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New Cayman Islands Law Makes LLC an Available Vehicle Option


7/20/16

Synopsis
 
As of July 8, 2016, the Limited Liabilities Companies Law 2016 (the “LLC Law”), which makes a limited liability company a vehicle option in the Cayman Islands, has taken effect. The LLC Law comes in response to requests from the investment funds industry to the Cayman Islands government to offer an additional corporate structuring option. It is closely modeled after the Delaware limited liability company law and is anticipated to fortify the Cayman Islands’ position as a leading offshore jurisdiction for investment funds and structuring vehicles.
 
Issue
 
The Limited Liabilities Companies Law 2016 was first published in December 2015. Introduction of the LLC will complement existing legal structures available in the Cayman Islands for international transactions including exempted companies, exempted limited partnerships, and trusts. It is anticipated that the flexible nature of the LLC will provide greater choices in the structuring of any international transaction. Though largely based on the current Delaware limited liabilities company law, the new law takes into account Cayman Islands laws and concepts. Key features include:

  • Body corporate with separate legal personality having at least one member
  • Liability of a member to make contributions to the LLC will be limited to amounts as agreed in the LLC agreement
  • Registration of the LLC will be affected by the filing of a registration statement with the Registrar of Limited Liability Companies
  • Members are free to agree among themselves to the internal workings of the LLC in the LLC agreement, such as allocations of profits and losses and allocations of distributions
  • Members would have capital accounts as opposed to holding shares
  • Existing Cayman Islands exempted companies may be converted to a LLC
     

What Does CohnReznick Think?
The LLC Law is a welcome addition to the structuring options available in the Cayman Islands. Many fund managers, especially those U.S. managers in the hedge and private equity areas, have been looking for options that look similar to Delaware limited liability companies which have capital accounts as opposed to issuance of shares. Before taking advantage of the options available under the LLC Law, fund managers should have a discussion with their non-U.S. investors to make sure they understand the differences between existing Cayman Islands exempt companies that issue shares as opposed to a LLC which does not issue shares but, instead, tracks investor capital balances.
 
Contact
 
For more information, please contact Jay Levy, Partner and CohnReznick Financial Services Industry Practice Leader, at 646-254-7412 or jay.levy@cohnreznick.com, or William Pidgeon, Partner, at 973-403-7998, or william.pidgeon@cohnreznick.com.
 
To learn more about CohnReznick’s Financial Services Industry Practice, click here.


This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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