On 7 July 2020, the Cayman Islands Government amended the Private Funds Law, 2020 (the "PFL"), changing the definition of a 'private fund' both to clarify the position for certain entity types and to extend its scope to additional entities.
As outlined in our previous update, the PFL commenced on 7 February 2020 and provides for the registration of certain closed-ended entities (termed "private funds") with the Cayman Islands Monetary Authority ("CIMA").
Revised Definition of Private Fund
Pursuant to the amended definition of 'private fund', a company, unit trust or partnership is defined as a 'private fund' where it offers or issues, or has issued, investment interests, the purpose or effect of which is the pooling of investor funds with the aim of enabling investors to receive profits or gains from such entity's acquisition, holding, management or disposal of investments, where:
(a) the holders of investment interests do not have day-to-day control over the acquisition, holding, management or disposal of the investments and the investments; and
(b) the investments are managed as a whole by or on behalf of the operator of the private fund directly or indirectly.
The definition does not include the following:
(a) a person licensed under the Banks and Trust Companies Law (2020 Revision) or the Insurance Law 2010;
(b) a person registered under the Building Societies Law (2020 Revision) or the Friendly Societies Law (1998 Revision); or
(c) any non-fund arrangements (a list of 25 structures and arrangements is scheduled on page 29 of the PFL).
Which entities fall within the scope of the revised definition?
The revised definition both clarifies the position for certain entity types and extends the scope of the PFL to additional entities. This clarification and extension may have changed the position for a number of entities, including but not limited to certain master funds, certain alternative investment vehicles and funds formed for a single investment.
When will entities qualifying as private funds need to register?
In order to comply with the PFL, all entities (including those caught by these changes to the definition of a private fund) which qualify as private funds will need to register with CIMA by 7 August 2020.
How does this affect you?
The fact-specific nature of the analysis in respect of entities that may fall within the revised definition, added to the fact that the PFL is a new regime in respect of which industry practice and CIMA's regulatory guidance are still developing, make it important to consult with your usual Maples Group contact as soon as possible if you are concerned that this clarification and extension may affect the Cayman Islands entities within your business.
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.
