The Mutual Funds (Amendment) Law, 2020 of the Cayman Islands (the “Amendment Law“) was brought into law on 7 February 2020.
The Amendment Law has removed the exemption from regulation for Section 4(4) investment funds i.e. investment funds which had its equity interests held by fifteen (15) or fewer investors a majority of which had the power to appoint or remove the fund’s operator, i.e. its director, general partner or trustee).
Following the passing of the Amendment Law Section 4(4) funds will be required to :
(i) register with the Cayman Islands Monetary Authority (CIMA);
(ii) pay an annual registration fee;
(iii) file copies of the fund’s constitutional documents with CIMA which show that a majority of the holders of equity interests have the ability to appoint/remove the fund’s operator;
(iv) have a minimum of two (2) individual directors;
(v) have each of their directors register with CIMA under the Directors Registration and Licensing Law, 2014 of the Cayman Islands ;
(vi) have the fund’s accounts audited annually by a CIMA approved auditor and file audited financial statements with CIMA within six (6) months of the fund’s financial year end; The Amendment Law provides that accounts should be prepared in accordance with International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP) of US, Japanese, Swiss or any other non-high risk jurisdiction.
(vii) file a fund annual return (FAR) with CIMA;
(viii) inform CIMA of any material changes to the information submitted in the registration application within 21 days of making any such change.
It is to be noted that there still is no minimum initial investment amount for Section 4(4) funds.
Existing Section 4(4) funds will have until 7 August 2020 within which to comply with the Amendment Law. This transitional period will not apply to Section 4(4) funds which commence carrying on business after 7 February 2020 and will be required to comply with the new requirements immediately.
Once registered Section 4(4) funds will receive a certificate of registration.
 This registration is an online filing process which is done on the director portal of CIMA’s website.
This briefing note has been provided as a general guide only and should not be relied upon as a substitute for specific legal advice. If you would like further information on any aspect of this briefing or on any other Cayman Islands legal issue please contact:
Corporate & Commercial Practice Group
D. +1 345 815 2807