As year end approaches, it is time to start planning the liquidation of Cayman Islands entities that have reached the end of their life cycle to avoid unnecessary fees.
In order to prevent the expense of annual 2021 government registration fees, an appointed liquidator will be required to hold the final general meeting for a company or file the final dissolution notice for an exempted limited partnership on or before 29 January 2021.
Additionally, an entity that is registered with the Cayman Islands Monetary Authority ("CIMA") pursuant to the Mutual Funds Law (2020 Revision) or the Private Funds Law, 2020 ("Funds") may be required to submit documentation to CIMA to have its status changed to Licence under Termination / Liquidation. Documentation must be filed by 31 December 2020 in order for a Fund to qualify for a reduction in its 2021 annual CIMA fee.
In light of the recently implemented CIMA Administrative Fines Regime1, Funds will also need to be aware of their requirements to file documents with, and make payments to, CIMA in a timely manner. Specifically, a Fund that is a regulated mutual fund is required to file an application to cancel its CIMA Licence or Certificate of Registration on the earlier of 21 days from the date the Fund ceases to carry on business or before 31 December of the year in which the Fund ceases to carry on business as a mutual fund. CIMA may impose sanctions for failure to comply with this requirement, which may include an administrative fine of up to CI$5,000 (US$6,097.56).
Funds seeking to de-register from CIMA will also be required to complete a final audit in most instances. Typically, in the context of a mutual fund, the final audit will cover the period up to the date of (i) the appointment of a third-party liquidator or (ii) the full payment of final redemptions to investors. Funds will need to allow for this, both in terms of the time required to prepare and submit the audited financials, as well the associated costs.
The Maples Group boasts the largest voluntary liquidation team in the Cayman Islands comprising dedicated individuals with extensive experience in the dissolution of various corporate, structured finance and investment fund vehicles. We have developed best practice procedures that meet all local statutory requirements. For a straightforward voluntary liquidation of a Cayman Islands company, we can generally complete the formal statutory process within four to five weeks (noting that the effective date of the certificate of dissolution would be three months after the final meeting).
For further information on the team and our liquidation services, please view our Overview of Services. Additionally, you may wish to refer to our legal guides with information on preparing your entities for liquidation and the statutory process: Voluntary Liquidations of Solvent Cayman Islands Companies and Voluntary Dissolution and Winding Up of a Cayman Islands Exempted Limited Partnership.
Please do not hesitate to contact your usual Maples Group contact or one of the individuals listed below who would be happy to answer any questions you may have, or provide a formal fixed-fee proposal.
1 Part VIA of the Monetary Authority Law (2020 Revision) (the "MAL") gives the Cayman Islands Monetary Authority ("CIMA") the power to impose administrative fines for breaches committed by persons (entities and individuals) of provisions prescribed under the MAL, the "regulatory laws" and the Anti-Money Laundering Regulations (2020 Revision). The administrative fines for breach of prescribed provisions of the Mutual Funds Law (2020 Revision) and Private Funds Law, 2020 came into effect in June 2020.