Cayman investment funds are regulated by the Mutual Funds Law, 1993 (it has been subsequently amending). Legislation of the Cayman Islands is based on English common law and is supplemented in accordance with local laws. The funds are regulated and supervised by the Cayman Islands Monetary Authority (CIMA).
Forms of business organization: company (the most common form of entity), limited partnership or unit trust. They are called ‘exempted’ since they are non-resident. Exempted companies may register as segregated portfolio companies (SPC).
There are two categories of investment funds established in the Cayman Islands depending on the degree of regulation of the fund – regulated and unregulated. Regulated mutual funds are subject to regulation by CIMA and must notify it about all the amendments.
In accordance with the Mutual Fund Law in the Caymans there are four types of regulated mutual funds: registered mutual fund, administered mutual fund licensed mutual fund and master mutual fund, as well as one type exempted from the CIMA regulation – private fund.
It should be noted that under the Cayman Islands Mutual Funds Law only open ended investment funds are referred to as ‘mutual funds’.
Therefore, closed ended funds (not mutual funds within the statutory definition) as well as funds which have no significant link with the Cayman Islands are referred to as unregulated mutual funds.
Nevertheless, Cayman Islands entities that are set up as closed ended funds must have a registered office in the Cayman Islands provided by a regulated entity and, if they have a separate advisor or manager which is itself a Cayman Islands entity, then that entity will be subject to regulation or exemption under the Securities Investment Business Law (SIBL).
There is no personal income tax, corporate profit tax, tax on dividends. An annual fixed state fee for offshore maintenance is paid. There are no legal restrictions on the investment policy and strategy of the fund. Exempted trusts and exempted limited partnership can obtain a renewable 50-year tax undertaking.
Every regulated mutual fund is required to audit its accounts annually by an approved Cayman Islands auditor.