2024 Regional Roundtable Update: Cayman Islands

2024 Cayman Islands Regional Update

Firm Name: Campbells LLP
Authors: Andrew Pullinger, Sayak Bhattacharya, Christopher Easdon

1. How is the political environment impacting business in or with your country?

In line with global trends where current levels of geopolitical instability have resulted in a depressed M&A market, Cayman has similarly experienced a decrease in deal volume and value in cross-border M&A transactions. However, there has been a large uptick in restructuring work, equity and debt recapitalizations, debt listings, down-round equity financings, and general streamlining of operations for companies to weather the current market conditions in preparation for more bullish times.

Despite these uncertain times, Cayman has fared well – maintaining Moody’s Aa3 bond issuer rating, the Aaa country ceiling rating, and a ‘stable’ economic outlook. Moody’s referenced the Cayman Islands’ stable political environment, strong policy continuity, high government effectiveness, sound financial management, and economic growth following the COVID-19 pandemic as factors supporting the Aa3 rating. To this end, Cayman Islands has a similar rating to jurisdictions such as Belgium, Czech Republic, Hong Kong, Ireland, Isle of Man, Macau, Qatar, Taiwan, and the United Kingdom.

Further, Cayman has maintained its track record of effectively adapting to international efforts against tax avoidance, tax evasion, and financial transparency.

According to a Cayman Finance article published in April 2024, in 2023, the Cayman Islands saw stable growth in areas of entity registration, the largest number of new CIMA-licensed international insurers in a decade (driven in part by Cayman’s growing attractiveness as a reinsurance domicile) and sustained drops in banking licenses resulting from bank consolidation and increased compliance costs.

2. Which countries have you previously collaborated with and do you see potential for future collaboration with on cross-border matters within the region?

The Cayman Islands' financial sector is closely tied to the US, LatAm, European and Asian economies. We work on a large number of VC fund managers and founders in connection with M&A transactions and preferred equity financings for predominantly LaTAM (typically in Brazil, Argentina, Mexico, Chile, Colombia, or Guatemala) based start-ups/companies in their growth phase.

With LatAm set to experience unprecedented growth in 2024, particularly in its tech sector, we see great potential for deepening our relationships with fund managers, founders, professional advisers, and intermediaries to broaden our regional footprint.

3. What legislation has recently changed or is changing that a potential international client should be aware of?

In line with Cayman’s objective of continuous improvement to align itself with global market practice and international standards, there has recently been considerable legislative upheaval in Cayman - whether tabled or enacted – as follows:

• (Beneficial Ownership). New changes proposed to the UBO regime will result in several changes to the Cayman Islands beneficial ownership regime, largely to consolidate the requirements into one piece of legislation, bring limited partnerships into scope, and reduce the number of exemptions relied upon.
• (Companies Act Amendments). New proposed changes to the Companies Act will result in the following key commercial enhancements:
  1. Reduction of Share Capital. Presently, reducing share capital for a solvent company (save for redemption or repurchase of shares) requires court sanction. The Amendment Act will permit a reduction of share capital without court approval, provided that this is permitted by a company’s artic. les of association. All that will be necessary is a special resolution of shareholders approving the capital reduction and a solvency statement.
  2. Digital assets. On 28 February 2024, the Cayman Islands Ministry of Financial Services and Commerce issued a consultation process for proposed amendments to the Virtual Asset Service Providers Act (the "VASP Act”). The proposed changes aim to introduce CIMA’s licensing regime for virtual asset trading platform operators and custodians. The amendments are expected to be brought into force later in 2024.