NEW BENEFICIAL OWNERSHIP TRANSPARENCY ACT, 2023
The Cayman Islands has recently made significant strides in aligning its beneficial ownership regime with international standards by enacting the Beneficial Ownership Transparency Act, 2023 “BOTA”. This new legislation came into force on July 31, 2024 and represents a consolidation and modernization of previous entity-specific regulations, streamlining compliance and enhancing transparency.
Consolidation for Simplification
BOTA consolidates various fragmented pieces of legislation into a single and coherent framework. This move simplifies compliance processes for entities in the Cayman Islands, making it easier for them to meet their regulatory obligations while ensuring greater clarity and transparency.
Expanded Scope of Compliance
The most notable changes introduced by BOTA is the expanded definition of legal persons required to comply with the beneficial ownership regime. The scope now includes:
- Companies
- Foundation companies
- Limited Liability Companies (LLCs)
- Limited Liability Partnerships (LLPs)
- Limited partnerships and exempted limited partnerships
However, foreign companies and partnerships registered in the Cayman Islands are not considered ‘legal persons’ under this regime, thus remaining outside its scope.
Introducing Alternative Compliance Routes
To ease the compliance burden, BOTA provides alternative routes for specific categories of legal persons. These categories include:
- Entities licensed by the Cayman Islands Monetary Authority (“CIMA”);
- Entities listed on the Cayman Islands Stock Exchange (“CSX”) or other approved stock exchanges;
- CIMA-registered mutual and private funds; or
- otherwise exempted by Cabinet (none currently).
Redefined Beneficial Ownership
BOTA redefines ‘beneficial owner’ to enhance clarity and ensure comprehensive coverage. An individual is now considered a beneficial owner if they:
- Own or control (directly or indirectly) 25% or more of the entity;
- Exercise ultimate effective control over the entity’s management; and/or
- Are identified as exercising control through other means.
If no individual meets these criteria, the name of a senior managing official must be provided.
Enhanced Information and Verification Requirements
BOTA mandates additional information for beneficial owners, including their nationality and the nature of their control over the legal person. Corporate service providers are responsible for verifying this information to ensure its accuracy and currency before entering it into the beneficial ownership register.
Broader Access to Information
The new regime broadens access to beneficial ownership information, allowing more bodies, including but not limited to the Royal Cayman Islands Police Service, CIMA, and the Anti-Corruption Commission, to request this data. Licensed financial institutions and designated non-financial businesses will also have access, subject to an annual fee of US$1,829. Future regulations may extend access to the public, pending parliamentary approval.
What is Next?
A number of entities that are now under BOTA were previously exempted under the old Beneficial Ownership Regime and should now consider all requirements and particulars that would be applicable moving forward regarding the establishment and maintenance of a beneficial ownership register and liaise with their service providers to file these registers in due time.
The old Beneficial Ownership Regime was applicable to a number of legal person that will continue with their reporting obligations under BOTA. However, they should re-assess their beneficial owners in order to comply with the new definitions and provide the information that is now required to be reported.
Our Thoughts
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Enhanced Transparency
: The consolidation and extension of the regime reflect a strong move towards enhanced transparency and alignment with international standards, particularly the FATF 40 Recommendations.
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Compliance Burden
: While the alternative routes to compliance may ease the burden for some entities, the new requirements for information and verification could increase the administrative workload for others, especially those without previous exemptions.
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Broader Access
: Allowing more bodies access to beneficial ownership information is a positive step for regulatory and enforcement purposes. However, the potential for public access, while increasing transparency, might raise concerns about privacy and data security.
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Guidance Clarity
: The detailed guidance provided should help entities navigate the new requirements and ensure compliance, though continuous updates and education will be necessary to keep pace with regulatory changes.
Overall, BOTA represents a significant shift towards greater transparency and compliance with global standards, balancing the need for regulatory oversight with the practical considerations of legal entities operating in the Cayman Islands.
For specific guidance on the specifics and details of the Beneficial Ownership Transparency Act how your business may be impacted by these measures, please contact your usual Vale Law attorney or any of:
Shelley Do Vale: shelley.vale@valelaw.ky
Santiago Mtnez-Carvajal: sc@valelaw.ky