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Trust and Corporate
Services Types of Company Ordinary Company Ordinary companies can be
classified as either resident or non-resident. Generally, a resident ordinary
company is used for onshore domestic businesses and enterprises. If there is
no intention to carry on business in the Cayman Islands, then a non-resident
company will be appropriate. There will be no exemption from tax for an
ordinary company. An ordinary company may be
incorporated by any person of legal age subscribing his name to a Memorandum
of Association. The Memorandum contains the objects of the company and the
law permits a company to undertake any legal business. It is usual for
companies to file Articles of Association prescribing regulations for the
company, but in the absence of Articles, Table A in the First Schedule to the
Companies Law will apply. Share capital may be divided into
shares of different classes with different voting, dividend and other rights.
The capital may be expressed in any currency and shares expressed in any
currency and the shares expressed to be of any amount, but each must have a
par value. The liability of shareholders is limited to any amount unpaid on
the par value of the issued shares. The Companies Law permits the redemption
or repurchase of shares out of profits or from the proceeds of a new issue of
shares made for that purpose or, if the company will remain solvent, out of
capital. However, a company may not pay a dividend out of share capital. There are no restrictions on where
meetings of shareholders may be held; however at least one meeting must be
held each calendar year. Meetings of the directors may be held whenever and
wherever the directors decide, which the directors may attend in person or
they may be represented by an alternate or proxy. Every company is obliged to
maintain a registered office in the Cayman Islands outside of which the name
of the company must be displayed and where the register of members, directors
and officers, together with a register of mortgages and charges are to be
kept. In January each year a company must file a return with the Registrar of
Companies giving details of its capital structure, its shareholders,
directors and officers. Exempted Company As the name implies, an exempted
company may apply to the Government of the Cayman Islands for exemption from
any tax that may be levied on income or capital of the company. Such an
exemption may be granted for a period of twenty years. An exempted company
may not carry on business in the Cayman Islands, except in the furtherance of
its overseas activities and is prohibited from making invitations to the
public in the Cayman Islands to subscribe for any of its shares or
debentures. The Companies Law provides for the
incorporation of exempted companies in a similar manner to ordinary
companies. Apart from the tax exemption, certain other exemptions and
privileges apply to exempted companies: ·
The
word ‘limited’ need not appear in the name. ·
Annual
General Meetings of shareholders are not obligatory. ·
Bearer
shares and shares of no par value may be issued. ·
Annual
Returns to the Registrar of Companies, accompanied by appropriate fees, take
the form of a declaration by a director or the secretary that the company has
complied with provisions of the Companies Law. The return does not identify
shareholders, directors, or officers. A company incorporated in another
jurisdiction under a law which permits or does not prohibit the transfer by
way of continuation may, subject to certain conditions, apply to transfer and
register the company in the Cayman Islands as an exempted Cayman company.
This provision may also operate in the other direction by transferring a
Cayman company to another territory where the local law permits or does not
prohibit such transfers. Limited Duration Company The Companies Law also permits the
registration of exempted companies as Limited Duration Companies with a life
of no more than thirty years. Such companies must have a minimum of two
shareholders and include in their title the words "Limited Duration
Company" or "LDC". The Memorandum of Association of the
company must limit its duration to thirty years or less. The voluntary
liquidation of the company will commence automatically at the end of the
fixed period specified in the Memorandum of Association, or upon the
occurrence of certain other events specified by statute. If a company wishes
to cease to be a limited duration company, it may do so by amending its
Memorandum of Association so that its duration exceeds or may exceed thirty
years and by deleting from its name the words "Limited Duration
Company" or "LDC." Foreign Company A company incorporated outside the
Cayman Islands which establishes a place of business or carries on business
in the Islands must register under the Companies Law. A certified copy of the
Memorandum and Articles of Association (or equivalent incorporation
documents) together with a certified list of the directors and officers
giving their names, addresses and occupations must be filed with the
Registrar of Companies. A foreign company must have an agent in the Cayman
Islands authorised to accept notices or service of process. Uses of Companies Apart from incorporating a company
to carry on business governed by other prevailing legislation, there may be
advantages to be gained by establishing a Cayman company to undertake certain
specific activities. The holding of real estate, copyrights, royalties or
patents, or other miscellaneous investments through a company may ease the
transfer of equity interests to other parties, or reduce taxation, or avoid
undue regulation in the country of the owner(s). Other more specialised uses
may include international trade, structured financing, restructuring of debt,
aircraft or ship leasing or venture capital funds. |
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© HSBC Group, 2001 |