The Cayman Islands introduced in 2017 the foundation company, a new type of non-profit corporate vehicle governed by The Foundation Companies Law, 2017.
A Foundation company may be limited by shares or by guarantee, with or without share capital.
It is a separate legal entity with the capacity to file lawsuits and be sued and to hold title to properties and provides limited liability to its members, but unlike a corporation, it cannot pay dividends.
A foundation company may be formed for any lawful object which need not be beneficial to other persons and may be for commercial, charitable/philanthropic or private purposes, or any combination of these.
A Foundation company may not have ownership or beneficial interest constraints, being useful as an SPV vehicle in corporate transactions, to hold the shares of a private trust company or use it as a protector of enforcer of a trust or for use in Cayman STAR trust structures.
The flexibility of a Foundation company avoids the need to set up a separate structure to carry out charitable/philanthropic purposes, as these can be combined with commercial purposes.
Foundation companies are also an attractive alternative to trusts, as they will be more easily recognized in civil law jurisdictions.
They can be used for estate planning, as it is a company but with the flexibility of a trust. Forced heirships laws of a foreign jurisdiction may not be applicable under the jurisdiction of the Cayman Islands.
It can also be an attractive vehicle to hold higher-risk, less diversified assets since interested persons will owe their duty to the Foundation company, and not to any potential beneficiaries.
Furthermore, a beneficiary of the foundation company has no powers or rights relating to the foundation company, its management or its assets and is not considered an interested person.
Although a foundation company may not distribute dividends to members, they can receive benefits as beneficiaries of the Foundation company, they can receive reasonable remuneration as a director or officer, indemnified or reimbursed for expenses or liabilities incurred in relation to the Foundation company, benefit from a loan or other transaction or relationship entered into with the Foundation company or may receive benefits disposing of surplus assets on its winding-up.
Foundation companies are exempt from taxation and may obtain a tax undertaking certificate from the Cayman Islands government guaranteeing no change to their tax status for a period of up to 50 years from the date of the undertaking.
A Foundation Company does not require anyone to have a formal role as a founder as such, it is incorporated on the instructions of the person(s) promoting it in the same way as any other Cayman Islands company.
It may be formed by one or more members, who may be either individuals or juristic persons and of any nationality. 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. Supervisors are interested persons who have the right to attend and vote to general meetings.
All foundations companies are required to have a Cayman Islands’ qualified secretary licensed under the Companies Management Law.
All in all, Cayman Islands’ foundation company is a flexible corporate vehicle that may be used as a special purpose vehicle for finance transactions, investment holding, wealth management, succession planning, private trust company structures, protectors or enforcers (in relation to other trusts or fiduciary structures), charity and philanthropic purposes, and as an alternative to a trust.
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.
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 – Foundation 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 Law is made.
Foundation companies are not required to file financial statements, nor tax return. An annual return must be submitted annually stating whether there has been a modification of the Memorandum of Association and confirming that no business has been conducted within the jurisdiction.
Each foundation company shall keep at its registered office a register of its supervisors containing- (a) the names and addresses of its supervisors; (b) the date on which each of its supervisor was appointed; and (c) any date on which a supervisor’s appointment ceased.
A minute book should also be maintained at the registered office. The registered office is also required to maintain copies of certain records for anti-money laundering purposes.
- 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
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
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.
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