Cayman Islands | Loeb Smith

New Enforcement Powers for CIMA to impose Administrative Fines on Cayman Islands’ Regulated Funds and Investment Managers are now in Force.

Introduction

The Monetary Authority (Amendment) Law, 2016 (the “Amendment Law“) which was enacted near the end of 2016 but only came into force on 15th December 2017 gives the Cayman Islands Monetary Authority (“CIMA“) the power to impose administrative fines for non-compliance on entities and individuals who are subject to Cayman Islands regulatory laws (e.g. the Mutual Funds Law, the Securities Investment Business Law, and the Directors Registration and Licensing Law) and/or the Anti-Money Laundering Regulations, 2017 (“AML Regulations“).

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Persons Affected

CIMA’s new powers to impose administrative fines for breach of, or non-compliance with, regulatory laws and/or the AML Regulations will cover, among others:

1. investment funds registered with CIMA;
2. investment management/advisory companies registered with CIMA (including those registered as an “Excluded Person” under the Securities Investment Business Law);
3. individuals who are Directors of entities covered under i. and ii. above (irrespective of whether or not the Director is resident in the Cayman Islands) and are registered with CIMA.

Types of Fines

For a breach prescribed as minor, the fine will be CI$5,000 (approx. US$6,000). For a breach prescribed as minor, CIMA also has the power to impose one or more continuing fines of CI$5,000 each for a fine already imposed for the breach (the “initial fine”) at intervals it decides, until the earliest of the following to happen:

(a) the breach stops or is remedied;

(b) payment of the initial fine and all continuing fines imposed for the breach; or

For a breach prescribed as serious, the fine is a single fine not exceeding: (a) CI$50,000 (approx. US$61,000) for an individual; or (b) $100,000 (approx. US$122,000) for a body corporate. For a breach prescribed as very serious, the fine is a single fine not exceeding: (a) CI$100,000 (approx.US$122,000) for an individual; or (b) CI$1,000,000 (approx. US$1,220,000) for a body
corporate.

CIMA will have six (6) months from becoming aware of a minor breach, or having received information from which the fact of the breach can be reasonably inferred, to impose a fine. There is a two (2) year time limit in respect of the imposition of fines for serious or very serious breaches.

Fines may be imposed even if the relevant breach is not a criminal offence. If a breach is also an offence, the imposition by CIMA of a fine will not preclude separate prosecution for that offence (or be limited by the penalty stipulated for that offence). Equally, any prosecution will not preclude the imposition of administrative fines or penalties.

The Monetary Authority (Administrative Fines) Regulations 2017, which also came into force on 15th December 2017 sets out, among other things, rules and guidance regarding the amount of fines, different categories of breaches, the criteria for exercising fine discretions, including procedures of imposing fines, appeals, payment and enforcement.

For specific advice on the imposition of administrative fines by the Cayman Islands Monetary Authority, please contact any of:

E gary.smith@loebsmith.com

E ramona.tudorancea@loebsmith.com

E yun.sheng@loebsmith.com

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What is CRS and how will it impact Cayman Islands domiciled investment funds?

The Common Reporting Standard (CRS) will impact Cayman Islands domiciled investment funds with effect from 1 January 2016. The CRS framework represents a globally coordinated approach to the disclosure of income earned by individuals and organizations in order to combat tax evasion.

The CRS represents a significant step towards the global automatic exchange of information (“AEOI”) for tax purposes. Among other things, the application of CRS in the Cayman Islands and other “early adopter” jurisdictions (including the BVI, Jersey, Guernsey, Ireland, and the United Kingdom) will require investment funds (and other financial institutions) to collect tax identification and tax residency information from all new subscribers and transferees (including debt-holders and equity-holders) who become investors on or after 1 January 2016. There are currently more than 90 jurisdictions that have committed to the implementation of CRS. The Cayman Islands are one of the first countries or early adopter jurisdictions that have agreed to implement AEOI exchanges under CRS by September 2017. On 16th October 2015, the Cayman Islands brought into force regulations which implemented the CRS regime into Cayman Islands law.

With effect from 1 January 2016, CRS will impose new investor due diligence and reporting obligations on investment funds and other financial institutions based in the Cayman Islands. Financial institutions should now be preparing for the commencement of CRS by ensuring that marketing and subscription documentation are updated and that appropriate due diligence and reporting procedures are in place, especially for new funds.

How is CRS different from US FATCA?

Unlike US FATCA which requires Financial Institutions to register with the United States Internal Revenue Service to obtain a Global Intermediary Identification Number (GIIN), under CRS there are no additional registration requirements for Cayman Islands domiciled financial institutions with overseas tax authorities. Information provided to the Cayman Islands Department for International Tax Cooperation (“DITC”) will be exchanged automatically between the DITC and overseas taxing authorities. In order to facilitate the collection of this information, the DITC published self-certification forms on 8 December 2015. These self-certification forms can be used to collect the information required under CRS from in- dividual and entity investors in Cayman Islands investment funds. Along with the publication of these forms, DITC announced that, while investment funds should strive to collect self-certifications from new investors upon subscription, investment funds have 90 days from the subscription date to collect the necessary self-certifications.

The United States (US) has not yet agreed to adopt the CRS. The US will continue to rely on US FATCA and its related network of intergovernmental agreements to achieve the AEOI on tax matters.

Key Timetable Dates

The Cayman Islands Ministry of Financial Services has outlined the following key dates with respect to CRS in the Cayman Islands:

1 January 2016 – All financial accounts opened with Reporting Financial Institutions from this date and on- wards are required to be subject to “new account”i due diligence procedures.

1 January 2016 – All financial accounts existing as at 31 December 2015 with Reporting Financial Institutions are required to be subject to “pre-existing account”ii due diligence procedures.

31 December 2016 – Due diligence procedures for identifying high-value pre-existing individual accounts shall be completed by 31 December 2016.

30 April 2017 – Deadline by which a Reporting Financial Institution is required to make certain notifications as to its CRS reporting status to the Cayman Islands Tax Information Authority. The CRS requires notification of: (i) the name of the Reporting Financial Institution; (ii) categorization of the Reporting Financial Institutions (i.e. reporting status); and (iii) certain details of its principal point of contact.

31 May 2017 – The first reporting date to the Cayman Islands Tax Information Authority in respect of relevant Reportable Accounts under CRS.

31 December 2017 – Due diligence procedures for identifying lower-value pre-existing individual accounts and for entity accounts shall be completed by 31 December 2017.

What steps should CI Financial Institutions take?

Financial Institutions (e.g. investment funds and banks) will need to have updated on-boarding procedures to determine CRS status of new account holders from 1 January 2016. Offering documents and subscription agreements for investment funds should be updated to incorporate appropriate references to CRS. Investment funds should be consulting with their administrators with regard to implementing updated on-boarding procedures.

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For more information on the application of CRS in the Cayman Islands please contact:

Gary Smith
Partner
E: gary.smith@loebsmith.com
www.loebsmith.com

In Vento and Others v Westminster Hope & Turnberry, Ltd (unreported, 25 November 2015) The Honourable Anthony Smellie, C.J., sitting in the Financial Services Division of the Grand Court clarified the grounds on which judgment creditors may seek to use charging orders to enforce judgment debts. Readers will note that typically charging orders are made in respect of immoveable property (eg. Land); Vento will be of particular interest to corporate litigators because the Grand Court endorsed the practical application of the extension of the remedy to shares which is set out in the Cayman Islands Judicature Law (2013 Revision) (the “Law”).

Background

The case in question concerned an action to enforce three foreign arbitral awards against Westminster, Hope & Turnberry Ltd, the defendant company. The Plaintiffs were successful in obtaining an order pursuant to the provisions of the Cayman Islands Arbitration Law 2012 and the Foreign Arbitral Awards Enfor cement Law (1997 Revision). The Defendant was a Nevisian company with the assets in the form of shares (the “Shares”) and the proceeds thereto which were held in the Cayman Islands on its behalf by Concord Capital SPC Fund. The Plain- tiffs had previously obtained a Mareva (or freezing) injunction in relation to the Shares and proceeds up to the value of the arbitral awards of US$9.7 Million. The Plaintiffs then applied for a charging order over the same .

How charging orders are made and the question for the Court to determine

An application for a charging order is made in two stages. Normally an applicant applies ex parte (or in the ab- sence of the defendant) to the Court for a charging order nisi (or initial order). A return date is then set for all parties to be heard on whether the charging order should be made absolute (or final). In the instant case, the Plaintiff had been successful in obtaining an order nisi and it fell to the Court to decide whether an absolute or- der should be granted. In determining that such an order was appropriate, the Court noted that while the typi- cal applications for charging orders concern immovable property, the class of assets which can properly be the subject of a charging order (set out in paragraph 2 to Third Schedule to the Law) is extensive. They include in- terests held by the debtor beneficially in land, securities such as Cayman Islands government stock, stock of any body incorporated within the Cayman Islands, shares in a mutual fund and funds in Court. “Stock” is defined in paragraph 5(1) to include “shares, debentures, and any securities of the body concerned.” Further the Court noted that paragraph 2(3) provides that the Court may also extend the charge to include any interest or divi- dend payable in respect of the relevant asset.

The factors which the Cayman Court will take into account in considering whether to grant a charging order absolute

The Court referred to paragraph 1(2) of the Third Schedule to the Law which provides that in exercising its discretion as to whether to make a charging order the Court must consider all of the circumstances of the case and, in particular, any evidence before it as to (a) the personal circumstances of the debtor; and (b) whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order. The Court held that whilst there does not appear to be any Cayman authority on the applicable principles to be ap- plied in exercising the Court’s discretion, the “classic statement” of Lord Brandon at page 690 in the English authority of Roberts Petroleum Ltd v Bernard Kenny (in liquidation) [1982] 1 All ER 685 should apply. Lord Bran- don held that:

“In cases where a charging order being made absolute is not precluded by a winding-up order, those principles can, in my view, be summarized as follows:

The question whether a charging order nisi should be made absolute is one for the discretion of the court.

The burden of showing cause why a charging order nisi should not be made absolute is on the judgment debtor.

For the purpose of the exercise of the court’s discretion there is, in general at any rate, no material difference between the making absolute of a charging order nisi on the one hand and a garnishee order nisi on the other.

In exercising its discretion, the court has both the right and the duty to take into account all the circum- stances of any particular case, whether such circumstances arose before or after the making of the order nisi.

The court should so exercise its discretion as to equity, so far as possible, to all the various parties in- volved, that is to say the judgment creditor, the judgment debtor, and all other unsecured creditors.

The following combination of circumstances, if proved to the satisfaction of the court, will generally justify the court in exercising its discretion by refusing to make the order absolute:

the fact that the judgment debtor is insolvent; and

the fact that a scheme of arrangement has been set on foot by the main body of creditors and has a reasonable prospect of succeeding.

7. In the absence of the combination of the circumstances referred to in (6) above, the court will generally be justified in exercising its discretion by making the order absolute.

For more information on the enforcement of foreign judgments and arbitral awards in the Cayman Islands please contact:

David Harby
Head of Commercial Disputes and Litigation
E david.harby@loebsmith.com
W www.loebsmith.com

On 28 August 2015, Jones, J., gave the first Judgment in the Grand Court of the Cayman Islands on the meaning of “fair value” in merger transactions pursuant to s. 238(1) of the Companies Law (2013 Revision) (the “Law”).

Statutory Mergers under Cayman law

Section 233 (1) of the Law provides that two or more companies limited by shares and incorporated under the Law may (subject to any express provisions to the contrary in any of their memoranda or articles of association) merge or consolidate in accordance with the statutory procedures set out in the Law. As is typical, in Integra the transaction which gave rise to the proceedings is perhaps better described commercially as a management buy-out (“MBO”) but was structured as a statutory merger under Part XVI of the Law between two companies incorporated in the Cayman Islands namely; Integra Group (the “Company”) and a newly incorporated special purpose vehicle owned and controlled by the MBO participants. A plan of merger complying with the statutory requirements was approved by a special resolution of the Company’s shareholders passed at an extraordinary general meeting (“EGM”). The merger was duly completed and the Company’s shares delisted from the London Stock Exchange.

Dissenting shareholders are not required to accept a merger or consolidation agreement which has been approved by the requisite majority. Instead, they are entitled to dissent and to demand payment for the fair value of their shares. Section 238(1) of the Law provides that:

“A member of a constituent company incorporated under this Law shall be entitled to payment of the fair value of his shares upon dissenting from a merger or consolidation.”

Section 238(2) provides that a shareholder of a constituent company who intends to dissent from a merger or consolidation must give written notice of objection to the company before the vote is taken, stating his intention to demand payment for his or her shares if the merger is authorised. Where the merger or consolidation is authorised in the EGM the dissenting shareholder’s company must notify the shareholder of this fact within the next 20 days. By section 238(5), a dissenting shareholder is then required, within 20 days of receiving that notice, to give the company a written notice of his or her decision to dissent and a demand for payment of the fair value of his shares. Section 238(8) then provides that either the shareholder’s company or the merged or consolidated company must make a written offer to the shareholder to purchase his or her shares for a specified price which it has determined to be the fair value (which could be more or less than the merger consideration). The legislation contemplates that the parties will then negotiate and attempt to agree upon the price to be paid. If no agreement is reached within a 30 day period, section 238(9) requires that the company must (and the dissenting shareholder may) present a petition to the Court for a judicial determination of the fair value of the shares. Section 238(11) provides that:

“At the hearing of a petition, the Court shall determine the fair value of the shares of such dissenting members as it finds are involved, together with a fair rate of interest, if any, to be paid by the company upon the amount determined to be fair value”

Principles to follow in Statutory merger cases

Until Integra all such arguments arising under section 238(1) about fair value have been compromised, with the parties’ respective counsel arguing about the legal principles involved and in particular, whether such a valuation should be based on English law principles or the laws of the State of Delaware in the US and Canada from which the legislation appears to have gained its inspiration. In Integra Jones, J., held that the correct approach was one which followed the practice in Canada and Delaware. Citing the dicta of Lambert J.A., in Cyprus Anvil Mining Corp v Dickson (1986) 8 B.C.L.R. 145, Jones J. noted that “every appraisal case turns on its own facts and that there is a need to consider all the evidence that might be helpful to the Court.” The Judge accepted the propositions set out in The M & A Lawyer (2014) entitled “Dissenting Shareholders’ Appraisal Rights in Cayman Islands Mergers and Consolidations.” This argued that the drafting of what is now Part XVI of the Law was heavily influence by Delaware and Canadian law and suggested that, having regard to the principles established in those jurisdictions, the Grand Court should have little difficulty in accepting the following propositions:

“1. Fair Value is the value to the shareholder of his proportionate share of the business as a going concern, save where it is worth less on a net assets (i.e. liquidated) basis as at the merger date: ex hypothesis the shareholder has bought into the company as a going concern, not in anticipation of participating in a liquidation, and it follows that, when he elects to dissent from a merger or a consolidation brought about at the behest of the majority, he is thereafter deprived of his proportionate share of an active enterprise and is entitled to be compensated for it. In determining the measure of such compensation, the Court should be guided by the following considerations:

1.1 Fair value does not include any premium for forcible taking (i.e. expropriation of the shares).
1.2 It is neither appropriate nor permissible to apply a minority discount when making the determination.”

These propositions were accepted by the Judge. In addition Jones J. cited the dicta of Anderson J., in Brant Investment Ltd et al v KeepRite Inc et al (1987) 60 OR (2d) 737 at p. 772 (Ontario High Court of Justice) that shareholders “should have no enhancement in the value of their investment attributable to the transaction which gave rise to their dissent.” Jones, J., stated that he agreed “with this proposition and its converse, namely that the dissenting shareholders should not bear any dilution or diminution in the value of their investment resulting from the merger.”

Date at which the determination of fair value is to be made

The Law does not specify the date at which the determination of fair value is to be made. However, having regard to both Canadian and Delaware statute, Jones, J., found that the appropriate date was the point immediately before the merger was approved at the EGM.

There was also some argument as to the appropriate interest to be awarded to dissenting shareholders, who had not yet received any payment in respect of their (now former) shareholding in the Company. Again, the Grand Court held that it should have regard to authority relating to a similar Delaware provision and made reference to Cede & Co., Inc v Medpoint Healthcare, Inc 2004 Del. Ch, Lexis 124 at page 21. Jones J., found that the Delaware Courts have interpreted their legislation “in a way which involves balancing the rate which the surviving corporation would have had to pay to borrow funds and the rate which a prudent investor could have earned on cash or cash equivalents during the relevant period. In Integra, the Grand Court held that the mid-rate between the Company’s assumed return on cash and the Company’s assumed US$ borrowing rate was the “fair rate of interest.”

For more information, please contact:-

David Harby

Head of Commercial Disputes and Litigation

In certain circumstances the official liquidator of a Cayman company may be able to take action to recover assets which have been transferred in the run up to the company’s insolvency. It is important for those concerned with the affairs of a Cayman company in the twilight of insolvency to be aware of the statutory powers available to the official liquidator and the Grand Court in the Cayman Islands.

Voidable preferences

Section 145(1) of the Companies Law (2013 Revision) (the “Law”) provides that every conveyance or transfer of property, or charge thereon, and every payment obligation and judicial proceeding, made, incurred, taken or suffered by any company in favour of any creditor at a time when the company is unable to pay its debts within the meaning of section 93 with a view to giving such creditor a preference over other creditors shall be invalid if made, incurred, taken or suffered within six (6) months immediately preceding the commencement of a liquidation.

Section 93 provides that a company shall be deemed to be unable to pay its debts if:

(a) it fails to comply with a statutory demand;

(b) the company fails to satisfy a judgment debt; or

Pursuant to section 100 of the Law, the compulsory winding up of a company is deemed to commence at the time of the presentation of the petition for the winding up or, in the case of a voluntary liquidation, at the time of the resolution or expiry of the relevant period or occurrence of an event provided by the company’s Articles of Association upon which the company is to be wound up.

It is important to note that a payment to a related party of a company shall be deemed to have been made with a view to giving a creditor a preference if made within the preceding period of six (6) months. Section 145(3) provides that a creditor shall be treated as a “related party” if it has the ability to control the company or exercises significant influence over the company in making financial and operating decisions.

Dispositions at an undervalue

Section 146(2) of the Law provides that every disposition of property made at an undervalue by or on behalf of a company with intent to defraud its creditors shall be voidable at the instance of its official liquidator. The official liquidator bears the burden of establishing an intent to defraud and no action may be brought under this section after six years following the date of the relevant disposition. A number of important definitions are set out in section 146(1):

(a) “disposition” has the meaning ascribed in Part VI of the Trusts Law (2011 Revision);

(b) “intent to defraud” means an intention to willfully defeat an obligation owed to a creditor;

(c) “obligation” means an obligation or liability (which includes a contingent liability) which existed on or
prior to the date of the relevant disposition;
(d) “transferee” means the person to whom a relevant disposition is made and shall include any successor
in title; and
(e) “undervalue” in relation to a disposition of a company’s property means:
(i) the provision of no consideration for the disposition; or
(ii) a consideration for the disposition the value of which in money or monies worth is significantly
less than the value of the property which is the subject of the disposition.

However, the rights of the transferee are subject to some protection. Pursuant to section 145(5) of the Law in the event that any disposition is set aside under this section and the Court is subsequently satisfied that the transferee has not acted in bad faith:

(a) the transferee shall have a first and paramount charge over the property which is the subject of the disposition, of an amount equal to the entire costs properly incurred by the transferee in the defense of the action or proceedings; and
(b) the relevant disposition shall be set aside subject to the proper fees, costs, pre-existing rights, claims and interests of the transferee (and of any predecessor transferee who has not acted in bad faith).

Fraudulent Trading

Pursuant to section 147, if in the course of a winding up of a Cayman company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose the liquidator may apply to the Court for a declaration that any persons who were knowingly parties to the carrying on of the business in such a manner are liable to make such contributions, if any, to the company’s assets as the Court thinks proper. The Commercial Disputes and Litigation Team at Loeb Smith has a wealth of experience of advising on the setting aside of antecedent transactions and would be happy to assist with any queries you may have. For more specific advice on setting aside of antecedent transactions in the Cayman Islands, please contact:

David Harby
Head of Commercial Disputes and Litigation
+1 (345) 749 7494
david.harby@loebsmith.com

A mareva or freezing injunction is an interim court order, restraining a party from dealing with, or removing, assets from the jurisdiction. Such an order is normally applied for on an basis (or without notice to the respondent) in order to avoid the risk of the dissipation of the assets which the injunction is intended to cover.

In order to be able to obtain a freezing injunction the applicant must show:

(a) a good arguable case against the respondent;

(b) that the refusal of an injunction would involve a real risk that a judgment or award in favour of the

applicant would remain unsatisfied; and

A good arguable case was described by Mustill, J., in The Niedersachsen [1983] 2 LLR 600 as ‘one which is more than barely capable of serious argument, but not necessarily one which the judge considers to have a better than 50% chance of success’. The element of a real risk requires “solid evidence” of the alleged risk of dissipation as opposed to a mere expression of opinion or assertion of likelihood. Finally, the court must consider whether it is just and convenient to grant the injunction. In determining this, the court will consider factors such as the conduct of the applicant, the rights of any third parties who may be affected and the potential hardship to the respondent.

In VTB Capital Plc v Universal Telecom Management and Anor [2013] (2) CILR 94, the Cayman Islands Court of Appeal held that the Grand Court had jurisdiction to award free-standing mareva injunctions in support of foreign proceedings, including against third parties. The following requirements were set out:

the entity against whom the freezing order is sought must be subject to the jurisdiction of the courts of the Cayman Islands;

it does not matter that the Cayman Islands entity is not party to a substantive cause of action recognized by the courts of the Cayman Islands;

the claim against the defendant, whether or not brought in the Cayman Islands, must be justiciable in the Cayman Islands; and

provided that points I to III above are satisfied, there is no reason why the defendant against whom the action is being taken in the foreign court should not be party to the proceedings in the Cayman Islands.

However, in VTB Capital Plc v Malofeev [2011] (2) CILR the Cayman Islands Court of Appeal held that the Grand Court could not grant leave to serve a defendant out of the jurisdiction where the only relief sought was an interim mareva injunction in support of foreign proceedings. This position has now been reversed by the introduction of s.11A of the Grand Court (Amendment) Law 2014. This provides that the Grand Court may by order appoint a receiver or grant other interim relief in relation to proceedings which:

(a) have been or are to be commenced in a court outside of the Islands; and

(b) are capable of giving rise to a judgment which may be enforced in the Islands under any Cayman

Islands law or at common law
david.harby@loebsmith.com
The Commercial Disputes and Litigation Team at Loeb Smith has a wealth of experience in representing clients in applications for mareva injunctions and would be happy to assist with any queries you may have. For more specific advice on applying for mareva injunctions in the Cayman Islands, please contact:

David Harby

Head of Commercial Disputes and Litigation

+1 (345) 749 7494

david.harby@loebsmith.com

In order to be able to obtain a freezing injunction the applicant must show:

1. a good arguable case against the respondent;
2. that the refusal of an injunction would involve a real risk that a judgment or award in favour of the
  applicant would remain unsatisfied; and
3. that it is just and convenient for the injunction to be granted.

A good arguable case was described by Mustill, J., in The Niedersachsen [1983] 2 LLR 600 as ‘one which is more than barely capable of serious argument, but not necessarily one which the judge considers to have a better than 50% chance of success’. The element of a real risk requires “solid evidence” of the alleged risk of dissipation as opposed to a mere expression of opinion or assertion of likelihood. Finally, the court must consider whether it is just and convenient to grant the injunction. In determining this, the court will consider factors such as the conduct of the applicant, the rights of any third parties who may be affected and the potential hardship to the respondent.

1. the entity against whom the freezing order is sought must be subject to the jurisdiction of the courts of the Cayman Islands;
2. it does not matter that the Cayman Islands entity is not party to a substantive cause of action recognized by the courts of the Cayman Islands;
3. the claim against the defendant, whether or not brought in the Cayman Islands, must be justiciable in the Cayman Islands; and
4. provided that points I to III above are satisfied, there is no reason why the defendant against whom the action is being taken in the foreign court should not be party to the proceedings in the Cayman Islands.

However, in VTB Capital Plc v Malofeev [2011] (2) CILR the Cayman Islands Court of Appeal held that the Grand Court could not grant leave to serve a defendant out of the jurisdiction where the only relief sought was an interim mareva injunction in support of foreign proceedings. This position has now been reversed by the introduction of s.11A of the Grand Court (Amendment) Law 2014. This provides that the Grand Court may by order appoint a receiver or grant other interim relief in relation to proceedings which:

1. have been or are to be commenced in a court outside of the Islands; and
2. are capable of giving rise to a judgment which may be enforced in the Islands under any Cayman Islands law or at common law

The Commercial Disputes and Litigation Team at Loeb Smith has a wealth of experience in representing clients in applications for mareva injunctions and would be happy to assist with any queries you may have. For more specific advice on applying for mareva injunctions in the Cayman Islands, please contact:

David Harby

The U.S. Internal Revenue Service (“IRS”) has issued a Notice which postpones by six months, from 1 January, 2014 to 1 July, 2014, the effective date for certain requirements under the Foreign Account Tax Compliance Act (“FATCA”).

Among other things, foreign financial institutions (“FFIs”) will not be required to register with the IRS or, where applicable, enter into an FFI agreement with the IRS until June 30, 2014. The IRS will publish the first list of global intermediary identification numbers (“GIINs”) by June 2, 2014, with monthly updates to follow. In order for an FFI to be on the first published list of GIINs, it now will need to register by April 25, 2014.

A copy of the full text of the Notice can be found here.

http://www.irs.gov/pub/irs-drop/n-13-43.pdf

We will be issuing a full legal update on the implications of FATCA for Cayman Islands financial institutions once the terms of the Cayman Islands Government’s Model 1 Intergovernmental Agreement (“IGA”) have been finalized.

If you have any questions regarding the matters covered in the Alert above, please contact the Attorney below or your usual Loeb Smith & Brady contact:

Daniel Loeb
+44 207 183 7966
daniel.loeb@loebsmith.com

In our December 2014 legal update on FATCA (attached), we outlined that all Cayman Islands Financial Institutions (including investment funds, investment managers, and other Cayman domiciled financial institutions) (“Cayman FIs”) that maintain Financial Accounts are required to take action, including, among other things, (i) establishing and maintaining arrangements that are designed to identify Reportable Accounts, and (ii) reporting Reportable Accounts to the Cayman Islands Tax Information Authority.

Registration

All Cayman FIs are required to register with the Cayman Islands Tax Information Authority no later than 30 April 2015.

Cayman FIs are able to register via the Cayman Automatic Exchange of Information Portal (“Portal”). Cayman FIs can access the Portal from a direct link on the Cayman Islands government website: www.tia.gov.ky. There is also a guidance note on the website detailing how to use the Portal.

Registration involves Cayman FIs providing electronic notification to the Cayman Islands Tax Information Authority in the prescribed form including the following information:

Name

Categorization under the U.S. IGA

GIIN

The full name, address, designation and contact details of the natural person identified and authorized by the Cayman FI to be the principal point of contact (“PPOC”) for the Cayman FI for all purposes of compliance with the Cayman Regulations which implemented U.S. FATCA and U.K. FATCA domestically into Cayman Islands law.

Registration electronically via the Portal is conditional upon each Cayman FI that has one or more Reportable Accounts uploading a PDF Document on that Cayman FI’s letterhead specifying an individual and providing authorization to the individual to be assigned as PPOC on behalf of the Cayman FI. The PDF Document should be signed by an appropriate person of the Cayman FI. Although this is not specified as a requirement, it is anticipated that Cayman FIs will appoint the individual named as their FATCA Responsible Officer on the Internal Revenue Service FATCA FFI Registration Portal (which Cayman FIs would have accessed to obtain their GIIN) to be their PPOC for the purpose of registration with the Cayman Islands Tax Information Authority.

Deadline for Reporting

Cayman FIs should also note that 31 May 2015 is the deadline for electronic reporting via the Portal in respect of each Reportable Account. There is no longer a mandatory requirement to make a NIL return.

Introduction

This article first appeared in Volume 12, Issue 1. of International Corporate Rescue, published by Chase Cambria Publishing.

Gary Smith reviews the decision of the United States Bankruptcy Court Southern District of New York in re: Soundview Elite, Ltd., et al., Debtors (Case No. 13-13098 (REG)) as another good example of the willingness of the US courts to share jurisdiction in the interests of comity in cross border insolvency cases.

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