Cayman Islands
Foundation Company
The Cayman Islands introduced the Foundation Companies Act, 2017 to expand the jurisdiction’s suite of flexible corporate structures. The legislation established the foundation company as a distinct legal entity designed to combine elements of traditional companies and civil-law style foundations. Though based on corporate law principles, foundation companies differ significantly in purpose and operation from commercial companies limited by shares.
A foundation company is incorporated under the Foundation Companies Act (as revised), which builds upon the framework set out in the Companies Act. It must be registered with the Registrar of Companies in the Cayman Islands and meet certain statutory requirements upon formation. A foundation company may be limited either by shares or by guarantee, and it can be established with or without share capital.
Despite this corporate foundation, the entity is structurally closer to a trust or civil-law foundation in terms of its intended uses and restrictions. It possesses separate legal personality and perpetual succession, allowing it to enter into contracts, hold property in its own name, sue or be sued, and otherwise operate independently from its founders or members. Like other corporate structures in the jurisdiction, members enjoy limited liability. However, unlike traditional companies, a foundation company is not permitted to pay dividends to its members.
Foundation companies may be created to pursue any lawful purpose, whether commercial, charitable, private, or a combination thereof. The legislation does not require that the objectives benefit third parties, making the structure suitable for a wide range of uses beyond philanthropy.
This flexibility allows the foundation company to operate in contexts where traditional trusts or corporate structures may be unsuitable or overly rigid. For instance, a foundation company can be used as a private wealth management vehicle, in estate or succession planning, or to serve as a special purpose vehicle (SPV) in complex corporate or financial transactions. It is also commonly used to hold shares of a private trust company or to act as an independent protector or enforcer in a trust arrangement—particularly in relation to Cayman STAR trusts.
Foundation companies are managed in a manner similar to other Cayman companies, with a board of directors and officers. They must appoint a secretary who is licensed under the Companies Management Act. This secretary must be a service provider located in the Cayman Islands, ensuring a local point of contact and compliance.
One notable difference from other corporate forms is the optional role of members. A foundation company may be established with members and subsequently operate without them. Once a company ceases to have members, it can continue to exist and function, provided that at least one supervisor is appointed. Supervisors are “interested persons” tasked with oversight functions. While they do not necessarily control day-to-day operations, they typically have the right to attend and vote at general meetings and may play a role similar to that of an enforcer or guardian in a trust.
Unlike shareholders in a conventional company, members of a foundation company do not automatically have rights to profits or distributions. Additionally, beneficiaries—if any—have no legal claim or control over the foundation, nor are they considered interested persons for governance purposes. This non-beneficiary control structure is part of what distinguishes foundation companies from traditional trust arrangements and enhances asset protection in certain jurisdictions.
As a standalone legal entity, the foundation company may hold a wide range of assets, including financial instruments, intellectual property, real estate, and shares in other entities. Although it is restricted from making dividend distributions to members, individuals involved in the foundation—such as directors, officers, or creditors—may still benefit from financial interactions with the company. For example, they may receive salaries, fees, or indemnities, or may benefit from loans or commercial transactions with the company. Upon winding-up, surplus assets may be distributed in accordance with the foundation’s governing documents.
Foundation companies are often selected for holding higher-risk or less diversified assets. Their governance design insulates decision-makers from direct fiduciary liability to beneficiaries, aligning duties strictly with the entity itself rather than any underlying stakeholder. This approach provides a level of operational independence that can be advantageous in dynamic or high-risk investment strategies.
A key rationale for introducing the foundation company was to provide a corporate structure that could be more easily recognized in civil law jurisdictions, many of which do not have an established concept of trusts. The foundation company’s separate legal personality and statute-based framework make it a more familiar construct in these jurisdictions, supporting cross-border estate planning and investment strategies.
This legal compatibility also makes foundation companies an effective tool for clients concerned with forced heirship rules in their home countries. Under Cayman Islands law, such foreign succession rules generally do not override the terms of the foundation’s constitution, allowing for greater control over intergenerational wealth transfers.
Foundation companies are not subject to direct taxation in the Cayman Islands. There is no income tax, capital gains tax, inheritance tax, or withholding tax on distributions or asset transfers. Additionally, a foundation company may apply for a tax undertaking certificate from the Cayman Islands Government. This certificate assures that no changes to the tax treatment of the entity will apply for up to 20 years, offering long-term certainty for strategic planning purposes.
The Cayman Islands foundation company represents a unique and adaptable legal entity suited for a broad spectrum of commercial and private purposes. Its hybrid nature—blending aspects of corporate law with the functional characteristics of a trust—provides users with a flexible tool for asset management, succession planning, philanthropic endeavors, and special purpose structures, and has also been widely used by decentralized autonomous organizations (DAO).
By offering a high degree of contractual freedom, limited liability, and exemption from many regulatory constraints applicable elsewhere, the foundation company fills a critical gap in global structuring needs—especially for clients operating across both common law and civil law jurisdictions. Its increasing adoption highlights the value of innovation in corporate and fiduciary law in meeting modern governance and planning challenges.
Legal
Country code – KY
Legal Basis – Common law
Legal framework – The Foundation Companies Law, 2017
Regulatory board – Cayman Islands Monetary Authority
Entity – Foundation Company
Liability - The properties and resources of a Foundation Company constitute an independent patrimony from that of the Members, Directors, Supervisors and Beneficiaries.
Requirements - For a company to be a foundation company, the requirements are that:
(a) it is limited by shares or by guarantee, with or without share capital;
(b) it has a memorandum that - (i) states the company is a foundation company; (ii) generally or specifically describes its objects (which may, but need not, be beneficial to other persons); (iii) provides, directly or by reference to its articles, for the disposal of any surplus assets the company may have on winding-up; and (iv) prohibits dividends or other distributions of profits or assets to its members or proposed members as such; and
(c) it has adopted articles; and
(d) its secretary is a qualified person.
A member is not regarded as receiving a dividend or distribution as a member merely because the member:
(a) is a beneficiary of the foundation company and receives benefits as such;
(b) receives reasonable remuneration as a director, officer or a person having a duty under its constitution;
(c) is indemnified or reimbursed for expenses or liabilities incurred in relation to the company;
(d) benefits from a loan or other transaction or relationship entered into with the company on terms that are no more favourable to the member than if they had been negotiated at arm’s length; or
(e) will or may, under the constitution, receive benefits from the disposing of surplus assets on winding-up.
Purpose - A foundation company may be formed for any lawful object which need not be beneficial to other persons. Such as acting as a holding company or an investment company or providing financial assistance or benefits to beneficiaries.
Capital – A foundation company must be limited by shares or by guarantee with or without share capital. There is minimum asset contribution or share capital required to incorporate a Foundation company.
Economic Substance – Under the International Tax Co-operation (Economic Substance) Act, 2018, companies conducting relevant activities must meet substance requirements.
'Relevant activities' include:
- banking i.e. banking business
- insurance i.e. insurer
- finance and leasing i.e. business of providing financing or leasing of assets
- fund management i.e. management of collective investment schemes
- distribution and service center business i.e. reselling goods to affiliated companies or providing services to affiliated companies. Affiliated company is defined as a company which is part of the same group (e.g. parent-subsidiary, sister entity with common parent company, etc).
- headquartering i.e. providing management services to affiliated companies
- intellectual-property business i.e. holding and exploiting IP assets, generating identifiable revenue from such assets. Please note that the provision of services for developing IP assets or holding or using IP assets for ordinary commercial or service business is not considered an intellectual property business. IP businesses are those that generate separate and identifiable revenue from IP assets (e.g. patent licensing)
- shipping i.e. transportation by sea of persons, animals, goods or mail, the renting or chartering of ships for such transportation, management of ship crew, sale of travel tickets, the use, maintenance or rental of containers, including trailers and other vehicles or equipment for the transport of containers, used for the transport of anything by sea
- and pure equity holding company, companies that only own equity interests in other companies, and only earn dividends and capital gains.
Note that investment fund vehicles are explicitly excluded from this legislation.
Companies that carry out relevant activities must satisfy the economic substance test – they must:
- conduct its core income-generating activities in Cayman (which are defined in the law).
- be directed and managed from within Cayman.
- have an adequate amount of operating expenditures incurred in or from within the Islands.
- have an adequate physical presence (including maintaining a place of business or plant, property, and equipment) in the Islands.
- have an adequate number of full-time employees or other personnel with appropriate qualifications in the Islands.
Holding companies which only hold equity participations in other entities and only earn dividends and capital gains will be subject to a reduced economic substance test – it must have complied with all applicable filing requirements and must have adequate human resources and adequate premises in the Islands for holding and managing equity participations.
All Cayman companies are required to notify annually the Department of International Tax Co-Operation – stating whether or not they are carrying out relevant activities.
Companies carrying out relevant activities are required to file a return related to the amount and type of income with respect to the relevant activity, expenses, assets, management, employees, and physical presence, among other requirements.
Companies failing the substance test will be given direction on how to meet the test and may face a fine of up to KYD 10,000.
Continued failure to meet the test in the following year may result in higher fines of up to KYD 100,000.
Founder – A Foundation Company does not require anyone to have a formal role as a founder as such.
A Foundation Company is incorporated on the instructions of the person(s) promoting it in the same way as any other Cayman Islands company. A founder does not have any automatic rights in relation to the Foundation, but may reserve rights if he/she wishes.
The founder may be given a power to amend any of the provisions of the Foundation’s constitution but only if expressly provided in the constitution.
Members – A Foundation company may be incorporated by one or more members, who can be non-residents, corporate bodies or individuals. A Cayman Foundation can cease to have members at any time, and the cessation will not affect the Cayman Foundation’s existence, capacity or powers, provided that it continues to have one or more supervisors.
Board of directors – A Foundation company is managed by a board of directors. Any individual of full capacity and any company may be a director. There is no residency requirement for directors and there are no other restrictions as to who may act as a director of a Foundation Company. Directors are required to give interested persons reports, accounts, and any information/explanations concerning the Foundation’s business and affairs.
Supervisors - A supervisor is defined by the Law as a person, other than a member, who, under the Foundation Company’s constitution has the right to attend and vote at general meetings.
Interested Person - An interested person is a person that is any of the Foundation Company members or supervisors.
An interested person is someone declared under a Foundation company's constitution to be an interested person or someone who has the right to be a member or supervisor of the Foundation. Further, an interested person can bring an action in the name or on behalf of the Foundation company for the enforcement of the duties or liabilities of directors in the same circumstances and manner as may a member of a company that is not a Foundation Company.
Beneficiaries – A beneficiary of a Foundation Company is a person who will or may benefit from the Foundation carrying out its objects. The constitution may provide for any type of beneficiary and for any type of beneficial provision.
It is possible for a Foundation company constitution to provide for any duties, powers or rights to be vested in beneficiaries. Therefore, a beneficiary can be given direct enforceable rights against the directors, officers and interested persons.
A Foundation Company may not have beneficiaries.
Beneficiaries' Right to Information - A beneficiary of the foundation company has no powers or rights relating to the foundation company, its management or its assets and is not an interested person.
Therefore, beneficiaries do not have the power to request reports, accounts, information and explanations concerning the foundation company’s business and affairs, and the discharge of its directors’ duties and the exercise of their powers.
Secretary – The foundation company shall have a Cayman Islands’ qualified secretary licensed under the Companies Management Law.
Registered Office – A foundation company’s registered office shall be at its secretary’s business address as a Cayman Islands’ qualified person
Foundation’s Constitution - A foundation company’s constitution may, as well as providing for its management by directors or their delegates, give rights, powers and duties of any type to members, directors, officers, supervisors, founders or others concerning the foundation company.
A foundation company has a duty to carry out the objects set out in its memorandum if, and only if, the memorandum - (a) expressly so declares; and (b) designates, or provides for the designation of, persons with standing to enforce the duty by action against the foundation company.
Disclosure – Details of members, directors, supervisors and officers are not disclosed in a public registry.
Re-domiciliation – A foreign company may continue in Cayman and change its status to a Foundation company.
Mergers - There is no ability for a Cayman foundation company to merge with any other entity.
Charitable/Philanthropic Purposes - Permitted.
Electronic Signature – Allowed.
Compliance – Cayman Islands companies must keep accounting records. The records may not be kept in Cayman, but must be made available at the registered office if an order or notice for production under the Tax Information Authority Act is made.
Companies are not required to file financial statements or tax returns. An annual return must be submitted every January stating whether there has been a modification of the Memorandum of Association and confirming that no business has been conducted within the jurisdiction. Companies are also required to pay an annual government fee every January.
An economic substance notification must also be filed outlining whether the company has been carrying on a relevant activity for the purposes of economic substance during the previous financial year. If the company has been subject to economic substance, an economic substance return must be completed and filed with the DITC on or before 31 December.
- Corporate founder permitted
- Corporate council members permitted
- Protector/Guardian required
- Local regulated person required
- Founder not disclosed in a public registry
- Council members not disclosed in a public registry
- Protector/Guardian not disclosed in a public registry
- Beneficiaries not disclosed in a public registry
- Beneficiaries have right to information
- Merge permitted
- Redomiciliation permitted
- Charitable purposes permitted
- Registered agent required
- Common law Legal basis
- - Initial endowment of assets
- 1 Minimum council members
- 2018 AEOI
Taxes
Cayman Islands does not levy income taxes. In addition, a Foundation Company may obtain a Certificate of up to 50 years tax exemption against any future Cayman Islands taxation.
Other taxes - There is no personal income tax nor capital gains nor corporation tax nor value added tax. The only existing taxes in Cayman Islands are:
- Stamp duty on the lease of the property from 5 to 20% of the annual average rent.
- Stamp duty on the lease of a land, 5% of the value of the property if the term is more than 30 years, or 5% of the average annual rent, if less than 30 years.
- Tourist Accommodation Tax: 10% of the income obtained by renting tourists or USD 10 per day for each room occupied in timeshare properties
- Stamp duty on the transfer of a property of 7.50% on its value.
- Import duty tariffs between 22% and 27%.
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 0% Offshore Income Tax Rate
- 0% Corporate Tax Rate
- 0% Capital Gains Tax Rate
- 0% Dividends Received
- 0% Dividends Withholding Tax Rate
- 0% Interests Withholding Tax Rate
- 0% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- 0 Losses carryforward (years)
- 0% Personal Income Tax Rate
- 0% VAT Rate
- 0 Tax Treaties
Country details
The Cayman Islands is a British overseas territory dependent on the United Kingdom and located northwest of Jamaica between the island of Cuba and the coast of Honduras in the waters of the Caribbean Sea. The Cayman Islands is a member of the CARICOM single market.
The 264-square-kilometer (102-square-mile) territory comprises three islands, Grand Cayman, Cayman Brac and Little Cayman, where about 69,000 people live, 55,000 of which live in its capital, George Town (Grand Cayman).
Its official currency is the Cayman Islands Dollar (KYD), pegged to the US dollar at a 1,227:1 ratio.
The Cayman Islands are a British overseas territory, designated by the UN Decolonization Committee as one of the last Non-Self-Governing Territories. The fifteen representatives who compose the Legislative Assembly are elected by the people every four years, they are in charge of managing the internal affairs. Of the elected members of the Legislative Assembly, five are elected to serve as ministers in a Cabinet headed by the Governor. The head of government is the Prime Minister.
The governor is appointed by the King/Queen of the United Kingdom on the advice of the British Government to represent the monarch.
The Cayman Islands has a solid economy, with one of the highest per capita income worldwide. Being also the one of the most expensive place to live, since most products are imported and are subject to high tariffs.
Its main sectors are luxury tourism for its pristine beaches, scuba diving and high-end gastronomy, and offshore financial and insurance services, with hundreds of licensed banks, which handle about $500 billion in assets.
Cayman Islands is one of the 5 largest financial centers in the world by deposits and the world’s largest financial center for investment funds, with the presence of the global largest financial institutions.
Main financial services available in the territory are private banking, hedge fund formation and investment, trust services, structured finance and securitisation, captive insurance, and international business company services.