On 7 July 2020 the Cayman Islands Government have enacted an amendment to the Private Funds Law, 2020 (the “PFL”). This clarifies and extends the scope of entities to be captured by the PFL and now reads as follows:
Pursuant to the amended definition of 'private fund', a company, unit trust or partnership is defined as a 'private fund' where it offers or issues, or has issued, investment interests, the purpose or effect of which is the pooling of investor funds with the aim of enabling investors to receive profits or gains from such entity's acquisition, holding, management or disposal of investments, where:
(a) the holders of investment interests do not have day-to-day control over the acquisition, holding, management or disposal of the investments and the investments; and (b) the investments are managed as a whole by or on behalf of the operator of the private fund directly or indirectly.
The definition does not include the following:
(a) a person licensed under the Banks and Trust Companies Law (2020 Revision) or the Insurance Law 2010;
(b) a person registered under the Building Societies Law (2020 Revision) or the Friendly Societies Law (1998 Revision); or
(c) any non-fund arrangements (a list of 25 structures and arrangements is scheduled on page 29 of the PFL)
The key changes to note being:
Investments interests now offered or issued rather than offered and issued
The entity’s purpose being to spread investment risk is no longer required
The Manager/Operator no longer needs to be receiving a reward.
Therefore certain master fund structures and alternative investment vehicles, entities holding a single investment, and entities with no “management” fees may be within the scope of the PFL and as such we recommend that you reach out to your IMS contact to discuss further. The deadline for registration as a Private Fund is still 7 August 2020.
Please see our previous article on the implications of the PFL here.