Cayman authorities update Private Funds Law

The initial Private Funds Law, 2020 was enacted in early February of this year and stipulated that closed-ended entities which are commonly known as private funds must be registered with CIMA – the Cayman Islands Monetary Authority.

The new regulations further explain what is legally meant to be a ‘private fund’ in Cayman.

July’s update clarified that private funds are considered to be entities which are incorporated as partnerships, companies or unit trusts when these entities issue participating non-redeemable pooled investment interests aiming to collect funds from one or more investors and issue profits or gains to them as a result of activities derived through the entity.

The law further clarified that Cayman entities would be considered to be private funds when the individuals or companies with interests/holdings do not personally control the investments of the entity, i.e. this is handled by another party – usually a fund manager.

‘Practically, the update may well mean that for a number of our clients, a structure which was not previously considered to be a private fund will now qualify as one in the eyes of the law. All existing private funds will need to be registered with CIMA by August 7th. ZEDRA’s team is already working with fund managers who have private funds to help them understand how the new regulations will affect them and how to meet this deadline in a timely manner, if they have not already started the process of registering,’ says David van Duynhoven, Managing Director, ZEDRA Cayman.

For more information, please contact David van Duynhoven.