How to Open a Fund in Cayman Islands
Cayman Islands is the ideal jurisdiction for a hedge fund for many reasons:
- Top offshore jurisdiction worldwide.
- English common law legislative system.
- 75% of all offshore hedge funds are established in Cayman.
- No personal, corporate income or capital gains tax.
Establishing a fund in Cayman takes three steps:
- Open a Management Company
- Drafting the Fund Articles of Association
- Fund Incorporation
Open a Management Company
If there is a Management Company in place in another jurisdiction, it can be used for the Cayman fund. Otherwise, the first step will be to open a Management Company in Cayman.
The Management Company will be established as a limited liability company under Securities Investment Business Law (2015 Revision), unless it applies for an exemption from registration. If it qualifies for exemption, it will not need to obtain a license for investment. Nevertheless, the company will have to pay the annual filing fee of $6K (separate from the $6K Fund annual fee) and declare the manager of the fund as an excluded person.
The Management Company will offer investments exclusively for one or more of the following classes of person:
- A sophisticated person including another Fund
- A high net worth individual
- A company, partnership or trust that shareholders, unit holders or limited partners who are one of more persons described on (1) or (2).
Exempt management company fees are the same as for non-exempt management companies.
Drafting the Fund Articles of Association
Legal counsel from an attorney will help in drafting the offering document including the terms of the offering and fund’s shares as well as the Articles of Association to set up the company.
Incorporation includes two steps:
- Fund registration with the Registrar of Companies.
- Fund registration with the Cayman Islands Monetary Authority (CIMA).
Funds may be exempt from registration if are closed-ended or include 15 or less investors. Fund incorporation fees are $8K approximately and annual fees $6K.
Consulting fees for formation and incorporation are $200K and include:
- Tax exemption certificate
- Register of Directors
- Stamp Duty
- Certified copies of Certificates of Incorporation
- CIMA administrative filing fee
- CIMA registration fee
Formation and incorporation may take up to 30 days.
Are you thinking of opening an offshore investment fund? FAS CPA & Consultants can provide valuable advice on how to begin the process and what tax strategies to use to maximize your profit.
Fulton Abraham Sanchez, the founder of FAS CPA & Consultants of Miami, FL, is a Certified Public Accountant specialized in Offshore Banking. You can email him to firstname.lastname@example.org.
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