In 2017, the Cayman Islands introduced a novel corporate structure known as the foundation company, established under the Foundation CompaniesAct. This act provides the legal framework for foundation companies, which are unique entities blending features of Cayman Islands company law with the characteristics of civil law foundations.
Characteristics and Nature of Foundation Companies
Foundation companies in the Cayman Islands are versatile entities, permitted to engage in a variety of lawful activities, including commercial, charitable, philanthropic, or private purposes. They are structured similarly to other Cayman Islands companies, yet they possess distinct attributes, especially in their operations and governance. The foundation company is recognized as a separate legal entity with limited liability, distinct from its members and directors. Unlike typical corporate structures, a foundation company can operate without members post-incorporation and has specific stipulations for amending its constitutional documents, such as prohibiting dividend payments to its members.
Applications of Foundation Companies
These companies are anticipated to serve diverse purposes, ranging from special purpose vehicles in financial transactions to entities for succession planning and charitable activities. Foundation companies are particularly appealing in civil law jurisdictions for family wealth management, resembling the board structures of family businesses and offering flexible beneficiary entitlements for asset protection.
Incorporation and Operational Framework
To establish a foundation company, applicants must comply with specific requirements, including a stipulation that the company be limited by shares or guarantee. The company’s constitution can allocate various rights, powers, and duties to different roles like members, directors, and officers.The foundation company must maintain a qualified secretary and adhere to detailed record-keeping and regulatory compliance standards.
Management and Governance
Directors manage foundation companies, and there are no residency requirements for them. The constitution may also allow for members or supervisors to serve as directors. Foundations do not necessitate a formal founder role, and beneficiaries can be defined flexibly within the constitution.
Ongoing Compliance and Regulatory Requirements
Foundation companies must ensure compliance with anti-money laundering and counter-terrorist financing laws and maintain various registers and records. They must also adhere to the financial record-keeping requirements stipulated in the Companies Act.
Fees, Taxation, and Legal Considerations
These entities are subject to an annual fee and must abide by specific distribution regulations. Notably, foundation companies benefit from the absence of direct taxation in the Cayman Islands. They also have provisions for dispute resolution and fall under the jurisdiction of the Cayman IslandsGrand Court for certain matters.
The introduction of foundation companies in the Cayman Islands represents a significant development, offering a versatile and legally robust structure for various purposes, appealing to a global clientele seeking flexible and efficient corporate solutions.
This article is only intended to give a general overview and summary of the subject matter. It is not, nor is it intended to be comprehensive, and it does not constitute, and should not be taken to be, legal advice. If you would like legal advice or further information on any issue of any kind raised by this guide, please get in touch with one of your usual contacts.
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