Do you have any Cayman vehicles that you are considering terminating?
If so, there are a number of active steps that should be taken before the end of the calendar year in order to reduce or eliminate certain annual fees and costs for 2022.
Voluntary Liquidation (safest and most administratively clean termination process)
Where a legal entity has operated or traded, and/or in cases where the entity has entered into third party or commercial transactions over its lifetime, the recommended process to terminate such a vehicle is by way of a voluntary liquidation. This is the preferred route as once the vehicle has been dissolved by voluntary liquidation, it cannot be legally re-instated by any interested party.
For Cayman Islands companies, our affiliated corporate administration business, Ogier Global, can act as voluntary liquidator. This is recommended due to the number of statutory obligations on the appointed voluntary liquidator, and also to optimise administrative efficiency.
For Cayman Islands partnerships, either the general partner or Ogier Global can act as voluntary liquidator. The approach taken will be made with reference to the terms of the limited partnership agreement. In either case, Ogier Global will ensure all statutory obligations as liquidator are properly met and the most efficient approach is taken.
We recommend commencing the termination process as soon as possible in order to avoid annual government registration and registered office fees for 2022 from being incurred.
Strike Off (quickest termination process but risk of future liability/claims)
Where an entity is dormant and/or has never traded, it may be suitable to terminate by way of strike-off. This process is more cost effective and quicker than voluntary liquidation, but it has the downside that it lacks the finality of voluntary liquidation, as any interested party who is aggrieved by the strike-off may apply for the entity to be re-instated for a period of up to 10 years after the strike-off date.
For companies, for example, action can then be taken against a former director, carrying the risk of personal liability for that director for any unsatisfied claims. Similarly for partnerships, a successful claimant may, for example, be able to clawback distributions previously made to limited partners. For this reason we do not recommend this option where the entity in question has taken in external investors and/or traded.
Additional considerations for Cayman funds registered with CIMA
Cayman entities that are registered with the Cayman Islands Monetary Authority (CIMA) as regulated mutual or private funds can reduce or avoid their 2022 CIMA license fees if trading has ceased in 2021 provided that certain filings have been made with CIMA before 31 December 2021.
In order to avoid 2022 CIMA fees in full, both mutual funds and private funds are required to have completed their final audit and have filed the related Fund Annual Return (FAR) with CIMA. They will also be required to submit an affidavit to CIMA, confirming that all investors have received their full and final share of the termination proceeds. Both the FAR and the affidavit would need to be filed with CIMA prior to 31 December 2021 in order to avoid 2022 fees in full.
In cases where the fund has ceased to trade or has terminated within 2021, but is either not able to return the proceeds to investors, nor complete the final audit before the end of 2021, then 2022 CIMA license fees will be payable at a discounted rate of 50 per cent. This will apply in cases where the fund has taken active steps to file the termination application with CIMA prior to 31 December 2021 and the application has been accepted by CIMA.
Where a voluntary liquidator has been appointed to the fund prior to 31 December 2021, further relief may be available for 2022 CIMA license fees.
How can Ogier help
If you require assistance with the termination of a Cayman Islands vehicle, or have any questions around the potential savings for 2022 fees, please speak to your usual Ogier contact or our liquidation specialist at Ogier Global, Corinne Cellier.
For further details of the liquidation and other fiduciary services provided by Ogier Global please see our brochure here.