Update from our sister company FTS: A second round of Industry consultation is now underway for the Cayman Islands government’s latest iteration of draft legislation for transparency of beneficial ownership information. The consultation for the Beneficial Ownership Transparency Bill 2023 runs for four weeks, with responses due by 25, April 2023.

Having previously consulted the industry in October 2022 on this legislation and in particular, proposals for a public register, the revised bill incorporates industry feedback as well as taking into account the judgment by the European Court of Justice, which declared the legal principle requiring EU countries to provide public access to beneficial ownership registers invalid.

The Cayman Islands first committed to providing a public register of beneficial ownership information in October 2019. While this is still expected to become the global standard, the November 2022 ruling in the EU did prompt the government to pause and consider with UK counsel, the constitutionality of implementing a public register. With this latest round of industry consultation – and while its considerations continue – the government has confirmed it has now amended the public access provisions in the bill.

Public access provisions will now be made via Cabinet regulations which cannot be commenced until a future resolution of Parliament. The government said the change provides an additional safeguard to allow this analysis to be completed before any public access can commence. Beneficial ownership obligations under existing legislation will remain until the commencement of the bill, which is being introduced in a phased approach.

Zooming back out, the government has stated the bill aims to enhance the jurisdiction’s beneficial ownership transparency framework and consolidate the legislation into a single act. This brings together parts of the Companies Act, Limited Liability Companies Act and Limited Liability Partnership Act. The bill also intends to bring limited partnerships and exempted limited partnerships into scope of the reporting requirements, as well as amend the definition of beneficial owner and update the information required. It also refers to the amendments to Recommendation 24 of the Financial Action Task Force on Transparency and beneficial ownership of legal persons.

There had been concerns raised previously among the industry regarding the proposed removal of key exemptions in the beneficial ownership legislation. With some 90% of trust companies having underlying entities, the industry had felt it was useful to have the exemption applied when the shares of a Cayman company were held by a regulated entity. The government, however has resisted this request and said the idea behind the exemption – that the information would be available and accessible elsewhere – really did not stand up when tested.

The idea, meanwhile, that including limited partnerships in the legislation would actually go far beyond prevailing international standards and would lead to a loss of limited partnership registrations to other jurisdictions, as the industry associations had maintained, was also countered. In seeking responses for the new consultation round, the government said that alternative routes to compliance have replaced the previously available exemptions in the Companies Act.  These work similarly, with information relating to beneficial ownership not required to be filed for legal persons listed on the Cayman Islands Stock Exchange or an approved stock exchange, licensed under a regulatory law or registered under the Private Funds Act or Mutual Funds Act.

With corporate services providers required to maintain up-to-date and accurate beneficial ownership information, there is still concern among industry participants over being held liable for the accuracy of information. With the consultation now entering its second phase, however, the government has just said corporate service providers are required to take reasonable measures to verify the particulars being filed are accurate and current, without providing further detail.