The Cayman Islands offers a range of legal structures suited to different investment strategies and corporate purposes, with the Exempted Company and the Exempted Limited Partnership being the most widely used by fund managers and investment vehicles. Selecting the correct entity from the outset is important, as each structure carries distinct legal, regulatory, and tax characteristics that affect how the fund is governed, how investors participate, and what ongoing compliance obligations apply.
Exempted Company
The Exempted Company is the most widely used corporate vehicle in the Cayman Islands and the standard structure for open-ended hedge funds, special purpose vehicles, holding companies, and joint venture entities. It can typically be incorporated within 24 hours, subject to due diligence requirements. In addition, this structure does not require Cayman-resident directors, though regulated entities must meet applicable director registration and governance requirements, and is eligible for a government-issued tax exemption undertaking for up to 50 years. Shares may be issued in multiple classes, making the Exempted Company highly flexible for fund structuring and investor segregation purposes.
Exempted Limited Partnership
The Exempted Limited Partnership (ELP) is the standard vehicle for closed-ended private equity, venture capital, and real assets funds. It closely mirrors the general partner and limited partner structure used in Delaware limited partnerships, which institutional investors in these asset classes are familiar with. The ELP is governed by the Exempted Limited Partnership Act (Revised), offers flexible profit and loss allocation, and benefits from the same tax neutrality as the Exempted Company. The general partner bears unlimited liability while limited partners’ exposure is capped at their committed capital.
Limited Liability Company
The Cayman Islands Limited Liability Company (LLC), introduced under the Limited Liability Companies Act, 2016, combines features of a company and a partnership. It offers members limited liability, does not require a board of directors, and allows for flexible governance through a written LLC agreement. The LLC has been adopted for joint venture vehicles, co-investment structures, and general partner entities, and is particularly familiar to US managers and investors who use the Delaware LLC as a reference structure.
Segregated Portfolio Company
The Segregated Portfolio Company (SPC) is a variant of the Exempted Company that allows a single legal entity to maintain multiple ring-fenced portfolios, each with its own assets and liabilities that are legally protected from the claims of other portfolios. SPCs are used for multi-class or multi-strategy fund structures, insurance captives, and structured finance vehicles. Investors in one segregated portfolio have no recourse to the assets of another, which is the key structural feature that makes the SPC suitable for umbrella fund arrangements.
Foundation Company
The Cayman Islands Foundation Company, introduced under the Foundation Companies Act, 2017, is a hybrid structure that combines features of a company and a trust or foundation. It may be structured without shareholders (in which case a supervisor is appointed) and is governed by its memorandum and articles. It can be used for wealth planning, purpose vehicles, and increasingly is used in digital asset and blockchain-related structures.
Selecting the right Cayman entity from the outset avoids costly restructuring later and ensures the structure is aligned with the regulatory, investor, and operational requirements of the strategy. wb.group advises on entity selection and incorporates all principal Cayman vehicles. Contact us to discuss which structure fits your requirements or visit wb.group’s Corporate Services Page.
Related questions: Why do fund managers choose the Cayman Islands rather than BVI, Bermuda, or other offshore jurisdictions? | Who regulates the Cayman Islands financial services industry, and what authority does CIMA have? | How does the Cayman Islands legal system work, and why does it matter for international investors? | How does the Cayman Islands compare to BVI, Bermuda, or Mauritius for fund structuring?
FAQs
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 (SPC) is an Exempted Company with statutory authority to create multiple segregated portfolios within a single legal entity, each with ring-fenced assets and liabilities. The key feature is that creditors of one portfolio have no recourse to the assets of another as a matter of Cayman law. SPCs are used for multi-class or multi-strategy hedge funds, fund platforms with multiple sub-funds, and insurance captive structures. They reduce the administrative burden of maintaining separate legal entities for each sub-fund while preserving the liability separation that investors require.
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.