The Beneficial Ownership Transparency Act, 2023, and the Beneficial Ownership Transparency Regulations came into effect on July 31, 2024, with full compliance mandated by 1 January 2025. The updated regime expands the scope of entities required to comply, affecting many that previously had minimal obligations. Enforcement of the new requirements is deferred until early 2025, allowing entities time to adjust to the changes. This update is crucial for businesses operating in or with the Cayman Islands to understand their new compliance responsibilities.

Disclaimer: This article summarizes the key changes of the regime for general information only, it does not constitute legal advice or opinion. We recommend consulting with your legal counsel to fully understand the impact of these changes on your specific circumstances.

Key Aspects of the Updated Regime:

  • Definition of a Legal Person: The updated regime includes Cayman Islands companies, limited liability companies, limited liability partnerships, foundation companies, and for the first time, exempted limited partnerships and limited partnerships as Legal Persons. Trusts and registered foreign companies remain out of scope.

  • Role of Corporate Services Providers (CSPs): CSPs are licensed providers of registered office services to Legal Persons and are essential for compliance with the new regime. They maintain beneficial ownership registers and facilitate communication with the Competent Authority.

  • Beneficial Owner Definition: A Beneficial Owner is an individual who directly or indirectly owns or controls 25% or more of the shares, voting rights, or partnership interests in a Legal Person, exercises ultimate effective control over the management, or is identified as exercising control through other means.

  • Majority Stake and Indirect Ownership: Understanding the concept of a Majority Stake is crucial for determining indirect ownership. A person holds a Majority Stake if they control 50% or more of another entity’s voting rights or management.

  • Alternative Compliance Routes: CIMA-registered mutual funds and private funds may opt for alternative compliance by appointing a Contact Person instead of identifying and reporting their Beneficial Owners.

  • Role of a Contact Person: The Contact Person acts as a liaison between the Legal Person and the Registrar, providing beneficial ownership information within 24 hours of a request.

  • Senior Managing Official: If no individual Beneficial Owner is identified, a Senior Managing Official, such as a director or CEO, must be listed as the contact person.

  • Treatment of Various Entities: The regime outlines specific treatment for segregated portfolio companies, limited liability companies, and trusts, ensuring comprehensive coverage of different entity types.

    Consolidation and Expansion:

    Previously governed by multiple pieces of legislation, the beneficial ownership regime is now unified under BOTA, supported by the new Regulations and Guidance. The definition of a ‘beneficial owner’ has been refined to include individuals who:

  • Directly or indirectly own or control 25% or more of the entity’s shares, voting rights, or partnership interests.

  • Exercise ultimate effective control over the entity’s management.

  • Are identified as controlling the entity through other means, such as serving as a senior managing official.

    The BOTA extends the regime’s reach to include limited partnerships and exempted limited partnerships, alongside companies, limited liability companies, limited liability partnerships, and foundation companies.

    Alternative Compliance Routes:

    Certain legal persons can opt for alternative compliance routes if they are:

  • Listed on an approved stock exchange.

  • Licensed or regulated directly by the Cayman Islands Monetary Authority (CIMA).

  • Registered with CIMA under the Mutual Funds Act or Private Funds Act.

    Entities choosing an alternative compliance route must provide their CSP with written confirmation of their category and specific required details.

    Specific Requirements for Categories:

  • Listed Entities: Must provide the name and jurisdiction of the stock exchange, and any relationship details to the listed entity.

  • Licensed Entities: Must identify the regulatory law under which they are licensed.

  • Investment Funds: Must appoint a Contact Person responsible for responding to beneficial ownership information requests from the Competent Authority. The Contact Person must be a licensed fund administrator or another licensed entity within the Cayman Islands.

    Compliance for SIBA Registered Persons:

    SIBA Registered Persons are now required to maintain a beneficial ownership register, with no alternative compliance route available. Entities are encouraged to assess their compliance requirements under the new legislation and engage with their CSPs to ensure all obligations are met.

    How Linnovate Partners can help

    For inquiries regarding the Beneficial Ownership Transparency Act (BOTA), appointing a Contact Person, or any aspect of Cayman Islands regulatory compliance, please reach out to any of our Client Success team members in your region, or email us at info@eshhop.com.