On 7 July 2020, the Cayman Islands Government passed several amendments to the Private Funds Law 2020.
It is important to note that these changes broaden the scope of the definition of a private fund in several ways that may require previously out of scope entities to register as a private fund and comply with additional requirements.
We have provided a summary of the key points to note below:
1. Amendments made to the definition of a “private fund”:
- The previous wording “offering and issuing of its investment interests” indicates that an ongoing offering is required to fall in scope. The amended wording “offers or issues or has issued investment interests” widens the scope of the definition to include vehicles that are not currently engaging in a sales process, including existing funds that have issued investment interests in the past.
- The reference to “principal business” has been deleted, so that entities engaged mainly in non-fund business with some private fund business shall not be automatically excluded.
- The reference “with the aim of spreading investment risks” has been deleted, so that closed ended funds with only one investment shall not be automatically excluded.
- The reference “for reward based on the assets, profits or gains of the company, unit trust or partnership” has been deleted to ensure that, in a multi-fund investment structure where manager fees are paid at one level, this shall not create an exclusion to register
2. Sections 16, 17 and 18 have been amended with the effect of increasing the level of compliance required in the event of a conflicts of interest arising in relation to valuation, safekeeping and/or cash monitoring. The previous position was that these conflicts of interest just needed to be disclosed, however the amendment now specifies that the conflicts of interest must also be “managed and monitored”.
3. Section 31 has been repealed, which means that the Cayman Islands Government is no longer to approve the exemption of “any person or class of persons or business or class of business from any provision of this Law” in its own right. Following this amendment, any such exemption should be made by amendment to the Private Funds Law itself, which requires the approval of the Legislative Assembly.
The amendments can be reviewed in full by following the link below:
Please note that the deadline for all registrations and compliance with the provisions of the Private Funds Law remains
7 August 2020.
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For further information or if you wish to discuss any of these changes and the services we can provide please do not hesitate to contact our team: