Loeb Smith Attorneys is pleased to announce that our team has been recognized for outstanding client service at HFM Asia Services Awards 2024 after being shortlisted for the second year in a row

“Best offshore law firm – client service” accolade highlights Loeb Smith Attorneys’ demonstrated exceptional client service, innovative product development, and strong and sustainable business growth over the past 12 months. The judging panel was made up of leading hedge fund COS, CFOs, CCOs, GCs and CTOs to ensure that the Awards recognized those driving up service standards across the hedge funds service providers sector.

With offices in the British Virgin Islands, the Cayman Islands and Hong Kong, Loeb Smith Attorneys has been nominated for numerous awards over the years and has achieved high rankings in legal directories.

Special thanks to our much-valued clients and partners as their continuous support and trust in us are the key reasons for our achievement. This achievement is another testament to our team’s expertise and Loeb Smith Attorneys’ commitment in Asia.

About Loeb Smith Attorneys

Loeb Smith Attorneys is one of the leading offshore corporate law firms considered one of the most active and knowledgeable firms for advising on offshore investment funds formation and launch of all asset classes including public securities, private equity, venture capital, real estate, and virtual assets. Other areas of strength and growth are advising on M&A, Finance, Corporate Restructurings, Capital Markets, Regulatory Compliance, Investments, Logistics, Shipping and Aviation.

Considered a leading law firm in the Fintech and Blockchain Technology space, Loeb Smith also advises on token issuances, application for VASP licences for Web 3.0 businesses, Metaverse infrastructure and other virtual asset service providers, and utilising Cayman and BVI structures to develop virtual asset platforms for DAOs. Loeb Smith’s clients are investment managers, financial institutions, onshore counsels, and HNWIs who the firm advises on day-to-day legal issues and complex, strategic matters.

Some of our firm’s recent accolades are: winning Leading Firm in Client Satisfaction 2024 award by Legal 500; ranked in Investment Funds category and listed as one of the Firms To Watch for Corporate & Commercial by Legal 500 in 2024; named as Recommended Firm by IFLR 1000 from 2021 to 2024; named in Offshore Client Choice List by Asian Legal Business from 2021 to 2023; ranked amongst Top 30 Asia’s Fastest Growing Law Firms by Asian Legal Business in 2023 and 2024; ranked in The A-List: Top Offshore Lawyers by Asia Business Law Journal in 2022 and 2024; named as one of the ALB Hong Kong Firms to Watch 2024; winning Best Law Firm – Fund Domicile at Hedgeweek US Emerging Manager Awards 2023 and 2024; winning Best Law Firm – Fund Domicile at Private Equity Wire US Emerging Manager Awards 2023 and 2024; winning Best Law Firm – Fund Domicile at Private Equity Wire US Awards 2023; and winning The Best Offshore Law Firm – Client Service at With Intelligence HFM Asia Services Awards 2024.

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Loeb Smith Attorneys is pleased to announce that Gary Smith has been recognized again as one of the top-rated practising offshore lawyers by the prestigious Asia Business Law Journal’s A-List of top offshore lawyers.

The A-List: Top Offshore Lawyers is based on interviews with thousands of in-house counsels in Asia and partners at international and onshore law firms in the region.

Gary Smith is Head of the Firm’s Investment Funds Group and is known for his ability to deliver pragmatic and well-thought-through solutions to complex technical issues. He advises on Cayman Islands & BVI investment funds, private equity investments, M&A, fintech, blockchain & virtual assets transactions, corporate, and corporate finance and is regularly praised by clients in international legal directories for his “strong client-relationships and is highly regarded by sources in North America and Asia” and “his knowledge impresses me and his creativity is very good. He is also very patient and intelligent”.

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The Foundation Companies Act 2017 introduced a new corporate vehicle to the Cayman Islands – the “foundation company”. This company structure has several applications and is growing in popularity.

Foundation companies are governed primarily by the above-mentioned act together with certain provisions of the Companies Act (as revised) of the Cayman Islands, which apply to all types of company.

A foundation company is a legal person that is entirely distinct from that of its directors, members (where relevant), beneficiaries and founders. This means that a foundation company can own assets, and can sue and be sued.

The constitution

A foundation company is incorporated with a memorandum of association and articles of association (the “constitutional documents”), which set out the rights and responsibilities of the various parties who manage and who benefit from the foundation company.

A foundation company may also adopt bylaws that expand on the matters dealt with in the constitutional documents, and can even be used to confer specific rights on individuals or groups of beneficiaries. These bylaws may be kept private as they are not required to be filed with the Registrar of Companies.

Foundation companies therefore provide the functionality and flexibility of a trust but without any of the complexities associated with trust administration.

The following classes of person will be involved in the management of a foundation company:

• Directors. A foundation company will typically be managed by its board of directors, who owe fiduciary duties to the company.
• Secretary. A foundation company must have a secretary who is licensed or permitted to provide company management services in the Cayman Islands. The foundation company’s registered office must be at the secretary’s business address.
• Supervisor. If a foundation company either chooses not to have any members, or at any time ceases to have any members, it is required to appoint a supervisor, who oversees its management but crucially has no ownership rights or financial entitlement. In the absence of any members, this provides necessary checks and balances on the board of directors to ensure that the foundation company is being properly managed, and is conducting its business in accordance with its constitutional documents, the requirements of any bylaws, and applicable law.
• Founder. The founder is similar to a settlor in the context of a trust. Founders have no specific rights or powers in respect of the foundation company unless such rights and powers are specified in the constitutional documents and/or in the bylaws. It is common for the constitutional documents to grant the founder the power to appoint or remove directors and beneficiaries.

In addition, the following classes of person can be associated with foundation companies:

• Members. Members are not automatically entitled to participate financially in the success of the foundation company unless the constitutional documents or bylaws provide otherwise.
• Beneficiaries. Beneficiaries are, subject to the constitutional documents and bylaws, able to participate financially in the foundation company.

The Companies (Amendment) Bill, 2024 (“Bill”) of the Cayman Islands was published in the Cayman Islands in January 2024, and proposed to make a number of amendments to the Companies Act (2023 Revision) (the “Act”). In consideration of the changing market dynamics, the Bill, if passed into law as it was drafted, would have provided a more flexible approach in a number of areas to enhance the Cayman Islands’ financial services and to improve efficiency in a number of well-trodden processes.

The Companies (Amendment) Act, 2024 was published on 11 March 2024 (the “Amendment Act”). Whilst the Amendment Act will, when it comes into force, enact a number of the very useful proposals that were contained in the Bill, there are a number of amendments that were proposed in the Bill but which do not feature in the Amendment Act.

A summary of the key amendments contained in the Amendment Act are set out below, whilst we also briefly consider amendments that were proposed in the Bill and which did not make the final cut.

Reduction in share capital

The Amendment Act, when in force, will simplify the process for a solvent company limited by shares or a solvent company limited by guarantee (with a share capital) to reduce its share capital. Whilst the traditional method by special resolution and confirmation by the Court will remain available, the process is simplified by the introduction of a new method which includes a special resolution supported by a solvency statement, consequently removing the need for Court confirmation.

To be accepted, the solvency statement (which is to be made by the directors of the company) must be made no more than 30 days before the date on which the special resolution approving a reduction of share capital is passed. A copy of the solvency statement must be sent or submitted to every member of the company at the same time or before the special resolution is provided to them.¹

The solvency statement will need to be provided to the Registrar within fifteen days after the special resolution is passed along with the minutes of the company reflecting (i) the amount of share capital of the company, (ii) the number of shares into which the share capital is to be divided and the amount of each share; and (iii) the amount deemed to be paid up on each share (if applicable).²

Failure to notify the Registrar within the 15-day allowance will require the company to apply to the Court by way of petition for an order confirming the reduction of share capital.³

This is a welcome development which will inevitably increase the efficiency of reductions in share capital.

Issuance of fractions of shares

The Amendment Act will empower companies limited by shares or companies limited by guarantee (with a share capital) to redeem or repurchase fractions of shares.

Re-registrations

The Amendment Act will make several changes to the provisions which relate to transfers by way of continuation and re-registration, as follows:

•  companies with or without a share capital will be able to apply to be registered by way of continuation as an exempted company limited by shares in the Cayman Islands. Currently, this is only available to companies with a share capital⁴;
• exempted companies, which currently must conduct business mainly outside of the Cayman Islands, may re-register as an ordinary resident company by passing a special resolution and applying to the Registrar for re-registration. Previously, this was not possible. However, when such re-registration takes effect, any tax undertaking given to the company by the Cayman Islands Government under the Tax Concessions Act will cease to apply⁵;
• a limited liability company incorporated under the Limited Liability Companies Act may, with the written consent of (subject to the terms of its LLC Agreement) at least two-third of its members convert to an exempted company⁶; and
• a foundation company incorporated under the Foundation Companies Act may, upon the passing of a special resolution to this effect, convert to an exempted company⁷.

Missed opportunities?

Finally, the Bill had also proposed the following amendments to the Act which will not take effect, as they do not feature in the Amendment Act:

• a change to the procedure for shareholder to dissent from a proposed merger or consolidation. Under the current Act, the requirement is for shareholders to give written notice of their dissent prior to the vote on the proposal taking place. The company is then required to give notice of the authorisation of the proposed merger or consolidation to each shareholder who dissented. The Bill suggested a new “objection deadline” which would require a dissenting shareholder to give notice to the company within twenty days of the notice to propose a resolution authorising a plan of merger or consolidation. The company is then only required to give notice of the authorisation of the proposed merger or consolidation to those dissenting shareholders who gave notice of their dissent prior to the objection deadline; and
• a change to the requirements for passing a special resolution in writing (i.e. other than in a general meeting of the company. Under the Act, such a written resolution must be passed unanimously, whereas the Bill proposed to reduce this to a two-thirds majority to match the threshold that must be reached in a general meeting.

These changes have not been reflected in the Amendment Act. It isn’t clear why these changes were left out of the Amendment Act, but they may be revisited in future amendments.

When do the changes take effect?

The date that the amendments set out in the Amendment Act will become law will be such date as may be appointed by Order made by the Cabinet . The Cabinet has yet to publish such an order and so the enactment date is unknown for the time being.

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1. Companies (Amendment) Act, 2024 cl 5, 14A(1)
2. Companies (Amendment) Act, 2024 cl 5, 14B
3. Companies (Amendment) Act, 2024 cl 5, 14B(6)
4. Companies (Amendment) Act, 2024 cl 10
5. Companies (Amendment) Act, 2024 cl 12
6. Companies (Amendment) Act, 2024 cl 15, 233A
7. Companies (Amendment) Act, 2024 cl 15, 233B

Further Assistance

This publication is not intended to be a substitute for specific legal advice or a legal opinion. If you require further advice relating to the matters discussed in this Legal Update, please contact us. We would be delighted to assist.

E: gary.smith@loebsmith.com
E: robert.farrell@loebsmith.com
E: ivy.wong@loebsmith.com
E: cesare.bandini@loebsmith.com
E: elizabeth.kenny@loebsmith.com
E: edmond.fung@loebsmith.com
E: vivian.huang@loebsmith.com
E: faye.huang@loebsmith.com
E: yun.sheng@loebsmith.com
E: frost.wu@loebsmith.com
E: max.lee@loebsmith.com

Loeb Smith Attorneys is pleased to announce that our Investment Funds team has won the “Best Law Firm – Fund Domicile” category at the Hedgeweek US Emerging Manager Awards 2024 for the second year in a row.

The awards recognise fund performance and service provider excellence within hedge fund emerging managers and were presented at an exclusive ceremony and networking event today, 6 June, at Convene 101 Park Avenue, New York. The pre-selection data for the fund manager shortlist was provided by Bloomberg. Congratulations to all winners: https://www.hedgeweek.com/hedgeweek-announces-winners-of-us-emerging-manager-awards-2024/

With offices in British Virgin Islands, Cayman Islands and Hong Kong, Loeb Smith advises on a comprehensive set of investment fund areas including Hedge Funds, Private Equity Funds, Venture Capital, Infrastructure Project Funds, Tokenized Funds, Real Estate Funds, Distressed Funds as well as other asset classes. Contact us to find more about our services.

Loeb Smith Attorneys is pleased to share that our team has been shortlisted in the “Best offshore law firm” and “Best offshore law firm client service” categories for the With Intelligence HFM Asia Services Awards 2024 for the second year in a row.

The shortlisting is a strong industry recognition of our leadership and expertise in the offshore law space and our commitment to delivering outstanding client service and comes less than a month after winning the “Best Law Firm – Fund Domicile” at the Private Equity Wire US Emerging Manager Awards 2024.

With offices in Hong Kong, British Virgin Islands and Cayman Islands, our integrated business model combined with our far-reaching approach to innovation and client service, enables us to meet the ever- evolving needs of clients and grow alongside them through sustainable partnerships.

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The EU’s General Data Protection Regulation (“GDPR”) applies to offshore investment funds with European investors. The Cayman Islands Data Protection Act, 2021 (“DPA”), regulates the processing of all personal data. Inspired by the UK’s Data Protection Act, the DPA includes provisions very similar to GDPR (together “Data Protection Laws”), with certain notable differences.

Even though the DPA applies generally to the processing of personal data and not just to investment funds, within this context and as part of the subscription process, investors are required to provide a government-issued photo ID, source of funds and wealth, contact details, payment details, and tax residence information, or even additional information about employment, dependents, income and investment objectives (the “Investor Personal Data”), which are processed and stored by or on behalf of the investment fund (the “Fund”) and/or by one or more of the service providers to the Fund. Some of the processing may be done by different parties in various jurisdictions.

Within the context of investment funds, the Administrator, Transfer Agent, Distributor, and the Investment Manager of a Fund may fall within the definition of a Data Controller or Data Processor. To ensure compliance with GDPR and/or DPA, the Fund’s Board of Directors should review the contractual arrangements with these parties and may need to appoint a Data Protection Officer. As a reminder, the Board of Directors of the Fund is required to supervise third party service providers and ensure that there are sufficient measures in place to protect Investor Personal Data. Privacy Notices in the Fund’s offering documents would need to be updated to ensure that investors are fully aware of where their Personal Data is being processed, by whom and for what purpose.

For ease of reference, a brief comparison between GDPR and the DPA is included below.

The Cayman Islands Monetary Authority (“CIMA”) has recently published its annual AML/CFT Activity Report for 2022 which can be viewed at the following link:  AML CFT Activity Report 2022 V1 (cima.ky) and there are a few points worth noting. In particular:

1. CIMA carried out 88 Inspections in 2022 compared to 161 in 2021; only 3 of those inspections resulted in letters of no findings, which means that 85 resulted in findings (i.e. clarifications and/or remediations were required);
2. CIMA issued 2 administrative fine penalties totaling CI$378,670.72 (approx. US$461,793. 56) relating to breaches of the Anti-Money Laundering Regulations (2023 Revision);
   Securities Investment Businesses remains a key priority for CIMA and appropriate resources should be allocated to cover AML/CFT compliance;
3. VASPs are also identified as having medium to high overall inherent risk and are likely to be closely scrutinized by CIMA as they become more widespread – particular attention should be placed on compliance with the ‘Travel Rule’;
   risk assessments (risk-based approach) remain important to demonstrate compliance (or lack thereof);
4. Client Due Diligence/Know Your Client documents ought to be checked and updated to ensure they are consistent with policies and procedures; and
   documented corporate governance and leaving a paper trail behind any AML/CFT-related decisions being taken by the board is very important.

We have advised and guided clients in both 2022 and 2023 through a number of CIMA inspections resulting in either no findings or in findings but with no administrative fine penalties from CIMA. Should your Cayman Islands company become the subject of an upcoming inspection from CIMA, please do not hesitate to get in touch with us.

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Further Assistance

This publication is not intended to be a substitute for specific legal advice or a legal opinion. If you require further advice relating to the matters discussed in this Briefing, please contact us. We would be delighted to assist.

E: gary.smith@loebsmith.com
E: robert.farrell@loebsmith.com
E: ivy.wong@loebsmith.com
E: elizabeth.kenny@loebsmith.com
E: cesare.bandini@loebsmith.com
E: vivian.huang@loebsmith.com
E: faye.huang@loebsmith.com
E: max.lee@loebsmith.com
E: frost.wu@loebsmith.com

Loeb Smith is pleased to welcome Ivy Wong to the firm as Senior Legal Director for its Corporate practice in the Hong Kong office, where her practice focuses on advising multi-national corporations and conglomerates, shareholders, investment funds, financial institutions, banks, public and private companies, as well as high net worth individuals. Ivy will become a Partner of the firm pending upon registration as a foreign lawyer in Hong Kong.

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Ivy is a seasoned corporate transactional lawyer who is qualified in multiple jurisdictions and has led many unprecedented and high-profile cross-border transactions that won industry awards and recognitions. She was previously a Partner and had served as a regional steering committee chair and a global steering committee member for her practice at one of the largest international law firms. Her practice is primarily focused on cross-border corporate work, capital markets, corporate finance, merger and acquisition, investments and restructuring, compliance and general commercial work.

Ivy is highly experienced in communicating with regulators, providing solutions that meet both regulatory and commercial needs, and advising board members and senior management in their corporate planning and transactions. With a track record serving a wide range of industry sectors, multiple of Ivy’s recent transactions are in healthcare, biotech and life sciences sectors.

Ivy has been shortlisted for Euromoney Asia Women in Business Law Award for consecutive years and is named one of the leading practitioners in Hong Kong. She is a Vice Chair of the Social Sustainability Committee of The British Chamber of Commerce in Hong Kong and sits on the judging panel for the Hong Kong Corporate Governance and ESG Excellence Awards co-conferred by the Chamber of Hong Kong Listed Companies. She has been quoted and interviewed by international media and journals including Bloomberg, CNBC, The Wall Street Journal, The Economist and Reuters.

“Ivy’s addition adds greater depth and expertise to the firm’s corporate, capital markets and M&A practice in Hong Kong for its international clients and enables the firm to better serve its clients and their business needs in Asia, practice areas that continue to be a strategic priority for our firm.” said Gary Smith, Partner. “Ivy is an experienced corporate transactional lawyer with a strong market profile, and a wonderful addition to our growing team in Hong Kong focused on offshore legal expertise and outstanding client service.”

“I am pleased to have the opportunity to join the team, which is young and energetic, with a clear vision for growth and commitment to the region. What sets it apart is also its expertise in the virtual assets space that is both cutting edge and fast-growing, and also its responsiveness to the regulatory changes and delivery of timely and quality advice to its clients.” said Ivy Wong.