The Cayman Islands’ new Beneficial Ownership Transparency Act (BOT Act) 2023 is set to come into full effect on January 1, 2025. For firms and entities not yet compliant, the time to adopt the new rules is now.
Understanding the Cayman Islands BOT Act 2023
The new rules represent a step change in oversight and enforcement by the Cayman Island authorities. Any organization or company with an entity based in the Cayman Islands, such as private equity firms, must ensure they’re fully compliant or face the threat of financial penalties, reputation loss, or both.
The BOT Act includes offenses and penalties for non-compliance. Fines can be sizeable—up to CI $100,000 (USD $121,000). The criminal penalty for a first offense is CI $25,000, second offense is CI $100,000, and third offense is that a legal person may be struck off. Individuals who fail to comply can be subject to financial penalties of up to CI $50,000 and potentially imprisonment. The local court also has the power to order a legal person (see below) to be struck off for persistent offense or where an administrative fine remains unpaid for 90 days after imposition of the fine.
Where a breach of the relevant legislation does not result on an offense under the law, administrative fines can also be imposed by the Cayman Islands General Registry and these can be CI $5,000 for each breach, with an extra CI $1,000 for every month the breach continues, up to a maximum of CI $25,000.
The Cayman Islands Parliament passed the BOT Act in December 2023, with initial discussions around enhancing and improving the beneficial ownership framework in the jurisdiction having started back in September 2021. The BOT Act came into force on July 31, 2024, though there was a grace period for corporate service providers and entities to be fully compliant by the start of 2025.
How has the definition of a beneficial owner changed?
In simple terms, the new law replaces a number of legacy regulations while also expanding the types of entities to which it applies. It brings new entities such as partnerships into scope and now applies to all legal persons, including:
- Companies
- Limited liability companies (LLCs)
- Limited liability partnerships (LLPs)
- Limited partnerships (LPs)
- Exempted limited partnerships (ELPs)
- Foundation companies
Under the Act, the definition of beneficial owner in relation to a legal person has been amended to be more aligned with Cayman Islands Anti-Money Laundering Regulations. Here, the definition refers to an individual:
- Who ultimately owns or controls (directly or indirectly) 25% or more of the shares, voting rights, or partnership interests in the legal person
- Who otherwise exercises ultimate effective control over the management of the legal person
- Or who is identified as exercising control of the legal person through other means
A person operating solely in the capacity of a professional advisor or professional manager (both terms defined in the BOT Act) is not considered a beneficial owner. However, it’s worth noting that the 10% threshold for identification of beneficial owners remains unchanged in the Anti-Money Laundering Regulations and so the requirements do remain different.
Exemptions replaced with alternative route to compliance
A number of the exemptions that applied under previous rules have been removed or significantly restricted in favor of certain alternative routes to compliance. Where an alternative route to compliance is possible, a legal person will not be required to report its beneficial owners but rather report limited required particulars.
- Listed, or is a subsidiary of a listed entity, on the Cayman Islands Stock Exchange or an approved stock exchange
- For particulars under this alternative route to compliance, the name and jurisdiction of the stock exchange
- Licensed under a regulatory law
- For particulars under this alternative route to compliance, the regulatory law under which the legal person is licensed
- A fund registered under the Private Funds Act (2021 Revision) or the Mutual Funds Act (2021 Revision); for particulars under this alternative route to compliance, the contact details of a licensed fund administrator or another contact person licensed or registered under a regulatory law for providing beneficial ownership information located within the Islands
For those legal persons not using an alternative route to compliance, the required particulars to be reported on the legal person’s beneficial ownership register are largely unchanged with two notable exceptions, those being that the legal person must also report:
- The nationality of all individual beneficial owners, and indicate if the beneficial owner has multiple nationalities
- Details of the nature in which the individual or reportable legal entity owns or exercises control of the legal person
What’s next? Public registers and greater public access
In September 2024, the competent authority also developed draft Beneficial Ownership Transparency (Legitimate Interest Access) Regulations. While not yet enacted into law, these regulations set out a framework for certain members of the public to apply to the competent authority a request for access to beneficial ownership information. Currently, this includes a person engaged in journalism or bona fide academic research; or a person acting on behalf of a civil society organization whose purpose includes preventing or combating money laundering, its predicate offenses, or terrorist financing.
How CSC helps clients navigate the new BOT Act 2023
CSC has been helping its clients track and adopt changes to Cayman Islands’ regulations for decades. Our on-the-ground team understands exactly what’s required for reporting and full compliance, and is well placed to provide dedicated support and insights.
As one of the leading global corporate services providers, CSC’s primary duty is to ensure our clients have the right information about the jurisdictions important to them, and our driving focus is to help our clients understand and submit the required information to relevant authorities.
We understand global and local compliance and regulatory landscapes. We’re invested in staying on top of changing laws and regulations to ensure compliance for our clients. We have a suite of solutions that we customize for each client’s unique needs, and have capabilities in 140 worldwide jurisdictions.
Stay ahead of the 2025 deadline. Contact CSC to ensure your firm complies with the BOT Act 2023.
