In a development eagerly anticipated by the private funds industry, the Cayman Islands published a draft law last month allowing the formation of a new type of vehicle, the Cayman limited liability company (LLC).
The LLC provides the industry with a corporate vehicle that is closely aligned with a Delaware LLC and which contains a number of features that make it more flexible than the other options available to private equity GPs in Cayman.
The new vehicle is an alternative to the Cayman exempted limited partnership (LP), the most popular vehicle of choice for Cayman private equity funds. GPs may find the LLC structure more favorable because it is considered a separate legal entity, whereas an exempted LP is not.
The LLC will also be an option instead of an exempted company, which can be constrained by share capital rules and can be cumbersome in the operation of capital calls, whereas the LLC is much more flexible, noted Mourant Ozannes partner James Wauchope in a call with pfm.
The new vehicle was introduced partly in response to requests from US legal counsel in the private funds industry, who wanted an option for a more compatible legal framework between onshore and offshore investors, noted Wauchope.
“Initially the most popular use will be as the GP entity and for subsidiary vehicles rather than for the fund itself,” he added. “Cayman LPs will continue to be the structure of choice for the time being, but the LLC will be a good option and may become more and more popular over time.”
The draft law is now open for comments from the industry, the Cayman Islands Monetary Authority and the Cayman Islands Registry of Companies, and Wauchope expects the law to come into force in the next few months.
If you do not receive this within five minutes, please try to sign in again. If the problem persists, please email: