AVOIDING ANNUAL FEES AND STUB AUDIT FEES

There are steps you can take prior to year-end which can enable you to reduce or avoid certain annual fees and costs which are due by 31 January of each year. Broadly speaking, a solvent Cayman Islands company which is no longer required for one reason or another, has two options for its termination - voluntary liquidation or strike-off. The method chosen generally depends on the history of the company’s operations and its current financial position. It is best that the company has no assets or liabilities before either is commenced.

Therefore, before beginning either process, it is generally necessary to ensure the following have been completed prior to year-end in order to remove certain fees and costs:

• all dividends have been paid to shareholders/partners/members (either in cash or in kind);

• the capital of the company is simplified as much as possible to make the passing of resolutions is more straightforward (e.g. for a company a single shareholder is preferred);

• all creditors have been paid in full; and

• if the company is a fund regulated by the Cayman Islands Monetary Authority, in order to avoid CIMA fees for the next year, the fund must have completed all required steps before submitting its application for de-registration, which include full redeeming all investors and completing the final audit (among other things), prior to year-end to avoid CIMA fees for the next year. Contact us for assistance in this regard.

CIMA REGISTERED FUNDS - SAVING ON STUB AUDIT FEES

In accordance with section 8(1) of the Mutual Funds Act (as revised), regulated funds are mandated to secure an annual audit. However, there exists an enticing alternative for funds, particularly those already in good standing with CIMA, which have the option to apply for an audit exemption under regulatory policies dealing with exemptions from audit requirements; such funds have the option to furnish a comprehensive voluntary liquidator's report per the regulatory policies in lieu of a stub audit report. This report will cover the period subsequent to the last financial year end for which an audit has been submitted. Please note that CIMA may consider extending the fund’s final audit period to a maximum period of 18 months from the last financial year end for which an audit has been filed on a case-by-case basis.

This innovative avenue proves particularly advantageous for funds obliged to conduct a final stub audit before initiating the filing of deregistration documents. This provision aligns with the recent regulatory enhancements for the deregistration of Cayman Islands funds governed by the revised Mutual Funds Act (as revised) and Private Funds Act (as revised), which came into effect on 17 August 2022.

Contact our liquidations specialist, Carlos Bourgy, at the details located below to find out more on how to avoid paying stub audit fees, seeking an audit waiver upon commencing a voluntary liquidation and how the submission of the comprehensive voluntary liquidator’s report can help get the fund back into good standing for deregistration purposes.

Email our liquidations specialist, Carlos Bourgy at CBourgy@ims.ky, or get in touch with your usual IMS contact for assistance with Voluntary Liquidations or Strike-off.