Cayman: Introduction of Registration Regime for Closed-Ended Funds Summary

This note has been updated since its original publication on 10 February 2020 to reflect further information in CIMA's FAQs, in particular CIMA have confirmed that funds registering before 7 August 2020 will be required to file their 2020 audit, rather than 2021 as originally indicated by the Cayman Islands government.

2020 heralds the introduction in the Cayman Islands of the registration and regulation of closed-ended funds. As the jurisdiction of choice for the establishment of such funds outside of the US, the Cayman Islands remains at the forefront of legal and regulatory developments in this area. We expect fund sponsors, investors and regulators to benefit from the alignment of law and best market practice in this regard.

On 7 February 2020, the Cayman Islands government enacted the Private Funds Law, 2020 (the “Law”), which followed the publication in January of the consultation draft of the Law. Whilst certain points of detail remain to be confirmed by regulations and guidance, the key provisions relevant to fund sponsors and investors are now sufficiently settled for clients to begin to make the substantive arrangements necessary for compliance with the new regime. Funds have until 7 August 2020 to register under the Law, with the registration portal to facilitate these registrations being made available in the coming weeks.

In addition to this summary, we have published a more detailed client advisory that describes the scope and application of the new regime. Please click here to access that advisory.

Walkers will continue our work with the Cayman Islands government, the Cayman Islands Monetary Authority (“CIMA”) and other key local professionals, and will provide updated summaries and client advisories as matters progress.

Which funds does this apply to?

The Law applies to ‘private funds’, by which it means only the primary investor-facing vehicle offered to investors in closed-ended funds, including most private equity, infrastructure and real estate fund structures.

Alternative investment vehicles are recognised as not requiring duplicative oversight or reporting, and the Law exempts more structural entities and certain other ‘non-fund arrangements’ from its application. The exact scope of these non-fund arrangements is expected to be clarified in further rules and/or guidance issued by CIMA in due course.

The key features of the Law
  • New private funds will be required to register with CIMA prior to calling capital for purposes of investment, and to pay a modest annual fee (the Cayman Islands government has confirmed that they will waive registration fees for funds registering before 7 August 2020).
  • Existing private funds will be required to register with CIMA by 7 August 2020.
  • We expect that registration will follow the well-established online submission procedure that is applicable to open-ended hedge funds.
  • Audited accounts will have to accompany an annual return to CIMA, which accounts will require confirmation by a local audit firm. Composite “whole fund” audits should be acceptable. 
  • Private funds will be subject to requirements in relation to:
    • valuation
    • custody
    • cash management and the identification of certain securities

In practice we expect that most fund sponsors will be able to discharge these obligations with minimal impact on their existing operations, relying on their internal capabilities and making certain straightforward disclosures to investors.

Ashley GunningPartnerT +1 345 914

Ingrid Pierce Global Managing PartnerT +1 345 814
Tim BuckleyManaging PartnerT +1 345 814 4646
Bicrom DasPartnerT +1 345 814
Ashley GunningPartnerT +1 345 914
Rolf LindsayPartnerT +1 345 914
Ed PearsonPartnerT +1 345 814 4528
Caroline WilliamsPartnerT +1 345 914

Daniel WoodManaging PartnerT +971 4 363

Denise WongPartnerT +852 2596

Hughie WongPartnerT +44 (0)20 7220

Thomas GrangerPartnerT +65 6603