What is a Cayman Islands exempted company and what are its key features?

A Cayman Islands exempted company is a corporate entity incorporated under the Companies Act (as revised) that is designed to conduct business primarily outside the Cayman Islands. It is one of the most widely used offshore company structures for international investment and fund transactions, routinely deployed as a hedge fund vehicle, holding company, special purpose vehicle (SPV), general partner entity, or issuer in structured finance transactions. Its combination of legal certainty, tax neutrality, operational flexibility, and confidentiality makes it the default choice for international fund structures and cross-border investment platforms.

Separate Legal Personality and Limited Liability

An exempted company has full legal personality: it can own assets, enter into contracts, sue and be sued, and borrow money in its own name. Shareholders have limited liability: their exposure is confined to any unpaid amounts on their shares. There is no minimum capital requirement under the Companies Act (as revised), and a company can be incorporated with as little as one share. The company has perpetual succession unless it is wound up or struck off the register.

Tax Neutrality and the Exemption Undertaking

The Cayman Islands imposes no corporate income tax, no capital gains tax, no withholding tax on dividends, and no stamp duty on share issuances. More significantly, an exempted company can apply for a tax exemption undertaking under the Tax Concessions Act (as revised). This provides a formal assurance that future legislation imposing direct taxation will not apply to the company for a specified period, currently up to 30 years from the date of the undertaking for an exempted company.

Note: the available period differs for other entity types (for example, exempted limited partnerships and LLCs may obtain undertakings for longer periods under the same Act). Managers should confirm the applicable term with Cayman counsel at the time of incorporation.

No Restrictions on Nationality or Residency

There are no requirements for directors or shareholders of an exempted company to be resident in the Cayman Islands or to hold any particular nationality. A single individual or corporate entity can act as the sole shareholder and sole director simultaneously. Meetings of shareholders and directors can be held anywhere in the world or conducted by written resolution without a meeting. There are no quorum requirements or mandatory annual general meetings under Cayman law, though the articles of association may impose these requirements contractually.

Confidentiality

Unlike many onshore jurisdictions, the Cayman Islands does not maintain a publicly accessible register of shareholders or beneficial owners. The register of directors is publicly accessible.

Beneficial ownership information is held in a secure, non-public register accessible only to competent authorities under the Beneficial Ownership Transparency Act, 2023 (BOTA), which came into force on 31 July 2024. This BOTA framework aligns Cayman with international beneficial ownership transparency standards while maintaining appropriate confidentiality for commercial and fund structures.

Restriction on Carrying on Business in the Cayman Islands

The defining feature of an “exempted” company is that it is exempt from certain domestic trading restrictions in exchange for conducting its business primarily outside the Cayman Islands.

An exempted company must file a declaration with the Registrar confirming that it will not trade in the Cayman Islands with any person except in furtherance of business carried on outside the Islands. This restriction does not prevent the company from maintaining a registered office, holding directors’ meetings, or employing local service providers in Cayman. It simply means the company’s commercial activities must be externally focused.

Incorporation and Ongoing Requirements

An exempted company is incorporated by filing a memorandum and articles of association with the Registrar of Companies. The company must maintain a registered office at the address of a licensed Cayman Islands service provider. Key ongoing obligations include:

• Filing an annual return with the Registrar of Companies each January, confirming compliance with the Companies Act (as revised);
• Paying an annual government fee (which varies by authorised share capital);
• Maintaining a register of members and a register of directors at the registered office or at another location notified to the Registrar;
• Filing beneficial ownership information under the BOTA framework;
• Complying with Cayman Islands AML/CFT regulations if the company is carrying on relevant financial business; and
• If registered as a mutual fund or private fund with CIMA, meeting the annual audit and financial statement filing obligations imposed by CIMA.

There is no requirement to file annual accounts publicly. The company must, however, maintain sufficient accounting records to enable the financial position of the business to be determined with reasonable accuracy at any time.

Common Uses

Exempted companies are used across a wide range of structures, including:

• Hedge fund vehicles (open-ended, registered with CIMA under the Mutual Funds Act);
• Feeder funds in master-feeder structures;
• General partner entities for exempted limited partnerships;
• Holding companies for international investments or intellectual property;
• Special purpose vehicles (SPVs) for structured finance, securitisation, or real estate transactions;
• Issuer vehicles in debt capital markets transactions; and
• Segregated portfolio companies (a special variant of the exempted company structure).

wb.group provides registered office services, corporate administration, and independent directorship services for exempted companies across fund and non-fund structures.

Related questions: What are the main types of legal entity available in the Cayman Islands? | How do I choose the right Cayman Islands entity structure for my fund or investment vehicle?

wb.group specialises in Cayman Islands corporate services for fund managers and investment platforms. Contact us to discuss your structure.