Cayman Islands Special Economic Zone Companies

• Law Firm: Conyers
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Commodities/Derivatives/Stock Exchanges, Corporate and Company Law, Directors and Officers, Shareholders
• Author: Conyers
• Published date: 03 April 2023

Preface

This publication has been prepared for the assistance of those who are considering the registration of an exempted company as a special economic zone company in the Cayman Islands ('Cayman'). It deals in broad terms with the requirements of Cayman law for the establishment and operation of such entities, including the requirements applicable to all exempted companies. It is not intended to be exhaustive but merely to provide brief details and information which we hope will be of use to our clients. We recommend that our clients and prospective clients seek legal advice in Cayman on their specific proposals before taking steps to implement them.

Before proceeding with the incorporation and/or registration of a special economic zone company in Cayman, persons are advised to consult their tax, legal and other professional advisers in their respective jurisdictions.

Persons considering establishing companies to carry on insurance or mutual fund business should request separate publications prepared by this Firm on these topics.

Conyers

1. INTRODUCTION

1.1. General

Company, trust, banking, insurance and related laws have made Cayman a leading offshore financial centre. The government's attitude towards and open communication with the private sector encourages the promotion and maintenance of Cayman's offshore business. Cayman enjoys a sophisticated telecommunications system, an abundance of professional service providers, and economic and political stability.

Special economic zones are regions specially established in a country, for which government concessions have been made in order to stimulate economic growth. The Cayman Islands launched a special economic zone intended to attract global science, technology, commodities and derivatives, maritime, media and educational entities to the country (the 'Cayman SEZ'). The Cayman SEZ represents an unprecedented combination of financial incentives within a tax-neutral environment which offers the ultimate legislative, geographic and lifestyle benefits.

1.2. Special Economic Zone Companies

A new or an existing exempted company may, if it satisfies the special economic zone requirements, be registered as a special economic zone company ('SEZ company'). The principal statute governing the formation and operation of Cayman exempted companies is the Companies Act. Absent an express exemption, the Companies Act applies to all SEZ Companies.

The Companies Act distinguishes between local companies (i.e. ordinary resident companies), which are generally required to be predominantly owned and controlled by Caymanians, and exempted companies, which are not. Generally, only local companies can carry on and compete for business within Cayman. Exempted companies, while resident in Cayman, must carry on their business activities external to Cayman. In rare circumstances, an exempted company may obtain a licence to carry on business activities in Cayman.

The principal statute governing the formation and operation of Cayman SEZ companies is The Special Economic Zone Act (the 'SEZ Act'). The SEZ Act requires that a SEZ company have, as its principal purpose, the carrying on of business mainly outside Cayman. International businesses establishing within the SEZ will not be permitted to trade in Cayman outside of the Cayman SEZ.

This publication is therefore concerned only with the Companies Act requirements applicable to exempted companies carrying on business from, yet external to, Cayman and the SEZ Act requirements specifically applicable to SEZ Companies.

1.3. Cayman Enterprise City

Cayman Enterprise City Limited ('CEC') is the developer of 'Cayman Enterprise City' which has been designated as the Cayman SEZ pursuant to The Special Economic Zones (Cayman Enterprise City) Order (2020 Revision). Cayman Enterprise City will, in due course, constitute a state-of-the-art campus of innovative and sustainable architecture designed to complement and respect the local environment.

While the Cayman Enterprise City campus is under development, existing facilities have been designated to function temporarily as the Cayman SEZ.

There are seven types of business authorized to be carried on in the Cayman SEZ:

Cayman Internet Park: designed to attract information technology and software businesses, with the intention of creating the largest Information and Communications Technology cluster in the region;

Cayman Science and Technology Park: designed to attract businesses specialized in natural sciences, specifically focused on biotechnology (research and application of technology that uses biological systems, living organisms or derivatives thereof, to make or modify products or processes for specific use), development of biomedical devices, development of pharmaceuticals and environmental technology (research and application of technology to monitor, model and conserve the natural environment and resources, and to curb the negative impacts of human involvement);

Cayman Media Park: designed to attract electronic media and integrated media-related businesses with the intention of creating the largest media and marketing related cluster in the region;

Cayman Commodities & Derivatives Park: designed to create a centralised global commodity and derivatives market in Cayman, with the intention of being the first dedicated commodities and derivatives centre in the Americas' time zone;

Cayman Outsource Park: The intent of this park is to facilitate the production and manufacturing, for special economic zone based businesses, of products in other jurisdictions. Please note, however, this park is not open to businesses other than the developer specified in paragraph 3 of The Special Economic Zones (Cayman Enterprises City) 2015 Order, a subsidiary of the developer, or businesses working in a formal partnership with the developer, and offering services only to businesses established within any of the parks in the special economic zone;

Cayman International Academic Park: designed to attract higher education institutions with a focus on the areas of technology underlying the other parks, that is, information technology, biotechnology, environmental technology, and integrated media and new media technology. This park also includes higher education institutions related to the Cayman Maritime Services Park; and

Cayman Maritime & Aviation Services Park: designed to attract maritime and aviation services businesses to assist in the establishment of the Cayman Islands as the largest maritime and aviation services cluster in the region.

CEC will work with potential SEZ companies to determine the nature of their business, along with space and staffing requirements, to ensure that the company will fit into the Cayman SEZ under one of the categories outlined above. The company must enter into a licence agreement with CEC outlining the terms of arrangement.

Once this process is complete, the company can incorporate or register as a SEZ company and apply for a Trade Certificate (see discussion at 3. Incorporation and Registration Process below).

1.4. Benefits and Exemptions

The Cayman SEZ application process has been streamlined to guarantee incorporation within ten days. A SEZ company located in the Cayman SEZ will also benefit from guaranteed protection of intellectual property and will be exempt from direct or indirect taxes, certain import duties and fees and work permit requirements. Employees of SEZ companies are granted five (5) year work/residency visas.

There are no restrictions on the transfer of any investment in or by a SEZ company within a special economic zone nor shall a SEZ company be restricted to investing in any other SEZ company. More particularly, a non-Caymanian may own, hold, freely transfer, securitize, finance, raise security or list the legal or beneficial title of any or all of his equity in any SEZ company.

2. PRE-INCORPORATION MATTERS

2.1. Company Name

On payment of a small fee, the proposed name of the company can be reserved with the Registrar of Companies (the 'Registrar') for a limited time. No company may be incorporated with a name that is the same as, or substantially similar to, the name of another company on the register. The use of certain words in company names such as 'royal', 'chartered' and 'bank' is restricted.

A SEZ company must include the words 'Special Economic Zone Company' or the letters 'SEZC' in its name.

A company may be incorporated with a dual name in a foreign script. There is no requirement that the dual name be a translation of the company's English name.

2.2 Contracts

Where a person purports to enter into a contract in the name of, or on...