The Cayman Islands has a developed and modern economy, with the highest standard of living and GDP in the Caribbean region.

The dominant industry in the Cayman Islands is financial services, with an estimated 75% of all hedge funds and approximately half of the assets under management in the sector domiciled there.

The Cayman Islands also have a substantial tourism industry.

The population of the Cayman Islands is approximately 71,000. English is spoken and is the ordinary language of business.

Business culture and etiquette is modelled on that in Europe and the United States, with ordinary working hours of 8.30 am to 5 pm, Monday to Friday. There are a number of local public holidays each year, on which most banks and other businesses are closed.

A general election took place in April 2021, resulting in a transfer of power from the previous People's Progressive Movement government to a coalition of independent MPs known as the PACT, under the leadership of the Hon. Wayne Panton as Premier.

There have been significant developments in the regulatory field, most notably following on from the Beneficial Ownership (Companies) Regulations (2019 Revision) which require the majority of Cayman Islands companies to establish and maintain registers of beneficial ownership (subject to some limited exemptions). These registers are not accessible by the general public but can be viewed by relevant authorities.

There have also been significant developments in respect of economic substance, with all Cayman Islands companies, limited liability companies (LLCs), limited liability partnerships (LLPs) and registered foreign companies now required to file an annual notification in respect of economic substance. Where a "relevant entity" (which, subject to limited exemptions, includes Cayman Islands companies, LLCs, LLPs and registered foreign companies) carries on activities deemed to be "relevant activities" within the meaning of the law, that relevant entity is likely to be required to maintain a level of operational economic substance commensurate with its commercial activities and to file an annual report in relation to this. Relevant activities include, for example:

The Virtual Asset (Service Providers) Act 2020, which came into full force in January 2021, creates a registration and licensing scheme for businesses involved in the issue, holding, trading and exchange of virtual assets, reflecting the increasing involvement of Cayman Islands companies in the crypto sector.

The Data Protection Act 2017 was brought into force in September 2019, and provides a framework of rights and responsibilities in respect of data processing which are in line with internationally recognised data privacy principles.

The Private Funding of Legal Services Act 2021 significantly liberalised the position in the Cayman Islands in relation to litigation funding from May 2021, abolishing maintenance and champerty as criminal offences and making provision for the use of conditional and contingency fee arrangements in addition to third-party funding.

As a result of constitutional changes which came into force in December 2020, Cayman Islands statutes are now known as "Acts" rather than "Laws". That change in nomenclature does not affect the validity or content of legislation which came into force before that change was made.

The Cayman Islands are administered as a British overseas territory, but have a significant degree of internal self-government. The Cayman Islands have a combined common law and statute-based legal system. Decisions of the UK courts and those in other Commonwealth jurisdictions are of persuasive authority.

The Cayman Islands distinguish between doing business within the Islands and doing business outside the Islands. The Local Companies Control Act (2019 Revision) governs foreign ownership and control of businesses doing business within the Islands, and ordinarily requires 60% Caymanian ownership and control. However, licences can be granted to overseas investors who are unsuccessful in attracting local participation. There are no restrictions on foreign ownership of land.

Exempted companies, limited partnerships and trusts formed to do business outside the Islands are, with limited exceptions, not subject to statutory or regulatory constraints on investment policies and strategies or other commercial matters.

In addition to heightened due diligence requirements when doing business with high-risk jurisdictions, Orders in Council implemented in the UK that relate to international sanctions are typically extended to the Cayman Islands (www.cimaky/un-and-eu-sanctions). The Cayman Islands Financial Reporting Authority administers and co-ordinates the implementation of financial sanctions in the Cayman Islands.

There are no exchange control or currency regulations.

Investment in the Cayman Islands is generally encouraged by policy rather than direct grants and incentives, although the Special Economic Zone Act permits certain types of business (internet/technology, media/marketing, commodities and derivatives and biotechnology) to benefit from a streamlined and expedited regulatory regime when establishing a physical presence within the Islands.

Investment in the Sister Islands of Cayman Brac and Little Cayman is encouraged by a 50% reduction in import duties for approved investments, and reductions in certain licensing fees.

The Cayman Islands Investment Bureau provides an investment information service.

The most common form of business vehicle used by foreign companies when doing business within the Cayman Islands is either:

When carrying on business outside the Islands, foreign investors typically use:

The following are also commonly used by foreign investors for business outside the Islands:

To form an ordinary resident company, the company's memorandum and articles of association must be filed with the Registrar. The Registrar registers the constitutional documents and issues a certificate of incorporation certifying that the company was incorporated on the date the incorporation documents were lodged with the Registrar.

An exempted company is formed in the same way, except that the subscriber for the initial shares of the company must swear an affidavit in the presence of a notary public that the objects of the company will be carried out mainly outside the Cayman Islands. Companies can be registered within 24 hours of filing the documents for an express fee of KYD400; otherwise, registered documents are returned within three to five business days.

The General Registry's website has further information (www.ciregistry.gov.ky).

Exempted companies must file the following information (including any changes) with the Registrar:

Details of the shareholders of exempted companies do not need to be filed with the Registrar. However, an exempted company must file an annual return stating that:

Ordinary resident companies must file:

Regulated entities must submit audited accounts to the Cayman Islands Monetary Authority. Regulated entities include:

There is no obligation to file accounts with the Registrar.

There is no minimum or maximum share capital requirement. However, the size of the authorised share capital determines the initial registration and annual government fee. Fees range from KYD300 (for an ordinary company with authorised capital of KYD42,000 or less), to KYD2,568, for an exempted company with capital of more than USD2 million.

Shares can be issued for non-cash consideration.

The Companies Act reserves certain rights to shareholders in general meeting or by special resolution. Other rights are granted in the articles of association or by shareholder agreement.

Companies are managed by a board of directors. There is no statutory minimum number of directors except in relation to regulated entities, such as mutual funds (see Question 9, Reporting requirements); these must have at least two directors.

Corporate directors are permitted.

There is no local residency requirement for directors. Directors of certain types of regulated entity must be registered and licensed by the Cayman Islands Monetary Authority.

The Companies Act provides that a director's liability can be unlimited, if this is specified in the memorandum of association. A director can be personally liable for failure to act honestly, in good faith and in the best interests of the company. They must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Liability can also arise under statute, for fraud.

A parent company is not generally liable for the debts of its subsidiaries unless it gave a guarantee.

There are no specific environmental considerations for many businesses established in the Cayman Islands. Where a business maintains a local footprint, development and planning decisions are taken with reference to relevant environmental considerations.

The provisions of the Labour Act (2021 Revision):

The Labour Act does not extend to the public sector, charitable organisations or churches.

Employment issues are adjudicated by Labour Tribunals or the Grand Court.

The Workmen's Compensation Act (1996 Revision) deals with some issues relating to accidental injury in the course of employment, but is now of limited practical application. The Gender Equality Act 2011 provides remedies for discrimination within the workplace, on certain grounds, including sex, marital status, pregnancy or any characteristic based on gender.

The Labour Act applies to Caymanian and foreign employees alike working within the Cayman Islands private sector. Employees working abroad are likely to be entitled to the labour protections available in the jurisdiction within which they work.

The prescribed minimum standards in the Labour Act cannot be excluded for employees working within the Cayman Islands, irrespective of the governing law of the contract.

A Draft Bill proposing significant amendments to the Labour Act has been undergoing an extended additional period of review and consultation; it is not yet clear when it is likely to be introduced.

A written statement of working conditions must be provided within ten days of commencement of employment for most categories of employee including a job title, brief statement of responsibilities and duties, any special requirements or conditions of the job, the regular hours of work, the rate of pay and method of calculation, the intervals at which the employee will be paid, the hourly equivalent of pay for salaried employees, the rate of commission (if any), the period of employment (if not indefinite), the probationary period (if any), the employee's entitlement to vacation and sick leave, and the applicable notice periods.

Other than insofar as any terms which fall below the minimum standards provided for in the Labour Act will be void, there are no other terms or collective arrangements implied by law.

Additional terms may arise from policy manuals and as a result of dealings or practices adopted between the parties.

All non-Caymanians employed in the private sector must have a work permit. An application for a full permit usually takes two to three months to process. Short-term temporary permits do not take as long. A streamlined regime exists for certain types of business that can be set up within the Special Economic Zone.

Permit costs vary depending on the sector (financial services, tourism or construction), and the skill level of the employee. The costs range from an annual minimum of KYD300 for unskilled workers to over KYD30,000 for certain senior management and professional roles. Permits are ordinarily renewable for a maximum of nine years.

An employee can make an application for permanent residency when they have been in the Islands for a continuous period of eight years, and these applications are determined under a points-based system which applies various economic and social criteria.

Employees are not entitled to management representation or consultation in relation to corporate transactions.

Employment at will is not permitted in the Cayman Islands and any termination which is not based on a fair ground within the meaning of the Labour Act will give rise to a claim for compensation for unfair dismissal.

Grounds for dismissal that are considered to be fair or justified are:

Statutory Minimum Notice. The notice period is the same as the time between paydays (subject to completion of any probationary period and the terms of the employment contract).

Severance Payment. Employees in continuous employment for more than one year are entitled to one week's severance pay at their latest basic rate per completed year of employment.

The Labour Tribunal can award compensation to an employee who has been unfairly dismissed. This compensation cannot exceed one week's pay for each completed year of service.

It is a criminal offence to discriminate with respect to the hire, promotion, dismissal, tenure, wages, hours or other conditions of employment on grounds of race, colour, creed, sex, pregnancy, mental or physical disability (other than where the ability to perform the job is impaired), political belief or exercise of rights under the Act. However, this provision does not give rise to any right of action on the part of members of the relevant class.

The Gender Equality Act 2011 provides remedies for discrimination within the workplace, on certain grounds, including sex, marital status, pregnancy or any characteristic based on gender, and remedies under that Act may be available to a class.

Redundancies that discriminate between Caymanians and non-Caymanians, or on the basis of other protected characteristics such as gender may be regarded as unfair and may also contravene the terms of other legislation.

In all other respects, redundancies and retrenchments are governed by the ordinary rules for notice and severance pay (see Question 15).

There is no personal taxation in the Cayman Islands.

There are no applicable taxes. For most categories of employee, the employer must pay the premium under a health insurance contract issued by an approved insurer. However, the employer can recover up to 50% of that expense from the employee.

Employers and eligible employees are ordinarily required to make mandatory contributions towards the employee's pension plan of 5% of the basic salary, up to the maximum prescribed level of pensionable earnings (currently KYD87,000 per year). However, pension contributions have been suspended since April 2020 as part of a package of Covid-19 financial relief, and are unlikely to recommence before 2022.

Employers are responsible for work permit fees, and these must not be passed on to employees.

There are no applicable taxes.

There are no applicable taxes.

There is no applicable corporate taxation.

Income is not taxed.

Businesses pay annual registration fees and either:

See above.

There is no corporate taxation in the Cayman Islands.

No taxes are payable in these scenarios.

There are no restrictions.

There is no corporate taxation in the Cayman Islands.

There are no applicable transfer pricing rules.

Most imports are subject to duty. This is charged at a rate that varies depending on the nature of the goods in question; the most common rate is 22%. There is also a category of duty-free goods.

Exported goods are not taxed.

There are no applicable double taxation treaties. There are, however, a number of agreements governing tax information exchange with various countries.

The Utility Regulation and Competition Act (2019 Revision) regulates competition between utility services providers, including in the information and communication technology sector and regarding the supply of other commodities.

In addition, the potential effect on existing Caymanian-owned businesses is taken into account by the Trade and Business Licensing Board when it considers whether to permit a foreign-controlled company to trade within the Islands.

The Companies Act regulates mergers and consolidations within the Cayman Islands.

Any two or more Cayman Islands companies limited by shares (other than segregated portfolio companies) can merge or consolidate.

Additionally, one or more Cayman Islands companies can merge or consolidate with one or more overseas companies (provided that the laws of the foreign jurisdiction permit that merger or consolidation), where the surviving or consolidated company is either a Cayman Islands company or an overseas company.

No turnover tests apply from a Cayman Islands perspective. However, a statement of the assets and liabilities of each entity involved in the merger must be lodged with the Registrar. Subject to any greater level of consent required by the articles of association of a Cayman Islands entity, the merger must be approved by a special resolution of its shareholders. A special resolution is (subject to the relevant articles of association) passed by at least two-thirds of voting shareholders present in person and/or by proxy at the relevant meeting.

"Foreign to foreign" mergers of companies are not regulated by the Companies Act. There are no exemptions specific to foreign companies under the Companies Act.

The Anti-Corruption Act (2020 Revision) prohibits various corrupt interactions involving public officials, including:

Offences under the Act are punishable in most cases by substantial terms of imprisonment.

It is possible that certain provisions of the UK Bribery Act may apply to acts done within the Cayman Islands in certain circumstances.

The Patents Act (2018 Revision) provides for a Cayman Islands Registry of Patents, to which patents registered in the British or European registries may be extended on application.

Business with the Registry of Patents must be conducted through a registered agent.

The main remedies the courts can grant to patent holders are:

Criminal sanctions are also available.

Patent protection in the Cayman Islands dates from the time the rights arose in the UK or EU. Protection continues in force so long as the protection and rights remain in force in the UK or EU.

Protection is available for any graphical mark capable of distinguishing goods, services or undertakings, including by way of words, designs, numerals, letters or the shape of goods and/or packaging

The Trade Marks Act 2016 establishes a Cayman Islands Register of Trade Marks. Applications may be made to the Registrar of Trade Marks for registration, which is not contingent on previous registration in any other registry elsewhere in the world.

Trade mark rights may only be enforced by the registered proprietor, who may be able to obtain orders for the destruction or delivery up of the offending materials, in addition to damages, injunctions and accounts of profits. Unregistered marks are expressly excluded from the scope of any action under the Trade Marks Act but may nevertheless be actionable in passing off.

Protection continues in force for so long as the requisite annual fee is paid. Dealings with the Registry must be conducted through a registered agent.

Registered designs are not protected as such, but can be protected as trade marks.

Unregistered designs are not protected as such, but can be protected by copyright.

Copyright applies to the following:

Copyright exists automatically when a qualifying intellectual work is created. The Copyrights, Designs and Patents Act 1988 was extended to the Cayman Islands in modified form by the Copyright (Cayman Islands) Order 2015. UK orders for certain reciprocal protections in relation to copyrighted materials and design rights have also been made. Protection is otherwise mainly by common law right and is not capable of registration in the Cayman Islands.

Remedies (for example damages and/or injunctions) are available to either the:

The duration of protection varies depending on the nature of the work, but is available for substantial periods of up to the life of the author plus 70 years. This period may not be renewed.

Agency, distribution and franchising agreements are not regulated by legislation. These agreements are governed by contract law.

The Electronic Transactions Act (2003 Revision) provides a framework for electronic transactions and the use of electronic signatures.

There is no specific regulation of online marketing and sales.

There are no laws governing advertising in general. However, there are certain sector-specific provisions (for example, in relation to tobacco and intoxicating liquor).

There are also various criminal offences that relate to public decency.

There is no specific regulation of sales promotions.

Certain data are protected by the following:

The Freedom of Information Act (2015 Revision) gives the public a general right of access to official documents. It does not apply to the records held by the Cayman Islands Monetary Authority or to exempted companies.

There is no specific legislation regulating product liability in the Cayman Islands. The Sale of Goods Act (1997 Revision), in certain circumstances, implies conditions as to quality and fitness of goods into some contracts for sale which may be enforced against the seller.

A consultation draft of a Consumer Protection and Guarantees Bill was published in October 2017. It is presently unclear when that legislation is likely to be brought into force.

The principal regulator is the Cayman Islands Monetary Authority, which has oversight over the entire financial sector.

Outside financial services, most key regulatory functions are amalgamated within the Utility Regulation and Competition Office (OFREG), which is responsible for:

Some regulatory functions are undertaken from within government itself (for example, the licensing of business activities by the Department of Commerce and Industry), and others are outsourced (for example, the regulation of professional activities, which is generally undertaken by approved regulators formed by the relevant professional organisations).