Starting a business in Cayman

SideBar: Cayman’s-competitive-advantages
 
“The building here is already a big step [referring to the new Government Administration Building on Elgin Avenue]. You can do so many things here now that would have previously required going to three or four separate locations across George Town.”


~ Franz Manderson

Anyone wishing to start a business in the Cayman Islands must follow a series of steps to register the business with the government. The Department of Commerce and Investment is charged with overseeing the establishment of businesses, and the Chamber of Commerce also offers a wealth of information.

The Department recommends enlisting the services of a local law or management firm for this purpose. There are many local firms that offer corporate services to assist with the process, which in many cases is complex out of necessity, depending on the nature of the company.

Improving the process

However, through the Chamber’s Future of Cayman initiative, the public and private sector are working together to facilitate a “Business Friendly Climate”, which includes ease in starting and operating companies.

Veteran civil servant Franz Manderson, who has been selected to become Cayman’s Deputy Governor in January 2012, and RE/MAX sales associate Michael Joseph are charged with leading that driver group.

Manderson said the goal of their group is not about just getting government out of the way so that businesses can operate freely and without restrictions.

“It’s more about government being able to foster relationships and work with the private sector so they can maintain their competitive edge. Too often government is seen as a stumbling block to business,” he said.

“All of this is geared toward eliminating that idea. We are focusing on customer service across government and in the Civil Service as well. It’s not just about technology; it’s also about having the right people.”

The driver is broken down into three objectives, which are further split into individual actions that are delegated to group members, who independently pursue the objectives between the regular driver group meetings.

“We meet once a month but touch base online almost every day  and maintain weekly, monthly and quarterly goals,” Joseph said.

One of the driver group’s individual actions is to focus on customer friendly service, which is a well-known tenet of private sector strategy but is not the first thing that springs to most people’s minds when the topic of government arises. However, Manderson has been towing the customer service line for years, for example, revamping the customer service centre while he was head of the Immigration Department, including setting up a call centre so people could have questions answered by phone and increasing emphasis on the department’s website.

In general, Manderson is advocating for more efficient government so that people and businesses can get things done with a minimal amount of bureaucratic steps. He said a goal is to set up “one-stop shops” that people can contact to deal with numerous departments at once.

“The building here is already a big step,” he said, referring to the new Government Administration Building on Elgin Avenue. “You can do so many things here now that would have previously required going to three or four separate locations across George Town.”

While having an efficient and customer-oriented government is a lofty objective, the individual actions in the Future of Cayman initiative do include some ‘low-hanging fruit’ that are easier to reach immediately. One such action, for example, is “Expand payment options via the introduction of online electronic transactions”.

Manderson said the government is working to quickly implement a system to allow people to make payments by credit/debit card, as well as online.

“There’s no reason that we shouldn’t offer that option,” he said.

Doing business in Cayman

Additionally, one of the driver group’s action items is to develop a roadmap to investment in Cayman, which is a document or series of documents that combine the necessary steps, in sequence, to start or buy a business, or buy property, or obtain employees. Until that roadmap is created, the Department and Chamber each is a good place to begin to find that information.

Businesses are usually established by an individual, company or partnership. All must be registered with the Registrar of Companies. Additionally, limited partnerships, which can be formed by two or more people or companies, must register with the Registrar of Limited Partnerships.

Currently, application for incorporating a business must be delivered in person to the Registrar, located at the Citrus Grove Building.

The first step to incorporate a company is to check with the Registrar to see if the desired business name is available. Applications for incorporating a business are made to the Registrar, and require a memorandum of understanding, articles of association, a cover letter outlining the business proposal, and a filing fee payable to the government. Fees vary according to the type of business.

The typical types of businesses are resident companies, foreign companies, non-resident companies, exempted companies and segregated portfolio companies. Resident companies and foreign companies carry on business in Cayman; the others are focused on doing business outside Cayman.

A resident company must maintain its registered officer and a register of past and present members. This company is allowed to hold land. A resident company with capital of $42,000 or less pays a fee of $150 upon registration and annually to the Registrar. A resident company with capital in excess of $42,000 pays $350.

A foreign company pays $850 upon registration and annually. A foreign company is a company incorporated outside of Cayman but carries on business locally.
Businesses wishing to engage in commercial activity in Cayman must have a Trade and Business Licence, administered through the Trade and Business Licensing Board. The fees vary broadly according to the nature of the company.

Foreign-owned or controlled companies must obtain a licence under the Local Companies (Control) Law. A company is considered foreign-owned if less than 60 per cent of the equity is owned by Caymanians or if less than 60 per cent of the board of directors is Caymanian. This licence has a maximum duration of 12 years, but the Governor may approve a longer period.

Companies operating within the financial services industry must apply for a licence from the Cayman Islands Monetary Authority. These entities include banks, trusts, insurance companies, fiduciary services, and investment and securities services.

Some businesses, such as hotels and telecommunications companies, must obtain licences through other departments and do not need a trade and business licence to operate. However, in those cases Local Companies (Control) Licences are required if the companies are foreign-owned.

Based in Cayman,
doing business overseas

More than 8,000 companies register with the Registrar in a typical year. Many of those are actually set up to do business outside of the jurisdiction. Those include non-resident, exempted and segregated portfolio companies.

A non-resident company with capital of $42,000 or less pays $400 upon registration and annually. A non-resident company with capital in excess of $42,000 pays $565. This type of company is an alternative to the exempted company. It must maintain a registered office and register of past and present members. It may deal in shares of exempted companies, foreign corporations and partnerships, but may only carry on such other business in Cayman as is necessary to further its foreign business. Non-resident companies do not intend to carry on business within Cayman. They may be converted to resident companies or exempted companies.

An exempted company with capital of $42,000 or less pays $470 upon registration and annually. An exempted company with capital between $42,000 and $820,000 pays $660. An exempted company with capital between $820,000 and $1.64 million pays $1,384. A company with capital in excess of $1.64 million pays $1,968. The proposed activities of an exempted company are to be carried on mainly outside Cayman. An exempted company does not have to keep a public register of members or hold an annual general meeting, though its board of directors must meet at least once  year in Cayman. An exempted company may be listed on the Cayman Islands Stock Exchange. An exempted company that is empowered to issue shares cannot hold land in Cayman.

Another kind of exempted company is an exempted limited duration company. Its duration must not exceed 30 years, and it must have at least two members. These companies pay an extra $200 upon registration, plus the normal exempted company registration fee.

A segregated portfolio company pays $500 upon registration. The annual fee for a segregated portfolio company depends on how much capital it has, and is the fee for a comparably sized exempt company plus $2,000. In addition, there is a fee of $1,000 for each segregated portfolio within the segregated portfolio company, up  to a maximum of $1,500. A segregated portfolio company is a form of exempted company whose business is restricted to offshore insurance and which has a class “B” insurer’s licence. This company have its assets and liabilities segregated into individual portfolios, apart from its general assets and other portfolios.

After registering

A business wishing to construct or renovate a building will need to liaise with the Department of Planning.

In addition to special concessions granted by the government for major projects that are negotiated between the government and the developer, the government also has offered standard concessions during calendar year 2011.

For example, there is a 100 per cent waiver for duty on building materials for Cayman Brac and Little Cayman; a 100 per cent deferral of infrastructure fees until the Certificate of
Occupancy/Completion stage for projects submitted for planning approval; 25 per cent deferral of building permit fees until the Certificate of Occupancy/Completion stage for projects submitted for planning approval; and a flat import duty rate of 15 per cent on materials imported before 31 December for projects submitted for planning permission or for a building permit.

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