The Cayman Islands government has proposed changes to the regime governing limited liability partnerships (LLPs), before the legislation becomes operational later this year.
Minister of Financial Services Tara Rivers is expected to present the Limited Liability Partnership (Amendment) (No.2) Bill, 2020 and the Securities Investment Business (Amendment) (No.2) Bill, 2020 during the current session of the Legislative Assembly.
Limited liability partnerships are different from other types of partnerships, such as exempted limited partnerships, in that they are separate legal entities that afford limited liability status to all its partners.
The creation of the LLP business structure will offer local legal and accounting firms an alternative to companies and general partnerships. LLPs are also expected to appeal to international clients, who use Cayman entities in their portfolios, the ministry said in a press release.
The amendments align LLPs with legislative changes made this year to the Companies Law and the Limited Liability Companies Law.
A proposed new part of the law sets out an administrative fine framework. Under the proposal, the registrar can impose fines of $5,000 for an initial breach, plus $1,000 for every month during which the breach continues or fines remain unpaid up to a total of $20,000. In addition, the penalty provisions for making false declarations are aligned with those of the Limited Liability Companies Law.
Other amendments require a limited liability partnership to provide certain information. If the changes are adopted, LLPs will have to include in their register of partners photographic evidence of the identity of the managing partner, as well as the residential address in cases where the managing partner is an individual.
LLPs will also have to include the end date of their financial year in the registration statement and state the nature of their business in the annual return.
A new proposed subsection of the law requires the registrar to disclose the location of the registered office of any LLP registered under the law to members of the public on request.
The registrar will have to make certain certificates and other documents, that will be defined by the regulations, available for inspection for a fee.
The amendments empower the registrar to strike off any LLP, if the partnership is not carrying on business, is not in operation or has not paid an administrative fine.
Regulations adopted in 2019 require limited liability partnerships to file beneficial ownership information with the General Registry in much the same way as limited liability companies and other types of companies.
Under the new amendments, corporate services providers of a limited liability partnership, rather than the LLPs, will be responsible for sending restriction notices to registrable persons to comply with beneficial ownership disclosures.
These notices are issued if a beneficial owner does not provide requested information and restricts what the beneficial owner can do with the interest in the LLP until there is compliance.
This is consistent with changes to the Companies and Limited Liabilities Company Law made earlier this year.
The amendments to the Securities Investment Business Law will improve the commercial functionality of LLPs, the ministry said. The proposed changes seek to include limited liability partnerships in the definition of a partnership and to include interests in a limited liability partnership as a security.