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

The New Year 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 8 January 2020, the Private Funds Bill, 2020 was published (the “Bill”), and we expect that the Bill will become law by the end of January 2020. Whilst the timetable for implementation of the Bill is yet to be determined, and 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. We expect that ample time will be provided to permit any necessary compliance steps to be undertaken in a measured way.

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.

Both this summary, and the more detailed client advisory, are based on the Bill as published. We do not expect that the final form of the legislation will deviate materially from the Bill. Walkers will continue our work with the Cayman Islands Government, the Cayman Islands Monetary Authority (“CIMA”) and other key local professionals, and we will provide updated summaries and client advisories as matters progress.

Which funds does this apply to?

The Bill 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 Bill 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 Bill 

  • 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.
  • Existing private funds will be required to register with CIMA in due course.
  • 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.

BRITISH VIRGIN ISLANDS
Ashley GunningPartnerT +1 345 914 4251ashley.gunning@walkersglobal.com

CAYMAN ISLANDS
Ingrid Pierce Global Managing PartnerT +1 345 814 4667ingrid.pierce@walkersglobal.com
Tim BuckleyManaging PartnerT +1 345 814 4646 tim.buckley@walkersglobal.com
Bicrom DasPartnerT +1 345 814 4606bicrom.das@walkersglobal.com
Ashley GunningPartnerT +1 345 914 4251ashley.gunning@walkersglobal.com
Rolf LindsayPartnerT +1 345 914 6307rolf.lindsay@walkersglobal.com
Ed PearsonPartnerT +1 345 814 4528 ed.pearson@walkersglobal.com
Caroline WilliamsPartnerT +1 345 914 6342caroline.williams@walkersglobal.com

DUBAI
Daniel WoodManaging PartnerT +971 4 363 7912daniel.wood@walkersglobal.com

HONG KONG
Denise WongPartnerT +852 2596 3303denise.wong@walkersglobal.com

LONDON
Hughie WongPartnerT +44 (0)20 7220 4982hughie.wong@walkersglobal.com

SINGAPORE
Thomas GrangerPartnerT +65 6603 1694thomas.granger@walkersglobal.com