The Cayman Islands provides six principal legal entity types for funds, investment vehicles, and international business: the exempted company, the segregated portfolio company (SPC), the exempted limited partnership (ELP), the limited liability company (LLC), the unit trust, and the limited duration company (LDC). Each structure has distinct legal characteristics, and the right choice depends on the fund strategy, investor base, and regulatory requirements.
Exempted Company
The exempted company is the most widely used entity in the Cayman Islands and is incorporated under the Companies Act (as revised). It is a separate legal person with perpetual succession, limited liability for its shareholders, and the ability to hold assets and enter into contracts in its own name.
Exempted companies are formed to conduct business primarily outside the Cayman Islands, and directors and shareholders can be of any nationality. They are commonly used as hedge fund vehicles, holding companies, special purpose vehicles (SPVs), and general partner entities in fund structures.
Upon application, the Cayman Islands government can issue a tax exemption undertaking that locks in tax-neutral status for a specified period under the Tax Concessions Act (as revised).
Segregated Portfolio Company (SPC)
A segregated portfolio company is a special type of exempted company that can create statutorily separate “segregated portfolios,” each with its own ring-fenced pool of assets and liabilities. This means that the assets of one portfolio are protected from the creditors of another, a feature with no equivalent in most onshore jurisdictions.
SPCs are frequently used by umbrella funds, multi-strategy platforms, and insurance captives, where multiple sub-funds or cells need to operate under a single corporate umbrella without cross-contamination of risk. Each segregated portfolio is not a separate legal entity, but its assets are legally isolated from the general assets of the SPC and from those of other portfolios.
Exempted Limited Partnership (ELP)
An exempted limited partnership is formed under the Exempted Limited Partnership Act (as revised). It consists of at least one general partner, who manages the partnership and bears unlimited liability, and one or more limited partners, whose liability is limited to their capital contributions.
ELPs are the dominant vehicle for closed-ended funds, including private equity, venture capital, real estate, and infrastructure funds. They are generally treated as fiscally transparent for US tax purposes, meaning income retains its character as it flows through to limited partners, a feature that is particularly attractive to US institutional investors and family offices, subject to applicable tax elections and the specific facts of the structure. There are no requirements to hold annual meetings or file accounts.
Limited Liability Company (LLC)
The Cayman Islands LLC was introduced in 2016 under the Limited Liability Companies Act (as revised) and was designed to replicate the Delaware LLC structure familiar to US fund managers and investors.
An LLC does not issue shares; instead, it is governed by a bespoke LLC agreement and has members rather than shareholders. It is neither a company nor a partnership in the traditional sense, but it combines the limited liability of a company with the contractual flexibility of a partnership. LLCs are commonly used for parallel funds that mirror a US limited partnership structure, co-investment vehicles, and joint ventures where US counterparties require a US-familiar form.
Unit Trust
A unit trust is not a company or partnership but a contractual arrangement governed by a trust deed. A trustee holds the trust assets for the benefit of unit holders, who receive beneficial interests (units) in return for their investments.
Unit trusts are particularly useful for investors in jurisdictions, including certain Asian and Middle Eastern markets, where local tax rules treat corporate entities less favourably than trusts. They are also used for Islamic finance structures and in situations where investors require a trust-based holding arrangement for regulatory or estate planning reasons.
Limited Duration Company (LDC)
A limited duration company is a variant of the exempted company designed with a defined lifespan specified in its memorandum, under the Companies Act (as revised). This may be set at up to 30 years, after which the company automatically begins winding up unless dissolved earlier by its members. [
The name of an LDC must include “LDC” or “Limited Duration Company” and it must have at least two members. LDCs are used in specific structured finance and joint venture contexts where a defined lifespan is commercially or contractually required.
Selecting the right entity type is one of the most consequential decisions in structuring a Cayman Islands fund or investment vehicle. The choice has implications for investor tax treatment, regulatory classification, governance, liability, and long-term flexibility. wb.group works with fund managers and their legal counsel to ensure the chosen entity type aligns with the fund’s strategy, investor profile, and commercial objectives.
Related questions: How do I choose the right Cayman Islands entity structure for my fund or investment vehicle? | What is a Cayman Islands exempted company and what are its key features? | What types of investment funds can be structured in the Cayman Islands?
wb.group specialises in Cayman Islands corporate services for fund managers and investment platforms. Contact us to discuss your structure.
FAQs
The Cayman Islands provides six principal legal entity types for funds, investment vehicles, and international business: the exempted company, the segregated portfolio company (SPC), the exempted limited partnership (ELP), the limited liability company (LLC), the unit trust, and the limited duration company (LDC). Each structure has distinct legal characteristics, and the right choice depends on the fund strategy, investor base, and regulatory requirements.
An Exempted Company is a Cayman Islands company incorporated for the purpose of conducting business outside the Cayman Islands. Unlike an ordinary resident company, an Exempted Company is not required to hold an annual general meeting in Cayman, may issue shares to bearer, and is eligible for a government-issued tax exemption undertaking of up to 50 years. The Exempted Company is the standard vehicle for offshore investment funds, holding structures, and special purpose vehicles used by international clients.
An Exempted Limited Partnership (ELP) is the standard Cayman vehicle for closed-ended funds, including private equity, venture capital, infrastructure, and real assets funds. It mirrors the Delaware limited partnership structure familiar to US institutional investors and their counsel. The ELP has a general partner with unlimited liability who manages the partnership, and limited partners whose liability is generally limited to their committed capital, subject to the terms of the partnership agreement and applicable law. The Exempted Limited Partnership Act (Revised) governs the ELP and allows flexible arrangements for profit allocation, capital calls, and distributions.
A segregated portfolio company is a special type of exempted company that can create legally ring-fenced sub-funds, each with isolated assets and liabilities. It is used by multi-strategy fund managers, umbrella fund platforms, and managed account operators who want to run multiple strategies or investor pools under a single corporate umbrella without cross-contamination of risk between portfolios.
The Cayman Islands Limited Liability Company (LLC), established under the Limited Liability Companies Act, 2016, is modelled closely on the Delaware LLC and will be familiar to US managers and investors. It offers flexible governance through an LLC agreement, does not require a board of directors, and provides limited liability for all members. The Cayman LLC is used for general partner entities, co-investment vehicles, and joint ventures where the flexibility and familiarity of the LLC structure is preferred over a company or limited partnership.
Yes. Cayman Islands entities regularly hold assets, enter into contracts, and maintain accounts across multiple jurisdictions. An Exempted Company or Exempted Limited Partnership can hold shares in foreign companies, own real property abroad, maintain bank accounts in the US or UK, and be a party to agreements governed by English or New York law. There are no exchange control restrictions on the movement of capital into or out of the Cayman Islands, which is one of the principal reasons the jurisdiction is used as a holding and fund structure location by international investors.
The exempted company is the most widely used entity for Cayman Islands hedge funds. It offers separate legal personality, limited liability for shareholders, and can issue redeemable shares, making it compatible with standard prime brokerage and administration arrangements. Open-ended hedge funds are typically registered with CIMA under the Mutual Funds Act as registered mutual funds.
Exempted limited partnerships are generally treated as fiscally transparent for US tax purposes, allowing income to retain its character as it flows through to investors. This is particularly important for US institutional investors such as pension funds and endowments. The ELP structure also allows flexible capital call mechanics and carried interest arrangements that are well understood by the global private equity market.
A Cayman LLC does not issue shares: it has members governed by a flexible LLC agreement, mirroring the Delaware LLC familiar to US investors. An exempted company issues shares and is governed by a memorandum and articles of association. LLCs are commonly used for co-investment vehicles and parallel fund structures, while exempted companies remain the standard for hedge fund vehicles and holding structures.