Legal frontiers in the Caymans

The first in our new legal frontiers series explores the considerable opportunities available to companies that utilise offshore structures in the Cayman Islands. The articles feature best practice approaches to structuring such vehicles while maintaining full regulatory compliance.

As Cayman Islands fine-tunes its position at the apex of a new generation of transparent offshore investment destinations, we ask Cayman Finance chief executive officer Jude Scott for a progress report on strategies to protect and develop the jurisdiction’s finance industry

Q:How does Cayman help Asian investors with overseas investment?

A: The Cayman Islands actually is a great premier global financial hub. It efficiently connects law abiding users and providers of investment capital and financing from around the world, benefiting developed and developing countries. Where it works really well is we are really an extender of value for countries, so that businesses or individuals can access investment financing opportunities globally through the Cayman Islands.

In addition to that, because the Cayman Islands is home to about 70% of global hedge funds, that also means there’s a huge amount of pooled investable capital in Cayman that’s available to be supporting the inward investing as well as supporting IPOs, for example, for Chinese businesses, and maybe listing in the Hong Kong stock exchange. When we look at the Belt and Road Initiative, Cayman has been uniquely positioned to support that. Whether it’s direct investing or accessing financing, it’s able to actually connect China with this large pool of investable capital from the global marketplace.

As we look at the types of transactions, the type of investment capital, and infrastructure transactions that are going to be taking place going forward, Cayman is well positioned to be supporting China as well as the other countries that China is working with, to be able to access that global capital in a way that is sensitive to the different requirements that are necessary for each of the countries.

In the Japanese market, we’re the primary jurisdiction for Japanese pension funds. Investing through Cayman entities, generally they’re going to be a unit trust as the preferred structure, but again, being able to access that global talent of investment, manager expertise and so on, to derive strong returns. Also, when we look at India, Cayman is really emerging as a top jurisdiction for supporting foreign direct investment into India and we’re seeing those trends replicated in other jurisdictions around Asia as well.

Q: How does Cayman balance compliance with the highest global transparency standards while also respecting investors’ privacy?

A: We understand our important role because we are so integral to the global financial system. We’re constantly working and enhancing our transparency measures. So whether it is the US Foreign Account Tax Compliance Act, whether it is common reporting standards as an early adopter, or BEPS country-by-country reporting, we take a very pragmatic approach to it. We look to understand what the international standards of direction are, and then we look to apply technology and pragmatism to create solutions that help our clients be able to comply with those, but in the most efficient way possible.