The Trade and Business Licensing Law, 2014 (the "Law") which comes into force in the Cayman Islands on 1 January 2016 replaces the existing legislative framework. Upon coming into force, the Law will address some of the operational issues currently faced by the Department of Commerce & Investment ("DCI") and the Trade and Business Licensing Board (the "Board").
The definition of "trade and business" under the Law includes any profession, calling, vocation, occupation, trade, manufacture, mercantile, wholesale or retailing operation or an undertaking of any kind whatever, whether carried on seasonally, occasionally or otherwise.
The Law does not however apply to:
(a) Any trade or business licensed or registered to be carried on as a trade or business under another Cayman Islands statute without reference to the Law, including where such statute exempts a person to whom it applies from being registered, being licensed or paying a fee.
(b) The sale of agricultural products by Caymanian producers thereof.
(c) Artisans, craftsmen and other persons who do not carry on a business of their own but are themselves employed by other persons.
(d) Self-employed Caymanian fishermen.
(e) Any corporation or body which satisfies the Board that it has been formed for purposes of social or public welfare, religion, charity, art or science.
Under the Law, all new applications are heard within 90 days and all renewals are handled within 30 days. A new fast track process has also been introduced to deal with applications within five business days upon the payment of an expedited licence fee.
The Law now allows for revocation or refusal of a licence where a person is carrying on or intending to carry on trade or business under a name which is likely to mislead persons because it is:
(a) identical to the name of any other person carrying on trade or business, whether in the Islands or not, or so nearly resembles that name as to be calculated to deceive;
(b) identical or similar to a registered trade mark unless it is established that the trade or business is the owner of the trade mark or it has a licence to use the trade mark;
(c) calculated to suggest, falsely, the patronage of or connection with some person or authority, whether in the Islands or not; or
(d) calculated to suggest, falsely, that such person has a special status in relation to, or derived from, the Government or has the official backing or acts on behalf of the Government or any department, branch, agency or office of Government.
Transfer of Licence / Capitalisation
Any sale, transfer, charge or other disposition of a person's interest in the licence will require the prior written approval of the Board. Similarly, all changes to the capitalisation that would result in the transfer of a 'significant interest'1 of business will require the prior written approval of the Board. A new licence will be required in all cases where any reorganisation constitutes the ultimate transfer of control of a licensee.
The Law attempts to clamp down on 'fronting' arrangements by implementing a requirement for enhanced "Know Your Customer" (KYC) information at the time of applying for a grant or renewal of a licence:
(a) Where a company is not Caymanian owned and controlled, the applicant is required to apply for a licence under the Local Companies Control Law (2015 Revision) prior to applying for a licence under the Law.
(b) The Board may take steps to carry out due diligence with regards to any person who has a beneficial interest in a trade or business for which an application for the grant or renewal of a licence is made under the Law.
The Board and DCI now have broad powers to conduct any investigation it considers necessary in relation to the licensee and may upon obtaining a warrant perform any of the following in the course of such investigation:
(a) Enter any premises for the purpose of ascertaining compliance with this Law;
(b) Compel the production of books, records and documents in the custody or control of the licensee;
(c) Compel the appearance of an employee or officer of a licensee or any other person for the purpose of ascertaining compliance with this Law or the relevant licence;
(d) Inspect, examine or make copies of any book, record or document in the possession of the licensee relevant to the licence held by the licensee;
(e) Require verification of income and all other matters pertinent to the licence; and
(f) Seize or remove any document or records relating to the licence for the purpose of examination and inspection.
The Law enhances DCI's enforcement powers by providing for administrative penalties and introduces a 'ticketing' scheme which is administered by DCI's 'trade officers'. The payment of a fixed penalty stated on the ticket (within 28 days of being served) is an option to discharge liability to conviction for the offence set out in the ticket. A person who is served a ticket however has the option of entering a plea of not guilty and requesting a trial by notifying the Clerk of the Court.
Ticketable offences include:
(a) Carrying on a trade or business in or from within the Islands without a valid licence (first offence only).
(b) Destroying or altering or causing to be destroyed or altered, any document, record, equipment or other property found in the course of a search.
(c) Hindering or obstructing or preventing or interfering with a trade officer or police officer in the exercise of any power under the Law.
(d) Failing to remove all advertising in contravention of the Law.
(e) Failing to comply with a condition or restriction of the licence.
(f) Failing to display licence as required.
(g) Failing to notify Board of change of address of the licensee.
(h) Hindering or obstructing or preventing or interfering with the Board in the exercise of its powers.
(i) Failing without reasonable excuse to answer any question relating to any register, book, record or other document or any relevant matter when required to do so by the Board.
(j) Failing to comply with a direction of the Board.
(k) Using the word "licensed" in juxtaposition with any word describing a trade or business carried out by the licensee on the ground only that the licensee is licensed under this Law.
1 Under the Law, "significant interest", in respect of a company, means a holding or interest in the company or in any holding company of the company held or owned by a person, either alone or with any other person and whether legally or equitably, that entitles or enables the person, directly or indirectly:
(a) to control 10 percent or more of the voting rights of that company at a general meeting of the company;
(b) to a share of 10 percent or more in dividends declared and paid by the company; or
(c) to a share of 10 percent or more in any distribution of the surplus assets of the company.