2025 Update: Changes to Cayman Islands Beneficial Ownership Regime

The Cayman Islands' New Beneficial Ownership Regime: An Overview

The Cayman Islands, a premier international financial center, has long been under scrutiny for its corporate transparency standards. In response to global calls for enhanced oversight and compliance with international norms, the Cayman Islands introduced a new Beneficial Ownership Regime (the "New BO Regime"). The new framework is established under the Beneficial Ownership Transparency Act, 2023 (the "Act"), which took effect on July 31, 2024, and will be enforced starting January 1, 2025. The Act is supplemented by the Beneficial Ownership Transparency Regulations, 2024, along with guidance from the Ministry of Financial Services & Commerce.

This article provides an examination of the New BO Regime, its key changes, compliance obligations, and the broader implications for legal entities operating in the jurisdiction.

Key Changes Introduced by the New BO Regime

1. Expansion of Scope

One of the most significant reforms under the New BO Regime is the expansion of its applicability to a broader range of legal entities. Previously, beneficial ownership reporting obligations were primarily limited to companies and LLCs. However, under the new framework, the regime extends to all entities classified as "Legal Persons," including:

Companies incorporated or registered in the Cayman Islands
Limited liability companies (LLCs)
Limited liability partnerships (LLPs)
Foundation companies
Exempted limited partnerships (ELPs)
Limited partnerships (LPs)

Notably, this expansion marks the first time that ELPs and LPs are required to comply with beneficial ownership obligations. However, certain foreign entities remain outside the scope of the regime, including:

Trusts
Registered foreign companies (e.g., U.S. general partners of Cayman Islands partnerships)

The rationale behind these exclusions is that trusts and foreign companies are typically subject to separate regulatory oversight in their jurisdictions, reducing the need for duplicative reporting.

2. Removal of Exemptions

Under the previous framework, certain regulated entities enjoyed exemptions from beneficial ownership reporting obligations. These included entities registered under key financial services laws, such as:

The Mutual Funds Act (As Revised)
The Private Funds Act (As Revised)
The Securities Investment Business Act (As Revised)
The Virtual Asset (Service Providers) Act (As Revised)

The New BO Regime eliminates many of these automatic exemptions. Consequently, a significantly larger number of entities must now maintain Beneficial Ownership Registers (BORs) and ensure compliance with the reporting requirements. However, the new regime introduces alternative compliance routes for some categories of legal persons, as detailed below.

3. Revised Definition of Beneficial Owner

The new regime refines the definition of a "Registrable Beneficial Owner" to capture a wider range of individuals and entities exerting control over legal persons. A beneficial owner is now defined as an individual who:

Directly or indirectly owns or controls 25% or more of shares, voting rights, or partnership interests;
Exercises ultimate effective control over an entity through a chain of ownership or other means; or
Has control over its management (including through nominee arrangements or other indirect mechanisms).

If no individual meets these criteria, the entity must identify a senior managing official (e.g., a director or CEO) as the beneficial owner. Importantly, the Act clarifies that a senior managing official may also be a Professional Advisor or Professional Manager, as defined under the regulations.

In cases involving trusts, where no individual meets the 25% ownership/control threshold, the trustees will be deemed the beneficial owners if they exercise ultimate effective control.

4. Expanded Beneficial Ownership Information Requirements

The New BO Regime introduces additional data collection requirements to enhance transparency. Entities must now include the following details in their Beneficial Ownership Registers:

The nationality of each beneficial owner
The nature and extent of ownership or control exercised by the beneficial owner

These additions bring Cayman Islands reporting obligations in line with evolving global best practices.

Alternative Compliance Routes

The Act provides the following alternative compliance mechanisms:

Investment funds registered under the Mutual Funds Act or Private Funds Act must provide the contact details of a designated "Contact Person." This individual must be a licensed fund administrator or another person licensed or registered with the Cayman Islands Monetary Authority (CIMA).

CIMA-licensed legal persons must identify the specific regulatory law under which they are licensed.

Legal persons listed on the Cayman Islands Stock Exchange or another approved stock exchange must provide the name and jurisdiction of the stock exchange. If applicable, they must also provide details of their relationship to the listed entity.

It is important to note that subsidiaries of licensed entities and regulated investment funds do not automatically qualify for alternative compliance routes. Only subsidiaries of listed entities may be eligible, provided they meet the definition of a "subsidiary" under the Act.

Regulated investment funds can appoint a "Contact Person"—a licensed fund administrator or other individual located in the Cayman Islands—to handle beneficial ownership matters. The Contact Person must respond to information requests within 24 hours (or any other specified timeframe). The Competent Authority may request full beneficial ownership details if deemed necessary.

Conclusion

The introduction of the New BO Regime represents a major shift in the Cayman Islands' approach to beneficial ownership transparency. By expanding its scope, eliminating many exemptions, refining the definition of beneficial owners, and introducing stringent enforcement mechanisms, the Cayman Islands is aligning its regulatory framework with international standards set by organizations such as the Financial Action Task Force (FATF).

While the new requirements impose additional compliance burdens, they also serve to enhance the jurisdiction's reputation as a transparent and well-regulated financial center. Entities operating in the Cayman Islands should take immediate steps to assess their obligations under the new framework and ensure timely compliance to avoid penalties.