Government plans new corporate restructuring regime

Chamber Economic Forum highlights post-COVID strategies

Last week’s digitally hosted Chamber of Commerce Economic Forum drew a lot of interest from participants in exploring new ways of dealing with fallout from the COVID-19 pandemic for local businesses. Here are some of the key talking points for the financial services industry:

New corporate-restructuring regime

Financial Services Minister Tara Rivers announced government’s intention to create a new regime governing corporate restructuring.

“The ministry is making great strides in finalising commercial enhancements to the Companies Law. These enhancements, which will introduce a new restructuring officer regime, have been met with strong support and agreement from industry, the judiciary and [the Cayman Islands Monetary Authority], acting in their respective roles. We expect to bring forward the amendments by the end of this year,” she said.

Once passed and enacted, these amendments will allow companies to petition and pursue restructuring without the intent of winding up the company. However, companies will retain the benefit of having a statutory moratorium obtained during the restructuring, and they will maintain the ability to petition for provisional liquidators, Rivers said.

“Importantly, this can have a positive economic impact on Cayman given the potential increase in global restructuring as a result of the global economic conditions,” she added.

Virtual asset service providers regime

The minister further announced that her ministry, with input from CIMA, is working on regulations to operationalise the virtual asset service providers regime.

“CIMA is also working on an action plan to address the implementation of the VASP-related laws and its various regulations. The implementation plan will focus on resourcing and building a risk-appropriate supervisory framework. An industry consultation on these enhancements will commence shortly,” Rivers said.

Petri Basson, chairman of the Blockchain Association of the Cayman Islands, lauded the regime for crypto services. “When you say you’re looking for some good news that’s the one thing most people can feel optimistic about. We have a very good regime that we’ve put in place,” he said.

While other markets are somewhat sceptical, waiting to see what is happening in the virtual space, there has been significant growth in the past eight months, he added.

Volume of financial services legislation

Rivers also spoke about the progress made to address the European Union list of non-cooperative jurisdictions for tax purposes and the Financial Action Task Force re-rating of Cayman’s anti-money laundering, countering the financing of terrorism and counter proliferation financing regime.

She noted in the past three-and-a-half years, the ministry had prepared approximately 125 pieces of financial-services legislation. That represented 27% of the total legislation passed during this time. In addition, legislation with financial-services touchpoints had been prepared by other entities, including the attorney general’s chambers.

This included the enhancement of the regulatory structures governing investment funds and oversight of private funds by the regulator. As of 7 Aug., 12,328 private funds have registered with CIMA.

The authority is preparing further guidance for industry, especially relating to non-fund arrangements and group registrations.

The EU had acknowledged Cayman’s progress, Rivers said, and the government expects Cayman to be removed from the list of uncooperative jurisdictions in tax matters at the earliest opportunity in October.

CFATF re-rating delayed

However, the re-rating assessment of Cayman’s anti-money laundering regime, which was also expected for October, has been pushed back.

“I understand that because of the pandemic and the travel restrictions there has been some movement in the timelines for when the re-rating assessment will take place,” Rivers said. The assessment is now expected to take place in the first quarter of 2021.

Network of global offices to represent Cayman

In reference to the government’s engagement with international policymakers and standard-setters, Conor O’Dea, chairman of Cayman Finance, said the current geopolitical disruption highlighted the need for representative offices in Hong Kong, Washington and Brussels.

“While the remote engagement is adequate, to go deeper we need to start looking at building that network of offices, which will support us on the ground, and make sure that we’re actively engaged on a 24/7-type basis. I think that’s a necessary requirement now to protect our industry,” he said.

Call for better public-private sector cooperation

James Bergstrom, the chair of the Financial Services Subcommittee on the Strategic Economic Advisory Council, called for a better framework of public- and private-sector collaboration, given that the pace of legislation has changed over the past 10 years from “manageable” to more “reactive”.

The public- and private-sector committee, led by Commerce Minister Joey Hew, is tasked with developing a long-term post-COVID-19 strategy for Cayman.

Bergstrom said there are some potential “easy wins”, for example with “slicker and faster” industry consultation on new financial services legislation.

He noted that as Cayman’s competitors are increasingly shifting from typical offshore jurisdictions to the likes of Ireland and Singapore, it is becoming more important to balance the regulatory load and costs for Cayman entities and structures.

It’s all about technology

For Finance Minister Roy McTaggart, the recurring theme of the Economic Forum was “the desperate need for us to innovate and the important role that technology is going to play in the future of Cayman and our economy”.

Cayman has moved away from the old way of doing things, and technology, particularly artificial intelligence, will play a key role in the future of how the economy is shaped, he said. Cayman must embrace this as the new norm by devising appropriate education and technology programmes.

“It’s all about technology these days,” McTaggart said.

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