Cayman Islands Companies Law

To members of the Company Managers Association:

This copy of The Companies Management Law has been scanned from the original without correction and may contain inaccuracies. Members are advised to obtain an original from the Legislative Assembly if they have not already done so.

Supplement No.3 published with Gazette No.4 of 16th February, 1998.

THE COMPANIES MANAGEMENT LAW (12 OF 1984)

(1998 Revision)

Consolidated with Laws 13 of 1993 (1)(part), 21 of 1993,16 of 1996 (part) and 4 of 1997 (part).

Revised under the authority of the Law Revision Law (19 of 1975).

Originally enacted-

Law 12 of 1984-9th May1 1984
Law 13 of 1993-28th June, 1993
Law 21 of 1993-24th September, 1993
Law 16 of 1996-20th September, 1996
Law 4 of 1997-24th March, 1997.

Consolidated and revised this 6th day of January, 1998.

Note (not forming part of the Law): This revision replaces the 1996 Revision which should now
be discarded

COMPANIES MANAGEMENT LAW

(1998 Revision)

ARRANGEMENT OF SECTIONS

I. Short title
2. Definitions
3. Application, etc., of Law
4. Business of company management
S. Powers and duties of Authority
6. Shares, etc., not to be issued or transferred without approval
7. Use of names
8. Duties of licensee
9. Annual returns, etc.
10. Power of search
11. Power of Authority to require insurance
12. Suspension of licence
13. Revocation of licence
14. Appeals
15. Offences
16. Regulations
17. Guidelines
Schedule: Licence application particulars

COMPANIES MANAGEMENT LAW

(1998 Revision)

1. This Law may be cited as the Companies Management Law (1998 Revision).
Definitions
2. In this Law
"appointed day" means the 6th February, 1985;

"auditor' means a person who has qualified as an accountant by examination of one of the Institutes of Chartered Accountants or Certified Accountants in England and Wales, Ireland or Scotland, the Canadian Institute of Chartered Accountants or the American Institute of Certified Public Accountants, and who is a current member in good standing of one of those institutes or a person of good standing with some other accountancy qualification who is recognised by the
Governor as such for the purposes of this Law;

"Authority" means the Cayman Islands Monetary Authority established under section 3(l) of the Monetary Authority Law, 1996 and includes any employee of the Authority acting under the Authority's authorisation;

"business of company management" means the provision of managerial services for profit or reward in or from within the Islands, whereby a person is a director for or a shareholder of a company or when the control over the whole or substantial assets of the company is vested in the
management company:

Provided that services to a company which comprise only the maintenance of a registered office, the conduct of directors' and general meetings (including the preparation and recording of resolutions at, and the minutes of, such meetings) the preparation, filing and keeping of statutory returns, the provision of nominee shareholders for the purpose of the formation of a company, or where the shareholding of such nominee shareholders does not in aggregate exceed two per cent
of the issued capital of the company, the forwarding of mail and services or a similar administrative nature shall not of themselves constitute the business of company management for the purposes of this Law:

And provided further that the holding, by any person who possesses Caymanian status within the meaning of the Immigration Law (1997 Revision) or who is resident in the Islands of a directorship of not more than twelve companies all or which are registered in the Islands, and all of which either carry on business
within the Islands, or are land holding corporations as defined in section 2 of the Land Holding Companies Share Transfer Tax Law (1995 Revision) and whose main business is the holding of land, shall not itself constitute the business of company management for the purposes of this Law:

And provided further that a person shall not be deemed to be in the business of company management merely by virtue of being a director or shareholder in a company if such person has been issued with a certificate of exemption by the Financial Secretary, who may not issue more than ten such certificates in respect of any one person;

"financial year", in relation to a licensee, means the period not exceeding fifty three weeks at the end of which the balance of his account is struck, or if no such balance is struck, or if a period in excess of fifty-three weeks is employed, then a calendar year;

"formation of a company" means the period of time ending three months after a company has been registered under the Companies Law (1995 Revision);

"Governor" means Governor in Council; and

'licence' and its cognates, means a licence granted under this Law.

3. (1) Subject to subsections (2) and (3), this Law has effect in addition to and not in
derogation of any other law, and in particular shall, unless expressly so stated, not derogate from
any provision of the Confidential Relationships (Preservation) Law (1995 Revision).

(2) No person who is licensed under this law is required to be licensed under the Local
Companies (Control) Law (1995 Revision) or the Trade and Business Licensing Law (1997
Revision).

(3) This Law has no application to-

(a) a trust company which is the holder of a valid licence to carry on trust
business granted under section 3 of the Banks and Trust Companies Law
(1995 Revision);
(b) a holder of an Insurance Manager's Licence granted under section 4(2) of the
Insurance Law (1997 Revision), in respect of insurance companies licensed under
that law;
(c) the holder of a Mutual Fund Administrators Licence granted under section 12 of the
Mutual Funds Law (1996 Revision) in respect of mutual find administration; or
(d) a regulated mutual hind, as defined in the Mutual Funds Law (1996 Revision).

4. (1) No business of company management shall be carried on except by a person to whom a
licence has been granted under this Law.

(2) A person desiring to commence the business of company management shall make
application to the Governor for a licence in the prescribed form.

(3) Where the application for a licence under this Law is made by a limited liability
company, no licence shall be issued in respect of such company unless the paid up share capital of
that company is not less than twenty-five thousand dollars.

(4) An application under subsection (2) shall be sent to the Authority, specify the particulars
set out in the Schedule and be accompanied by a fee of five hundred dollars which shall be
forwarded by the Authority to the Financial Secretary for the benefit of the revenue, and the
Governor, if satisfied that the application is not against the public interest and that the applicant is
suitably qualified, may grant a licence on and subject to such terms and conditions as appear to
him necessary or desirable. Any decision to refuse to grant a licence is final and conclusive and
shall not be subject to any appeal to, or review by, any court.

(5) The Governor shall cause the granting of a licence under this Law to be gazetted.

(6) The holder of a licence under this Law shall, on or before every fifteenth day of January
pay to the Financial Secretary for the benefit of the revenue-

(a) a fee of five hundred dollars; and
(b) a fee equivalent to fifteen dollars for each company for which management services
are being provided on the date of payment:
Provided that the Governor may, from time to time, waive or reduce either
or both such fees in relation to any person or group of persons in Cayman Brac
or Little Cayman.

(7) It is a condition of a licence that the holder shall, as soon as possible after any such change
has occurred, inform the Authority of any changes made of the information furnished in
accordance with the Schedule.

5. (1) The Authority shall-

(a) maintain a general review of company management in the
   Islands;
(b) of its own motion or when so required by the Governor, examine
   in such a manner as it may think necessary the affairs or business
   of any licensee for the purpose of satisfying itself that this Law is
   being complied with, that the licensee is in a sound financial
   position and carrying on his business in a satisfactory manner,
   and report to the Governor the results of such examination;
(c) examine and report on the several documents pursuant to section
   9; and
(d) examine and make recommendations to the Governor with
   respect to
   (i) the qualifications of auditors;
   (ii) all applications for approval of the issue or transfer of
    shares under section 6;
   (iii) the conditions to be attached to all exemptions from the
    requirements of section 6;
   (iv) the use of words which might infringe section 7(1);
   (v) the use of names by licensees and requirements to be
    imposed in respect thereof under section 7(2);
   (vi) all proposals for the suspension of licences under section
    12;
   (vii) all proposals for the revocation of licences under section
    13,
   (viii) all proposals for regulations to be made under section 16;
    and
   (ix) all proposals by applicants in respect of capital under
paragraph 5(l) of the Schedule.

(2) The Authority may-

(a) examine and make recommendations to the Governor with respect to
applications for licences under section 4; and
(b) act as the adviser to the Governor and take all necessary action to ensure the proper
and just implementation of this Law:

(3) The Authority, with the approval of the Governor, may authorise in writing any person
to assist it in the performance of its duties.

6. No shares or other legal or equitable interest in a company which is a licensee shall be issued,
transferred or disposed of without the prior approval of the Governor, and no alterations in the
directors of a company which is a licensee shall be made without the prior approval of the
Governor:

Provided that the Governor may, subject to such conditions as he may deem necessary,
exempt a licensee from this provision.

7. (1) No person, not being a licensee, shall-

(a) use any word which in the opinion of the Governor connotes the business of
company management, either in English or in any other language, in the description
or title under which he carries on business in or from within the Islands; or
(b) make any representation in any document or in any other manner that he is carrying
on the business of company management.

(2) The Governor may require a licensee who carries on company management business
under a name which is-

(a) identical with that of any other person, whether within the Islands or not, or which
so nearly resembles that name as to be calculated to deceive;
(b) calculated to suggest, falsely, the patronage of or connection with some person
whether within the Islands or not; or
(c) calculated to suggest, falsely, that he has a special status in relation to or derived
from the Government, or has the official backing of or acts on behalf of the
Government or of any of its departments or officials,

forthwith to change its name, and in default of compliance may revoke such licensee's licence.

8. A licensee shall maintain, in respect of his business of company management-

(a) such proper books and records as shall accurately reflect the business of such
licensee;
(b) separate accounts in its books for each managed company and shall
segregate the hinds and other property of such managed companies
from its own; and
(c) separate bank account or accounts into which it shall deposit all
monies held by it on behalf of managed companies.

9. (I) A licensee shall, within six months of the end of his financial year-

(a) prepare annual accounts in accordance with generally accepted
accounting principles, audited by an independent auditor;
(b) furnish written confirmation to the Authority from an independent
auditor that annual accounts have been prepared as required under
paragraph (a) and whether or not the auditors' certificate for such
accounts is unqualified and if qualified, the nature of the
qualification; and
(c) furnish to the Authority his annual accounts and a certificate of
compliance by an independent auditor that the information set out
in the application for a licence, as modified by any subsequent
notification of change in accordance with section 4(7), remains
correct and gives an accurate summary of the business of the
licensee.

(2) A licensee shall, at any time when so required by the Authority, furnish
to the Authority a certificate of compliance in accordance with subsection (1)(c).

(3) A licensee shall, at any time, if so required by the Authority, produce to
the Authority such evidence as may be required as to the solvency or otherwise
of his licensed business and that he has maintained the required minimum paid up
share capital.

10. (I) If a Judge of the Grand Court, Magistrate or Clerk of the Court is
satisfied by information on oath, either parol or written, given by the Authority-

(a) that a licence has been suspended;
(0) that there is reasonable ground for suspecting that an offence
against this Law has been or is being committed and that evidence
of the commission of the offence is to be found at any premises
specified in the information, or in any vehicle, vessel or aircraft so
specified; or
(c) that any document, cash or security which ought to have been
produced under section 5(2) and has not been produced is to be
found at any such premises or in any such vehicle, vessel or aircraft,

he may grant a search warrant authorising the Authority, together with any other person named in
the warrant and any constable, to enter such premises or any premises at any such time within one
month from the date of the warrant, and to search the premises, vehicle, vessel or aircraft.

(2) A person authorised by such warrant to search any premises, vehicle, vessel or aircraft
may search every person who is found in or whom it has reasonable ground to believe to have
recently left or to be about to enter those premises, vehicle, vessel or aircraft, and may seize any
document, cash or security found in the premises, vehicle, vessel or aircraft which it has
reasonable ground for believing ought to have been produced under section 5(2):

Provided that no female shall, in pursuance of any warrant issued under subsection (I), be
searched except by a female.

(3) Where by virtue of this section a person has any power to enter any premises, vehicle,
vessel or aircraft, he may use such force as is reasonably necessary for the purpose of exercising
that power.

(4) whoever obstructs an authorised person in the exercise of any powers conferred on him
under this section is guilty of an offence.

11. Every holder of a licence under this Law shall effect a policy of insurance with a reputable
insurance company against losses arising out of claims of negligence or breach of duty by the
licensee or any employee or against the dishonesty of employees or The Licensee and against loss
of documents and against such other risks as the Authority may from time to time stipulate in such
amount and of such a nature as the Authority may determine to be fit and proper, having due
regard to the nature and type of business carried on by the licensee, and in the event that such
insurance shall be withdrawn, cancelled or not renewed, the licensee shall immediately notify the
Authority and shall cease to carry on his business until such insurance has been reinstated or
replaced.

12. (1) Where the Governor is of the opinion that a licensee is-

(a) carrying on the business of company management in a manner detrimental to the
public interest, or to the interest of the companies being managed by him or any of
them; or
(b) in contravention of this or any other law,

the Governor may require him forthwith to take such steps as he may consider necessary to rectify
the matter, or he may forthwith suspend the licence pending the receipt of information or any
explanation under section 5(1 )(b)).
(2) Whenever the Governor suspends a licence under subsection (1), he
shall cause notice of such suspension to be published in the Gazette.

(3) No suspension shall exceed a period of ninety days unless extended
from time to time by an order of the Grand Court on application by the Authority
that it is in the public interest that such suspension shall continue and specifying
the duration of such period of further suspension, which shall not itself exceed
ninety days each at any one time.

13. (1) The Governor may revoke a licence-

(a) if the licensee has ceased to carry on the business of company
management;
(b) if the licensee becomes bankrupt or goes into liquidation, is wound
up or otherwise dissolved; or
(c) if having received a report from the Authority upon the licensee
under section 5(1)(b), he is of the opinion that it would be
detrimental to the public interest for the licensee to continue to
carry on the business of company management.

(2) Whenever the Governor revokes a licence under subsection (1), he shall
cause notice of such revocation to be published in the Gazette.

14. (1) An appeal shall lie to the Grand Court against any-

(a) order to revoke or suspend a licence under section 12 or 13; or
(b) order requiring a licensee to take steps under section 12.

(2) An appeal under subsection (I) shall not without an Order of the Grand Court,
operate as a stay of the Order appealed against.

(3) The Rules Committee constituted tinder the Grand Court Law (1995
Revision) may make rules of procedure governing the conduct of appeals under
this section.

15. (1) Whoever, with intent to deceive, for any purpose of this Law, makes any
representation in the truth of which he does not believe is guilty of an offence and liable on
summary conviction to a fine of fifty thousand dollars and to imprisonment for two years.

(2) Subject to subsection (I), whoever with intent to deceive, by any act or omission
contravenes any provision or requirement of this Law is guilty of an offence and liable on
summary conviction to a fine of twenty-five thousand dollars and to imprisonment for one
year.

(3) Any licensee who advertises inviting either directly or indirectly other parties to commit
breaches of the laws of the country in which such advertisement appears or to which such
advertisement is directed is guilty of an offence and liable on summary conviction to a fine of one
thousand dollars and to imprisonment for six months; and where a limited liability company is
convicted of such an offence, every director and every officer concerned with the management of
the company is also liable to be convicted for that offence unless he satisfies the court that the
offence was committed without his knowledge or consent and that he took all reasonable steps to
prevent the commission of the offence.

16. The Governor may make regulations for carrying this Law into effect, and without prejudice
to the generality of this provision may make regulations-

(a) prescribing anything by this Law required to be prescribed; and
(6) exempting any person or business, or class of person or business, from any provision
of this Law.

17. Without derogation of the regulation-making power conferred by section 16 the Authority
may, from time to time, issue, by publication in the Gazette, guidelines with relation to such
matters as it may think fit and appropriate and failure by any licensee to comply with such
guidelines shall be taken into consideration when any action is proposed to be taken under section
12 or 13.

SCHEDULE

(Section 4(4))

Licence application particulars

Every person or company applying for a licence under this Law shall furnish in
writing to the Authority the following particulars which shall accompany such
application-

1. The name of the applicant or applicant company, the address of its principal
or registered office and the names and addresses of all the directors of such
applicant company, together with the names and addresses of all persons who
will provide such applicant company with advice of a specialised or technical
nature as part of the carrying out of the functions of the company.

2. If the principal or a registered office is situate outside the Islands-

(a) the name and address of one of its officers who is the authorised
agent in these Islands to accept on behalf of the applicant any
service of process and any notices required to be served on it; and
(b) the name and address of another of its officers who in the absence
or inability to act of the officer named in subparagraph (a) is the
authorised agent in the Islands of the applicant for the purposes of
subparagraph (a).

3. Evidence of the proper incorporation of the company pursuant to section 4
of the Companies Law (1995 Revision) or in the country of incorporation as the
case may be.

4. Evidence in writing that the applicant himself or some person or company
directly or indirectly connected with the applicant is possessed of solid and
practical experience in company management.

5. (1) An undertaking in writing to provide and set apart a fully paid up capital
before or at the time it commences business, such as the Governor may in his
absolute discretion determine, or by a guarantee under seal of such sum given by
a holding or parent or other company approved by the Governor.

(2) The guarantee referred to in subparagraph (1) shall expressly provide
that its formal validity, its essential validity, its interpretation and effect and the
rights and obligations of the parties to it are governed exclusively by the law of
the Islands, and that the courts of the Islands only (which expression shall include the Court of
Appeal) shall be the forum for these purposes aforesaid.

6. Character references in writing, together with such other evidence as the Governor may
require, that neither the applicant nor, if it is an applicant company, any director or officer of the
company has a criminal record either in the Islands or without.

7. Annual accounts of its holding or parent or other company, if any, for the last preceding two
years and thereafter annually duly audited and certified by competent and reputable accountants.

8. Name, address and professional qualifications of applicants auditors

9. Full name, addresses, nationalities and references, of all persons who are directors, partners,
managers or officers.

10. Names, with addresses and nationalities, of all persons who are shareholders, if any.

11. Names of all subsidiary companies of the applicant with addresses of their registered offices.

12. Copy of the act, charter, certificate of incorporation or memorandum of association and
articles of association or partnership agreement of the applicant, as may be appropriate, verified
by a statutory declaration made by a director, secretary or partner and duly authenticated as
follows-

(a) in the case of a company incorporated in the Islands, certified in
accordance with section 26 of the Companies Law (1995 Revision); or
(b) in the case of a foreign company, certified and authenticated under the public seal of
the country, city or place under the laws of which such company has been
incorporated.

13. References, including one from a bank or trust company.

14. Statement of assets and liabilities at the end of the month prior to the submission of the
application, certified by a director or senior officer.

15. Statement of capital of any other company held, directly or through a subsidiary or a nominee,
as an asset of the applicant.

Publication in consolidated and revised form authorised by the Governor in Council this 6th day
January, 1998.

Carmena H. Parsons
Clerk of Executive Council