and Restricted Scope Private Funds

Under the Private Funds Regulations, an ‘alternative investment vehicle’ means a company, unit trust, partnership or other similar vehicle that (a) is formed in accordance with the constitutional documents of a private fund for the purposes of making, holding and disposing of one or more investments wholly or mainly related to the business of that private fund; and (b) only has as its members, partners or trust beneficiaries, persons that are members, partners or trust beneficiaries of the private fund.

Where IFRS or GAAP of a non-high risk jurisdiction permit consolidated or combined financial account reporting and a private fund chooses to report consolidated or combined financial statements with an alternative investment vehicle, the requirements described above pertaining to audit, valuation, safe keeping, cash monitoring and  identification of securities do not apply to such alternative investment vehicle.

Under the Private Funds Regulations, a ‘restricted scope private fund’ is a private fund that is (a) an exempted limited partnership; (b) managed or advised by a person who is licensed or registered by CIMA or authorised or registered by a recognised overseas regulatory authority; and (c) in which all of the investors are non-retail in nature, being either high net worth persons or sophisticated persons.

Aside from these provisions, there are no further references to either alternative investment vehicles or restricted scope private funds and we expect that further guidance will be issued in due course with respect to these new categories.

Supervision and Enforcement

CIMA has been given broad supervision and enforcement powers in respect of private funds analogous to those already in place in the context of mutual funds.


Existing private funds and private funds formed after 7 February 2020 must register with CIMA no later than 7 August 2020 (or such later date as may be specified by CIMA).

Mutual Funds (Amendment) Law

This law primarily introduces a registration requirement for what was previously referred to as an ‘exempt’ fund, having fifteen or fewer investors the majority of whom have the power to remove/appoint the operator. This will now be a regulated fund required to register, pay a fee, and file with CIMA prescribed details as well as audited accounts (annually, via an approved auditor).  Such funds must register with CIMA no later than 7 August 2020 (or such later date as may be specified by CIMA).

The new laws seek to strike a balance to achieve their dual purposes 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 laws also address EU suggestions for investment fund oversight, as set forth in a report dated 27 May 2019 from the EU Code of Conduct Group (Business Taxation).  The Ministry of Financial Services worked closely with a Cayman Islands based working group comprised of CIMA and fund professionals, including accounting, audit, administration, governance and legal firms, in drafting the laws.

CIMA has released notices and FAQs confirming procedures.  Funds that register before the 7 August 2020 deadline will not incur registration fees for 2020 (only an application fee of USD366).  The annual fee going forward will be USD4,268.

CIMA has also indicated that an audit for the 2020 financial year will be required (to be filed by no later than 30 June 2021).


Appleby’s e-alert from July 2019 explained certain key changes to the regulatory framework and ongoing filings required for persons regulated under the Securities Investment Business Law (Revised) (SIBL), including the requirement for former ‘Excluded Persons’ to re-register as ‘Registered Persons’.

The deadline for re-registration of Excluded Persons was 15 January 2020.  A former Excluded Person who did not file a re-registration application by that date will be required to file a new application for registration after that date. Previous failure to comply with filing requirements under the SIBL may be grounds for CIMA to refuse to register an applicant going forward.

See also our note below regarding the application of economic substance requirements to re-registering Excluded Persons.


Operators of Cayman Islands companies are reminded that 7 February 2020 was the deadline to ensure that their register of members specifies, with respect to each category of shares, whether such category of shares carries voting rights and, if so, whether such voting rights are conditional. The Companies (Amendment) Law, 2019 had introduced this requirement on 8 August 2019. Companies incorporated on or before that date had six months (until 7 February 2020) to update their register of members.

For the purposes of the register of members, the Companies (Amendment) Law, 2020 redefined ‘voting rights’ to include the right to appoint or remove directors.


The Companies (Amendment) Law, 2020 and the Limited Liability Companies (Amendment) Law, 2020, although largely in force from 19 February 2020, introduced certain changes to the Cayman Islands beneficial ownership registration regime which are not yet in force. The pending changes are:

  • the threshold for including an UBO on the register will be amended to 25% or more (rather than more than 25%); and
  • one of the thresholds for determining whether an entity (Company S) is a subsidiary of one or more legal entities will be amended to such legal entities, separately or collectively, holding 75% or more (rather than in excess of 75%) of the shares or voting rights in Company S.

Where an entity has not filed with the Registry of Companies either a declaration stating that it is exempt or filed a register if not exempt (including a nil register), that entity will not be entitled to receive a Certificate of Good Standing (COGS) until such time as the register is filed.

Government is still deciding how to deal with newly-incorporated entities, i.e. how long they will have to file a register following incorporation before the failure to do so would result in not being able to obtain a COGS.  Government has also been examining and considering reducing available exemptions from the requirement to prepare beneficial ownership registers, including for investment funds. In the initial proposal, whilst the information for an investment fund would not need to be filed with government, it would need to be maintained in the event it was requested.

Additionally, the Cayman Islands government has introduced an online protocol for the filing of beneficial ownership information. Some users have experienced technical issues with the use of the new online portal.  Where that is the case, government has advised that the manual filing protocol should be continued to allow industry to fulfill its legal obligations. Once the technical issues are resolved, government expects to issue amended user guidance.


Operators of existing investment funds not currently registered with CIMA should consider whether either the Private Funds Law or the Mutual Funds (Amendment) Law applies to their fund, so as to now bring their fund into the scope of CIMA’s regulation.

Recommended compliance steps include:

  • Check the fund’s current registration status on CIMA’s website
  • Consult with Appleby or your other advisors to determine (i) the basis on which the fund was previously excluded from registration with CIMA and (ii) whether registration is now required
  • If registration is required:
    • register with CIMA by the applicable deadline
    • engage with your fund’s auditors to ensure audit arrangements for the 2020 financial year are put in place
Key Contacts

Peter Colegate

Partner: Cayman Islands

T +1 345 814 2745 | +1 345 324 0504
E Email Peter

Twitter LinkedIn Email Save as PDF
More Publications
14 May 2024

A New 'Star' is Born

Appleby involved in first of its kind application brought by an Enforcer of a STAR Trust in the Gran...

3 May 2024

Funds - How to Comply with Cayman's New Corporate Governance Rules

The Cayman Islands Monetary Authority (CIMA) issued rules on corporate governance and internal contr...

29 Apr 2024

Cayman Islands Grand Court Orders Disclosure Despite PRC Data Security Law Concerns

The Cayman Islands Grand Court has recently ordered disclosure of documents in on-going court procee...

24 Apr 2024

Restructuring Provisional Liquidators May Not Be Dead After All

In the Cayman Islands restructuring provisional liquidators may not be dead after all. In Re Kingke...

9 Apr 2024

Chief Justice affirms Cayman’s availability for the enforcement of foreign arbitral awards

Chief Justice affirms Cayman’s availability for the enforcement of foreign arbitral awards

8 Apr 2024

Whose crypto is it anyway? – the status of cryptocurrency as ‘property’ under BVI and Cayman law

In recent years, a number of courts have grappled with the question of whether cryptocurrency is “...

8 Apr 2024

Electronic dissemination of corporate communications by Hong Kong listed issuers from an offshore perspective

In June 2023, The Stock Exchange of Hong Kong Limited published consultation conclusions to its cons...