The Cayman Islands Exempted Company: A Complete Guide (Companies Act 2023)

Introduction to the Cayman Exempted Company

The Cayman Islands exempted company is the world's most widely used offshore corporate vehicle for fund formation, structured finance, holding company purposes, and capital markets transactions. The jurisdiction hosts over 100,000 active companies and is home to the majority of the world's hedge funds, private equity vehicles, and special purpose acquisition companies (SPACs).

The consolidating legislation — the Companies Act (2023 Revision) — brought together decades of amendments into a single coherent statute. This guide covers the formation process, governance requirements, economic substance obligations, the CIMA register, annual return requirements, and the mechanics of striking off and dissolution.

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The Statutory Framework: Companies Act 2023 Revision

The Companies Act (2023 Revision) is the primary statute governing Cayman companies. Key related legislation includes:

• Economic Substance Act (2022 Revision) — substance requirements for relevant activities
• Beneficial Ownership Transparency Act 2023 — replaces Companies (Amendment) Act 2017 register provisions
• Mutual Funds Act (2021 Revision) — for regulated fund vehicles
• Private Funds Act (2020) — for private equity and closed-ended funds
• Anti-Money Laundering Regulations (2023 Revision) — AML/KYC obligations

The Cayman Islands Monetary Authority (CIMA) is the primary financial services regulator. The Registrar of Companies sits within the General Registry, a department of the Cayman Islands government.

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Types of Cayman Company

Company Type	Key Characteristic	Primary Use
Exempted Company	Cannot trade in Cayman, exempted from tax for 20 years	Funds, holdcos, SPVs
Ordinary Resident Company	Can trade locally	Cayman-based business
Exempted Limited Duration Company	Fixed lifespan	Project finance, JVs
Segregated Portfolio Company (SPC)	Multiple segregated portfolios	Multi-class funds
Limited Liability Company (LLC)	US LLC equivalent, flexible	PE funds, US investors
Exempted Limited Partnership (ELP)	No separate legal personality	PE/VC fund structures

For international structuring purposes, the exempted company and the exempted limited partnership are the dominant vehicles. This guide focuses on the exempted company.

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Formation: Process and Costs

Formation Documents

To incorporate a Cayman exempted company, the following documents must be filed with the Registrar of Companies:

1. Memorandum of Association — states the company's name, objects (or unrestricted objects), share capital, and confirms exempted status
2. Articles of Association — governs internal management, director/shareholder rights, meetings, and dividend rights
3. Form CE1 — the exempted company application form, signed by the registered agent

The entire process is conducted through a licensed Cayman Islands registered agent. The applicant does not need to attend in person.

Formation Costs

Cost Item	Amount (USD)	Notes
Government incorporation fee	$700	Companies with authorised share capital up to $50,000
Government incorporation fee	$1,150	Share capital $50,001–$1,000,000
Government incorporation fee	$1,500	Share capital over $1,000,000
Registered agent/office set-up	$500–$1,500	Varies by agent; includes first year
Registered agent annual fee (thereafter)	$800–$2,000	Varies by agent and complexity
Apostille / notarisation of documents	$200–$400	If required for banking
Register of Directors filing	$50	Per director update

Standard formation timelines: same day or next day for straightforward structures using standard documents.

The 20-Year Tax Exemption

Upon application, an exempted company receives an undertaking from the Cayman Islands government that it will not be subject to any tax or duty on profits, income, gains, or appreciation for a period of 20 years from the date of the undertaking (Companies Act 2023, s.174). The exemption is renewable. This provides statutory certainty of the Cayman zero-tax position for the period.

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Directors: Requirements and Duties

Minimum Requirements

• Minimum number of directors: 1 (no maximum)
• Residency requirement: none — directors may be resident anywhere in the world
• Corporate directors: permitted — a Cayman company may have a corporate director
• Director nationality: no restrictions

Register of Directors

The Cayman Islands requires all exempted companies to maintain a Register of Directors and Officers. Following the Beneficial Ownership Transparency Act 2023, the Register of Directors must be filed with the Registrar of Companies and is publicly accessible via the CIMA/General Registry portal (name and nationality only; address is not public).

Filing requirement: Any change in directors must be notified to the Registrar within 30 days of the change. The prescribed form (Form RD) is filed through the registered agent. Failure to file attracts a penalty of CI$500 per month.

Directors' Duties

Cayman company law imposes fiduciary duties and common law duties of care on directors:

• Fiduciary duty to act in good faith in the best interests of the company
• Duty to act within powers conferred by the Articles
• Duty of care and skill — the standard applied is that of a reasonably diligent person with the general knowledge, skill and experience that may reasonably be expected of a person in that position (consistent with English law principles)
• Duty not to fetter discretion and to exercise independent judgment
• Duty to avoid conflicts of interest

These duties are owed to the company, not to individual shareholders. The Articles may modify some of these duties (e.g., permitting related party transactions subject to disclosure).

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Shareholders: Requirements

• Minimum number of shareholders: 1
• Maximum number of shareholders: unlimited for private exempted companies (distinguished from the 50-shareholder cap for ordinary companies)
• Shareholder residency: no requirement
• Corporate shareholders: permitted
• Bearer shares: abolished under the Cayman Islands Companies (Amendment) (No. 4) Act 2014 — all shares must be registered
• Shareholder anonymity: the Register of Members is not publicly available; only certain authorities may access it

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Economic Substance: When It Applies

The Economic Substance Framework

The Economic Substance Act (2022 Revision) was enacted in response to the EU Code of Conduct Group's concerns about Cayman's tax regime. It applies to Cayman entities (including exempted companies) that carry out "relevant activities."

Relevant Activities

Relevant Activity	Examples
Banking business	Deposit taking, lending
Distribution and service centre business	Purchasing goods from affiliates, providing services to affiliates
Finance and leasing business	Providing credit or finance, leasing assets
Fund management business	Managing investment funds
Headquarters business	Providing senior management to affiliates
Holding company business	Only holding equity participations
Insurance business	Underwriting risks
Intellectual property business	Owning/exploiting IP
Shipping business	Operating ships commercially

The Substance Test

For most relevant activities, the economic substance test requires:

1. Directed and managed in Cayman: the company's core income-generating activities (CIGA) must be directed and managed in Cayman (board meetings in Cayman with physically present directors, or participation by directors resident in Cayman)
2. Core income-generating activities performed in Cayman: adequate employees, expenditure, and physical presence in Cayman
3. Adequate employees and expenditure: proportionate to the level of activity

Pure equity holding companies face a lighter test: they must comply with Cayman filing requirements and must be directed and managed in Cayman, but do not need to conduct CIGA locally.

Substance Reporting Deadline

Economic substance notifications and reports are filed via the DITC (Department for International Tax Cooperation) portal. The deadline is 12 months after the end of the company's financial year. Penalties for non-compliance escalate from CI$10,000 for the first year to CI$100,000 for subsequent failures, with potential striking off and information exchange with relevant foreign tax authorities.

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The CIMA Register and Regulatory Filings

Fund Registration and CIMA

If an exempted company is used as a fund vehicle, it may be required to register with CIMA under the Mutual Funds Act or Private Funds Act:

• Registered mutual fund: minimum subscription CI$100,000 per investor, or limited to 15 investors
• Administered mutual fund: licensed Cayman administrator
• Licensed mutual fund: full CIMA licence

Private funds (closed-ended, PE/VC) are registered under the Private Funds Act 2020 and pay an annual registration fee of CI$3,048.78.

Annual Return Requirements

All Cayman exempted companies must file an annual return with the Registrar of Companies. The annual return is due on or before 31 January of the following year and must confirm:

• Company name and registration number
• Registered office address
• Directors and officers (current)
• Share capital
• Nature of business

Annual government fee for exempted companies (2025):

Authorised Share Capital	Annual Fee (CI$)
Up to CI$42,000 (approx USD 50,000)	CI$854
CI$42,001 to CI$1,099,999	CI$1,007
CI$1,100,000 and above	CI$2,154

These fees are due by 31 January. A 33% penalty applies to fees paid after 31 January.

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Beneficial Ownership: The REEFS System

The Beneficial Ownership Transparency Act 2023 replaced the earlier Companies (Amendment) Act 2017 framework. Cayman companies must maintain a beneficial ownership register identifying all registrable persons — individuals who ultimately own or control 25%+ of shares or voting rights, or who otherwise exercise significant control.

The register is held by the company's licensed registered agent and submitted to the Registrar. It is not publicly accessible — it is available only to Cayman law enforcement and competent authorities under appropriate legal process.

The Registrar maintains the consolidated REEFS (Register of Entities and Enforcement) system, which stores beneficial ownership information for law enforcement access.

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Striking Off and Dissolution

Voluntary Striking Off

A Cayman exempted company can be struck off the register voluntarily under s.159 of the Companies Act. The process requires:

1. Directors pass a resolution confirming the company has no assets, liabilities, or ongoing operations (or that liabilities have been settled)
2. Resolution submitted to the Registrar through the registered agent
3. Government notice period (60 days)
4. If no objections received, company is struck off

Cost: approximately CI$300–$600 in registered agent fees plus any outstanding annual fees.

Voluntary Winding Up (Liquidation)

For a company with assets, a formal winding up is required:

1. Shareholders pass a special resolution to wind up
2. Liquidator appointed
3. Creditors notified and claims settled
4. Surplus assets distributed to shareholders
5. Final return filed with Registrar
6. Dissolution certificate issued

Restoration After Striking Off

A company struck off the register may be restored within 10 years by application to the Registrar (administrative restoration for recent strikes) or by court order. All outstanding fees and penalties must be paid. The restoration is backdated to the date of striking off for continuity purposes.

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Cayman vs Other Offshore Jurisdictions: Quick Reference

Feature	Cayman	BVI	Seychelles
Standard formation time	Same day	1–2 days	1–2 days
Minimum directors	1	1	1
Public register of directors	Yes (name only)	No	No
Economic substance rules	Yes (relevant activities)	Yes (relevant activities)	Yes (relevant activities)
Annual government fee	CI$854–$2,154	$550–$1,750	$100–$150
Fund regulation	CIMA (sophisticated framework)	SIBA (lighter framework)	FSA (basic)
Banking access	Strong (prime banks)	Strong (good correspondent access)	Moderate

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HPT Group and Cayman Structure Advisory

HPT Group works with clients establishing Cayman Islands exempted companies for fund formation, holding company structures, SPV purposes, and capital markets transactions. We manage the full formation process through our network of licensed Cayman registered agents, advise on economic substance compliance, CIMA registration requirements, and annual maintenance obligations. Whether you are establishing a single holding vehicle or a multi-layered fund structure, HPT Group provides the co-ordinated advice needed to ensure your Cayman entity is correctly established, maintained, and compliant with the evolving regulatory framework. Speak to our team to discuss your requirements.