The Cayman Islands

Overview

The Cayman Islands is the fifth largest financial centre in the world and meets the highest criteria of corporate governance required for the regulation of its financial services industry. As a result, businessmen are confident in the knowledge that it is recognized worldwide as a highly reputable jurisdiction. In fact, most of the world’s largest banks have a branch or subsidiary located in the Cayman Islands where the largest international accounting firms have been established for many years.

The legal system is based on English Common Law, together with local statutes which have been amended and modernized from the common law in a manner suitable for a modern financial centre.

Practical winding up legislation is encompassed within Part V of the Companies Law (2007 Revision) which governs both voluntary and compulsory liquidations. The English Insolvency Rules 1986 apply so far as is predictable and provided that they are consistent with the Companies Law.

Unlike in the English Companies Law no distinction is made between a Creditors Voluntary Liquidation and a Members Voluntary Liquidation.

One of the last remaining British Overseas Territories in the Caribbean, the Cayman Islands is made up of three islands: Grand Cayman, Cayman Brac and Little Cayman, with a total land mass of 100 square miles.

There are more than 90 nationalities represented in the Cayman Islands today. An overwhelming 95 per cent of the population lives in Grand Cayman-with George Town, the capital, home to 23,275 residents – followed by the districts of West Bay and Bodden Town.

The diverse composition of the population has contributed to a variety of cultural influences that create a fusion of music, fashion, cuisine and lifestyle. The main language is English, with Spanish frequently spoken as a second language.

The government is a parliamentary democracy with free elections held every four years. The present constitution provides for a system of government comprising the Governor, Cabinet and Legislative Assembly. The Governor is appointed by the Queen and is responsible for defence, external affairs, internal security and the police. In all other matters, the Governor must follow the advice of the cabinet unless he or she deems this to be against the public interest.

The Cabinet consists of five elected members of legislative Assembly who are voted into the Cabinet by the Assembly itself, and three official members comprising: the Chief Secretary, the Attorney General, and the Financial Secretary. The three official members are appointed by the Governor who presides over the Cabinet. The five elected members are ministers, each with specific portfolio of subject areas and responsibilities assigned by the Governor.

Judicial System

The Cayman Islands have three resident judges and three magistrates. There are three courts: the Summary Court, the Grand Court and the Court of Appeal. The Summary Court deals with both civil and criminal cases, which are usually heard by a magistrate. Appeals from the Summary Court are heard in the Grand Court. The Grand Court is superior court of record which administers the common law and the law of equity of England, as well as locally enacted and applied laws. The final court of appeal is the Judicial Committee of the Privy Council in the United Kingdom.

Economy

The Cayman Islands is known for its stable macroeconomic environment, Its integration into the global economy coupled with dynamic growth in the two main economic sectors of tourism and financial services have delivered a high standard of living for the average Caymanian citizen. GDP per capita was estimated at CI$43,800 in 2004.

The Cayman Islands have also benefited from relatively low inflation over the last five years. Between 1999 and 2003, inflation averaged a moderate 2.7%. Unemployment remains constrained as well, as a large proportion of the labor force is constituted by non-Caymanian residents on work permits.

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Financial Services

Political stability a sound legal system, a stable banking environment, a sound regulatory regime, tax neutrality and the absence of exchange controls make the Cayman Islands a highly attractive place to do business.

Given this environment, it’s not surprising that the Cayman Islands is a thriving centre for international finance. Cayman Islands clientele have access to wide array of services including banking, trust, mutual funds, company management, structured financing, vessel registration, insurance, and listing on the stock exchange. Supporting this array of services are highly skilled legal, accounting and other professional advisors. It is home to the world’s leading banks, investment agencies, accounting firms and law firms.

The responsibility for regulating the licensing of banks, trust companies, management companies and insurance companies lies with the ‘Cayman Islands Monetary Authority’ www.cima.ky who have introduced a series of up to date laws and regulations.

Indeed, the Cayman Islands banking sector has received an Aa3 country risk rating for its services and (95% of the) largest banks in the world are licenced here.

The Cayman Islands’ banking sector adheres to the guidelines of the Basle Committee on Banking Supervision. The Cayman Islands are a member of the ‘Offshore Bank Supervisors’ and the ‘Caribbean Group of Banking Supervisors’, both of which were formed under the auspices of the Basle Committee.

Banks adhere to the ‘know your client’ rule. These rules have been approved by the U.S. Internal Revenue Service, enabling institutions in the Cayman Islands to become qualified intermediaries under the US Withholding Tax Rules introduced on 1 January 2001.

As a leading domicile for offshore hedge funds, the Cayman Islands is also the second largest captive insurance centre in the world, and the first choice worldwide for structured finance vehicles.

In addition, a vibrant trust and corporate services sector is supported by English common law and an impressive array of professional service providers, including the presence of the majority of the worlds largest accounting firms and international law firms.

Established in 1997, the Cayman Islands Stock Exchange("CSX") www.csx.com.ky enjoys status as a "recognized stock exhange" under Section 841 of the Income and Corporation Taxes Act 1988. Recognition by the U.K. Inland Revenue confirms the CSX as an exchange of comparable merit and capacity to those in a major economy or significant financial centre. Other major recognitions include registered organization status by the London Stock Exchange and affiliate membership of the International Organization of Securities Commission and Intermarket Surveillance Group. The CSX’s listing rules have been designed to facilitate the listing of mutual funds and specialist debt securities, as well as Eurobonds, derivative warrants and depositary receipts.

There is also a secondary listing facility for companies registered on other recognized exchanges. The exchange is also able to list domestic equities although demand for this facility is currently limited.

Taxation

The Cayman Islands Government does not impose income tax, corporation tax, capital gains tax, gift tax. There are no property taxes or rates and no controls on the foreign ownership of property and land. The bulk of government revenues are earned through consumption-based taxes, such as licensing fees and customs duties and property transfer taxes.

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