Tired of registering a Cayman company article? Let's take a look at the Cayman Company Act

A person incorporated in the Cayman Islands as an exempted limited liability company under the Cayman Islands Companies Act must primarily carry on business outside the Cayman Islands. A company is required to submit annual returns to the Cayman Islands Registrar of Companies for deposit and is required to pay a fee based on the amount of the company's statutory share capital.

share capital

The Cayman Islands Companies Act allows a company to issue common shares, preferred shares, redeemable shares or any combination of the above shares.

The Cayman Islands Companies Act provides that if a company issues shares at a premium in exchange for cash or other consideration, it is required to transfer an amount equivalent to the total premium for such shares into an account called the "Share Premium Account". If, under any arrangement, the shares of the Company are allotted as consideration for the acquisition or cancellation of shares in any other Company and the Issuance of Shares at a premium, the Company may elect not to apply such provisions to such premiums.

The Cayman Islands Companies Act provides that, subject to the provisions of the Memorandum of Association and the Articles of Association( if any), a company may use the share premium account in such manner as may be determined from time to time, including but not limited to the following:

(a) Distribution or payment of dividends to shareholders;

(b) Pay in full the amount of unissued shares to be issued to shareholders as paid bonus shares;

(c) Redemption and repurchase of shares in accordance with the provisions of section 37 of the Companies Act of the Cayman Islands;

(d) Write-off of start-up costs;

(e) Write off any expenses incurred or commissions paid or discounts granted by the Company in connection with any issuance of shares or warrants of claim; and

(f) a premium payable as redemption or purchase of any shares or warrants of claim in the Company.

No distribution or payment of any dividend from the share premium account may be made to shareholders unless the Company is able to repay debts due in the course of day-to-day business immediately following the date of the proposed distribution or payment of dividends.

The Cayman Islands Companies Act provides that, subject to the regulations confirmed by the Cayman Islands High Court, a company limited by shares or a limited company with a share capital may reduce its share capital in any way by special resolution, subject to the approval of its Articles of Association.

Subject to the detailed provisions of the Cayman Islands Companies Act, a company limited by shares or a limited company with a share capital may issue shares that the company or shareholders elect to redeem or are liable to redeem, if approved by the Articles of Association of a company limited by shares. In addition, the company may repurchase its own shares (including any redeemable shares) if approved by its Articles of Association. The method of purchasing shares must be approved in detail by the Articles of Association or approved by the general resolution of the company. The Articles of Association or the provisions of the purchase method may be determined by the directors of the company.

The Company may not redeem or repurchase its shares unless the Shares are fully paid-up. If the Company no longer has any shareholding directors as a result of redemption or repurchase, the Company may not redeem or purchase any of its own shares. Unless, immediately following the proposed payment date, the Company is still able to repay debts due in the ordinary course of its business, it is unlawful for the Company to redeem or repurchase its shares on its share capital.

There are no statutory restrictions in the Cayman Islands on the financial assistance provided by a company to purchase or subscribe for shares in itself or its holding company. Accordingly, if the directors of the Company, in the exercise of their duties with due diligence and good faith, consider that it is appropriate and in the interest of the Company to give such financial assistance. The funding must be made in an equitable manner.

Dividends and distributions

Apart from section 34 of the Cayman Islands Companies Act, there is no statutory provision governing the payment of dividends. Under English case law (which may be considered convincing in this respect in the Cayman Islands), dividends may only be paid on corporate profits. In addition, section 34 of the Cayman Islands Companies Act allows a company to pay dividends and make distributions at a share premium if it passes the solvency test and complies with the relevant provisions of the company's memorandum of association and articles of association, if any.

Shareholder litigation

The Cayman Islands courts are expected to follow English jurisprudence. The Cayman Islands Courts have cited and followed Foss v. Harbottle's jurisprudence and its exceptions, which allow minority shareholders to bring class actions or derivative actions in the name of companies in respect of:

(a) acts that exceed the authority of the Company or are unlawful,

(b) the act of defrauding minority shareholders and the negligent party itself has control over the Company, and

(c) Actions requiring the resolution (not actually obtained) passed by a specific (or special) majority of shareholders.

Protect minority shareholders

If a company (not a bank) splits the share capital into shares, the Cayman Islands Court may, on the application of a shareholder holding not less than one-fifth of the issued shares of the company, appoint an investigator to investigate the affairs of the company and report the results in the manner specified by the Court.

Any shareholder of the company may enter the Cayman Islands Grand Court and may issue a winding-up order if the court considers that the winding up of the company is fair and just.

Generally, a shareholder's claim against a company must be made in accordance with the general contract or tort law applicable to the Cayman Islands, or in accordance with the individual rights of the shareholders under the memorandum and articles of association of the company.

The Courts of the Cayman Islands have cited and followed the English common law provision that major shareholders may not commit fraud against minority shareholders.

Asset sale

The Cayman Islands Companies Act does not impose special restrictions on the powers of directors to sell corporate assets. In general, directors are required to exercise such powers with due diligence and good faith for appropriate purposes premised on the interests of the company.

Accounting and Auditing

The Cayman Islands Companies Act requires companies to arrange for the storage of appropriate book records relating to:

(a) all receipts and expenditures of the Company and the events relating to the occurrence of such receipts and expenditures;

(b) Records of all purchases and purchases of the Company's goods; and

(c) Company assets and liabilities.

No record of the books necessary to properly reflect the state of the Company's affairs and to explain its transactions will not be deemed to be properly kept.

Register of Shareholders

Subject to the Articles of Association of the Exempted Company, the Exempted Company may deposit the Register of Shareholders and any Register of Shareholders in any register of shareholders at such places within or outside the Cayman Islands as the Directors deem appropriate from time to time. The Cayman Islands Companies Act does not provide for a company exempted from filing a list of shareholders with the Cayman Islands Registrar of Companies. Therefore, the names and addresses of shareholders are not publicly available data and will not be available for public inspection.

Access to books and records

Under the Cayman Islands Companies Act, shareholders of a company do not have a general right to access or obtain a copy of the company's register of shareholders or a copy of the company's records. However, they have the relevant rights that may be contained in the Articles of Association of the company.

Special resolution

The Cayman Islands Companies Act provides that a resolution is a special resolution if a shareholder entitled to vote in person or (if the delegated representative is permitted) passes a resolution by at least two-thirds of the majority of votes at a general meeting of shareholders (which shall be duly issued in the notice of the general meeting specifying that the resolution to be submitted is a special resolution), provided that the company may specify in the Articles of Association that the required majority of votes must be more than two-thirds and that such majority votes (not less than two-thirds) shall also be required. Matters subject to approval through a special resolution vary from one to the other. If authorized by the Articles of Association of the Company, a written resolution signed by all shareholders of the Company who will then be entitled to vote may be regarded as a special resolution.

Shares of a subsidiary in a parent company

Where the purpose of the company permits, the Cayman Islands Companies Act does not prohibit a Cayman Islands company from acquiring and holding shares in its parent company. Directors of any subsidiary shall take over the interests of the Company and perform their duties prudently and in good faith for appropriate purposes.

Consolidation and consolidation

The Cayman Islands Companies Act allows for mergers and integrations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. In this regard,

(a) "merger" means the merger of two or more companies to be incorporated and the attribution of their business, property and liabilities to one of the companies that is a surviving company; and

(b) "Consolidation" means the consolidation of two or more proposed consolidated companies into one consolidating company and attribution of the business, property and liabilities of such companies to the consolidating company.

For the purposes of a merger or consolidation, the proposal for the merger or integration shall be subject to the approval of the directors of each proposed merging company, which thereafter shall be authorized by (a) each proposed consolidated company by a special resolution and (b) such other authorizations, if any, as may be set out in the Articles of Association of the proposed merging company.

The Merger or Consolidation Proposal, together with a statement on the solvency of the consolidated or existing Company, a list of assets and liabilities of each proposed merger company and a copy of the Undertaking certificate in respect of the Merger or Consolidation, will be sent to the shareholders and creditors of each proposed merger or consolidation company and the undertaking that the merger or consolidation announcement will be published in the Cayman Islands Gazette must be filed with the Cayman Islands Registrar of Companies for the record. Subject to certain exceptional circumstances, dissenting shareholders are entitled to be paid the fair value of their shares after the required proceedings have been made, provided that, if the parties fail to reach a consensus thereof, such fair value will be determined by the courts of the Cayman Islands. Mergers or consolidations under such statutory procedures are not subject to court approval.

recombination

The statutory provisions provide that the commencement of a reorganization and merger must be approved by a majority of the votes equivalent to 75 per cent of the value held by shareholders or creditors present at the general meeting,as the case may be, and subsequently approved by the Cayman Islands Court. While dissenting shareholders may submit to the Grand Court that the transaction for which they have applied for approval does not give fair value to their shares, it is unlikely that the Court will reject the transaction solely on these grounds without evidence of management fraud or dishonesty, and if the transaction is approved and completed, the dissenting shareholder will not be granted valuation rights similar to those normally available to dissenting shareholders of a U.S. company (i.e., the right to cash be paid in accordance with the valuation of their shares by the Court).

acquisition

If a company proposes to acquire shares in another company and, within four months of the proposed takeover, not less than 90 per cent of the holders of the acquired shares accept the acquisition, the acquirer may, within two months of the expiry of the said four-month period, give notice at any time requiring the dissenting shareholder to transfer its shares in accordance with the terms of the proposed takeover. Dissenting shareholders may file an objection to the assignment in the Grand Court of the Cayman Islands within one month of the issuance of the notice. The dissenting shareholder has a duty to demonstrate that the Grand Court should exercise its discretion, although the Court generally will not exercise its discretion unless there is evidence of fraud or dishonesty or collusion between the Acquirer and the relevant shareholder accepting the Takeover, unfairly forcing the minority shareholders to be removed.

Indemnity Guarantee

Cayman Islands law does not limit the indemnity guarantees given to senior officers and directors by the Articles of Association of a company, provided that the Cayman Islands courts do not consider any of the relevant provisions to be contrary to public policy (e.g. originally intended to provide a guarantee of indemnity for the consequences of the offence).

Winding

A company may be ordered by a court to wind up or voluntarily (a) be approved by the shareholders of the company by a special resolution (if the company is solvent) or (b) by the shareholders of the company by ordinary resolution (if the company is solvent).

The winder's responsibilities are to collect the company's assets (including the amounts owed by the contributors (shareholders), if any), to determine the list of creditors and to repay the debts owed by the company to creditors (or to repay them pro rata if the assets are insufficient to repay all debts), and to determine the list of contributors and to distribute the remaining assets (if any) according to the rights attached to their shares.

Exchange

The Cayman Islands have no exchange control regulations or currency restrictions.