The Director Registration And Licensing Regime In The Cayman Islands - Directors and Officers

The Cayman Islands Directors Registration and Licensing Act, 2014 (the DRLA) provides for the registration and, in certain cases, licensing of individuals appointed as directors of (i) mutual funds regulated under the Mutual Funds Act by the Cayman Islands Monetary Authority (CIMA); or (ii) companies registered as 'registered persons' under the Securities Investment Business Act (each a Covered Entity). The DRLA also prescribes a licensing regime for corporate directors of Covered Entities.

Scope

The DRLA only covers directors of Covered Entities and does not apply to directors of other Cayman Islands companies. Further, it does not apply to all fund entities registered with CIMA, as both CIMA registered partnerships and trusts are outside its scope. The DRLA does not extend therefore to directors of general partners, or to trustees, of Covered Entities. The DRLA is not restricted to Cayman-based directors but extends to all directors of Covered Entities, wherever they are resident or incorporated. The DRLA allows CIMA to verify certain basic information in respect of directors of Covered Entities as well as to establish a regulatory framework for both 'professional directors' and corporate directors.

Registered Directors

An individual acting as a director of an existing Covered Entity is required to be registered with CIMA. CIMA may refuse to register an applicant if it has information that the applicant has been convicted of a criminal offence involving fraud or dishonesty, or is the subject of sanctions from a regulator, self-regulatory organisation or a professional disciplinary body.

The initial application fee is US$170, together with a registration fee of US$685. For each subsequent year, an annual registration fee of US$855 must be paid by 15 January.

With regard to new fund launches, a director of a Covered Entity must be registered or licensed by CIMA before being appointed to act. Such registration or licensing may therefore have timing implications when launching a new fund if any proposed director is not already registered or licensed.

Professional Directors

Professional directors are required to be licensed (as opposed to registered) by CIMA. Applicants will be subject to a 'fit and proper' determination and the licence may be granted with conditions. Two categories of director who would otherwise fall within the definition of professional director are exempted from the licensing requirement but are required to register with CIMA as registered directors. Such persons are directors, employees, members, officers, partners or shareholders of (i) an entity holding a Cayman Islands companies management licence or a mutual funds administrators licence; or (ii) fund managers of a CIMA regulated mutual fund which fund manager is registered or licensed by one of the prescribed overseas regulatory authorities listed in the DRLA, provided such individual is acting as a director of the relevant fund(s) by virtue of his relationship to that fund manager.

The initial application fee is US$610, together with a licensing fee of US$3,050. For each subsequent year an annual licensing fee of US$3,660 must be paid by 15 January.

Corporate Directors

Corporate directors are either required to be registered as a Cayman Islands company or, if a non-Cayman Islands entity, to be registered as a foreign company in Cayman. Overseas corporate directors will therefore have an added financial burden to register as a foreign company in Cayman to comply with the DRLA.

A corporate director is required to be licensed by CIMA, though corporates which hold a Cayman Islands companies management licence or a mutual fund administrator's licence and which provide directors to Covered Entities are not required to be separately licensed under the DRLA. Corporate directors must have at least two natural persons on their board who meet CIMA's fit and proper requirements and proposed new or additional appointees are required to be approved by CIMA.

The initial application fee is US$975, together with a licensing fee of US$8,780. For each subsequent year an annual licensing fee of US$9,760 must be paid by 15 January.

Both corporate directors and professional directors are subject to minimum insurance requirements.

Registration and Licensing Process

Registration and licensing applications are required to be made via CIMA's online portal. Applicants for registration or licensing will be required to provide certain prescribed information. Payment will only be accepted via the online portal by way of Visa or MasterCard.

Database

Pursuant to the DRLA, CIMA maintains a register of directors of Covered Entities, in accordance with the confidentiality provisions of the Monetary Authority Act. The public may search the name of any director to see whether registered or licensed in accordance with the DRLA. The result of any such search will only show the director's name, the type of registration or license held, the registration/license number and the date on which such person was licensed or registered. The Registrar of Companies also maintains a list of the names of current directors (and where applicable, alternate directors) of a company, which is available for inspection by any person on payment of US$61. This list is searchable by company name and will provide only the names of the current directors.

Penalties

The registration, licensing and other obligations under the DRLA are personal obligations of the particular director and not obligations of the Covered Entity or any other person.

Failure to comply with the director registration requirements under the DRLA is an offence and on summary conviction carries a maximum fine of approximately US$60,000 and/or up to 12 months imprisonment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.