Appleby Cayman Islands Regulatory Update ' Q4 2022

Published date04 January 2023
Subject MatterFinance and Banking, Corporate/Commercial Law, Financial Services, Corporate and Company Law
Law FirmAppleby
AuthorSheila Crosby and Menelik Miller

INTRODUCTION

The regulatory environment continues to remain active and this update from Appleby's Cayman office takes a closer look at the significant developments in the past quarter, including the new regulatory procedures from the Cayman Islands Monetary Authority (CIMA), the EU's 'new' position1 on public access to beneficial ownership registers and developments regarding the imposition of sanctions. We hope you will find its contents useful.

HOT TOPICS

LIMITED LIABILITY COMPANIES ACT

The Cayman Islands Limited Liability Companies Act was amended on 19 October 2022 by the Limited Liability Companies (Amendment) Act, 2022 (LLC Amendment Act) which came into operation on that date.

The LLC Amendment Act no longer requires an LLC to file a certificate of amendment on membership changes with the Registrar; however, the LLC is still required to maintain at its registered offices, the names and addresses of each person who is a member, date they became/ceased to be a member(s) and the nature of their voting rights.

ECJ SAYS PUBLIC ACCESSS TO BENEFICIAL OWNERSHIP REGISTERS INVALID

The European Court of Justice's (ECJ)2 recent judgment held that a directive3 requiring Member States to ensure that beneficial ownership information of corporate and other legal entities were accessible in all cases and to any member of the general public was invalid. The directive was held to be invalid as it was incompatible with Articles 7 and 8 of the Charter of Fundamental Rights of the European Union (Charter).

The ECJ's decision has cast serious doubts on whether mandated public access to beneficial ownership registers can remain in force as they are incompatible with the fundamental rights to a private and family life (Article 7 of the Charter) and the right to the protection of personal data (Article 8 of the Charter).

This decision does not bind the UK or the Cayman Islands as since Brexit, ECJ decisions are not binding on English courts and the Charter was not incorporated into UK law as part of the European Union (Withdrawal) Act 2018. However, English courts and the UK government will need to consider this decision as the right to a private and family life remains in UK law as part of the 1998 Human Rights Act and beneficial ownership registers have featured heavily in the government's policy and approach to the reduction of financial crime. In the Cayman Islands the right to Private and Family Life is also enshrined within Article 9 of the Constitution.

As a result of the judgment, EU Member States have reportedly already started to restrict access to their beneficial ownership registers for companies.

The Cayman Islands Government is currently considering industry feedback in relation to the Beneficial Ownership Transparency Bill, 2022 and associated regulations, which propose to consolidate all beneficial ownership legislation into one act. On the 30 November 2022, the Cayman Islands Ministry of Financial Services (MFS) stated that in line with the request of the United Kingdom, and with the assistance of external counsel, they were currently reviewing the ECJ judgment to determine if there are any implications with respect to the proposal to introduce public beneficial ownership...

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