MLA urges Caymanian business ownership rule

East End representative Arden McLean has advocated company ownership rules that would disqualify non-Caymanians from owning shares in local businesses, to deal with the issue of fronting. 

Speaking in Finance Committee last Wednesday Mr. McLean said, “The only way to address fronting is 100 percent Caymanian ownership.” 

Mr. McLean said current rules requiring a Caymanian to own at least 60 percent of a local business and limiting non-Caymanian ownership to 40 percent, unless exempt under the Local Companies Control Law, are no longer needed because the country now has sufficient financial means to develop the economy.  

“The day of 60-40 and LCCL … done. That was when we did not have the financial resources in this country to assist with development and to build it,” Mr. McLean said. “All those people who assisted us received their just reward for that. “We got plenty Caymanians … We got plenty of us now; we can deal with that.” 

Fronting covers cases where a Caymanian partner is the majority owner of a local business on paper only, and certain contractual arrangements or other instruments allow the non-Caymanian shareholder to exercise financial and management control.  

The topic of fronting emerged during a discussion of the use of public docks by dive operators which interfere with Caymanian fishermen.  

When Minister of Financial Services Wayne Panton pointed out that many of the dive firms are owned by Caymanians, opposition benchers shouted: “Fronters!” 

West Bay MLA Captain Eugene Ebanks said, “There is a lot of fronting going on, there is no question in my mind about that. Unfortunately, the Caymanians are not the ones who really benefit in a significant way from these fronting operations.” 

Mr. Panton responded that the new Trade and Business Licensing Law contained significant enhancements, including specific provisions that will address the issue of fronting.  

Under the new law, applicants for the renewal of a trade and business license have to present, in addition to an annual return and a shareholder return, a statement confirming that the effective control and benefit of the company is not in any way altered from the return of shareholdings.  

Significant changes in ownership or interests in a company have to be pre-approved in writing by the Trade and Business Licensing Board. 

“I am not going to tell you that it will have a 100 percent success, but I imagine that there is a far greater chance that it will address some of the issues in connection with that than under the old law,” Mr. Panton said. 

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Mr. McLean
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  1. If fronting is the problem that we are trying to fix then the proposed changes will go a long way to solving that problem.

    I am not 100% convinced that I support the change but I do admit that it is more than obvious to see what is going on in the Cayman Islands with Caymanians not truly owning many of these so-called local companies.

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  2. I think that Mr McLean approach to the law is wrong and self interesting to the economic development of the Islands, and to say that we have enough of us here now, make me feel like he is saying that if you want to do business in Cayman Islands you have to deal with with one of us that all ready have lots of money, while refusing all the other people the opportunity and chance to better one’s life. We have to remember that the law has been around for a long time, and it has helped many people even those that are trying to change it now . Mr McLean I think that the Islands has more other problems that need to be addressed , not this one.

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  3. Let me understand this…

    There is fronting going on now, with laws requiring 60% Caymanian ownership which is a significant controlling majority. As In: With 60%, one can fire or hire directors, appoint themselves as directors, control the bank accounts and the money etc etc.. you don’t need a 100% to do this.

    But with the 100% ownership proposal by the enlightened ones, fronting will somehow NOT happen IF we add another 40% ownership on top of that?? What’s the difference between 60% and 100% in terms of controlling interest? You think people won’t front at 100%, ONLY at 60%??? What about at 75% Does this mean we will reduce fronting by 15%??

    So what they are in essence saying IS: We won’t fix the issues we’re supposed fix (Which is Caymanian Ownership), so we will just make it entirely not attractive (or impossible) for foreign nationals to open commerce in the Cayman Islands? That’s your solution? For example Shetty should not have been allowed to come on Island according to the enlightened ones..

    This will fix our current unemployment in your views? This will fix the training issues, inexperience and underexposure to new modern businesses, markets and practices for Caymanians?

    Just when you think you heard the dumbest thing imaginable from these pseudo-intellects, you hear something like this…It’s embarrassing that our leaders don’t have the slightest clue how the economy actually works in real life (I mean embarrassingly clueless) and result to political posturing to make it look like they are actually doing something meaningful.

    How about this for a thing that actually solves a major problem: We need 100% replacement on leadership for the Country, Then:

    Facilitate MORE commerce from overseas to create NEW businesses in Cayman, which in turn create NEW and MORE opportunities so that new Caymanian ownership is NEEDED to satisfy the NEW demand?

    What a concept its called ECONOMICS, Supply and Demand! This model is based on CREATION not DESTRUCTION.

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  4. I am not sure I completely understand his gripe. If there is an issue with fronting then maybe that should be addressed. I am sure there are plenty of Caymanians that greatly benefit from their relationships with their Non-Caymanian business partners, some may not even have a business or even an income if not for these relationships. Taking this option away may be like biting your nose off to spite your face. I don’t see where any Caymanians have been forced into these relationships nor can I imagine why they would be.

    I find it hard to believe that only the Non Caymanian Business Partners are benefiting, if they are then the issue is with the business plans and what the excepted agreement or contract was. In the case of fronting I am also sure the Caymanian Partner is getting something out of it or else they wouldn’t be involved.

    If I am missing something and there is a situation where Non-Caymanians are forcing Caymanians to go into business with them and then stealing all the booty please enlighten me on how they are able to do this.

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  5. Let’s see…how can someone prove to be looking out for the interests of all Caymanians while also discouraging foreign capital from those driftwood types ???

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  6. MLA McLean specifically mentions the dive industry.

    I have dived in these islands for over 30 years. Virtually every person I have encountered has been non-Caymanian.

    It seems that very few Caymanians are interested in a career in SCUBA diving.

    At the same time, many visitors come to these islands to enjoy diving in these still clear waters.

    Is it the intention of MLA McLean to just get rid of the diving industry altogether so it will not upset local fishermen?

    If so I suggest that it is a very bad idea.

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  7. I can relate to the situation Norman pointed out, I have also noticed this about the dive industry. I’ve been diving for quite a bit not as long as Norman but I have to say I have yet to see a Caymanian Dive Instructor or Caymanian Dive shop. This struck me as really strange because you would think that local people would have this industry on look because of their knowledge and love for the local marine environment. If anyone can help me understand why this is that would be great. What could be keeping Caymanians from establishing Dive related businesses?

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  8. Will be a moot point if the cruise dock goes ahead, won’t have a dive industry to interfere with fishermen, or any fish for the fishermen. The public docks will be serene and unused.

    Many of the dive operators using the public dock used to load at public beach – when the road was closed there ceased to be any way to load tanks and equipment – west bay dock became the only option.

    And by the way, the same dive company who did much of the work to bring cayman a world class wreck dive, the kittiwake, also does a lot of work out of their own pocket to maintain that dock in a safe condition…

    @David and @Norman – The scuba industry is not well paid but does offer good opportunities for travel. Just because you don’t see them working here, doesn’t mean that Cayman is not represented around the world, I suspect that the opposite is true considering it on a per capita basis. Novice instructors suffer from the high cost of living in Cayman and until they have a few years experience will be better working off island.

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  9. As far as I know, the public docks were established to facilitate the public (Caymanian or otherwise) for loading an unloading purposes only of recreational boats. No commercial use was meant to be allowed by either fisherman or dive companies. However reality is both businesses use docks for their own benefit. Occasionally either users (divers and fishermen) exceed the unwritten common sense time allotment. In my experience, most dive operators respect the usage rules, clean after themselves and try to minimize the impact and even tackled dock repairs when requested.
    I have see fishing boats though, tied up to docks for hours on end and even nights with no crew on sight. I believe both business could co-exist with minimal impact to the environment and without infringing in other users rights (means the rest of us)as long as perceived entitlement is left to one side. Dive operators and fishermen need to make themselves aware of the rules of usage of these docks, realize how lucky we are that we can have them and let their respective staff members know the rules of the game.

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