Cayman Islands Foundations
Pursuant to the Foundation Companies Act, 2017 (the “Act”), Foundation companies may be an attractive alternative to trusts, particularly for those in civil-law jurisdictions, where there are concerns about the tax treatment of trusts. Clients from common-law jurisdictions may also be attracted to a Foundation Company for holding higher-risk assets, such as shares in family businesses.
A Foundation Company has a separate legal personality and will transact with third parties in its own right, rather than through its trustee were it a trust
Foundation Companies benefit from the Cayman Islands’ company case-law history and tthe Cayman Islands’ trust legislation, providing certainty as to how the courts will treat disputes
In contrast to a trust, duties are owed only to the Foundation Company itself as opposed to beneficiaries, and rights can be enforced against only the company and not the directors
A Foundation Company is not required to have any members at all, if permitted by its memorandum and provided that the company has a supervisor with the right to attend and vote at general meetings
A Foundation Company whose objects are to be carried out mainly outside the Cayman Islands may be incorporated as an exempted company, and not subject to any income, withholding or capital gains taxes in the Cayman Islands.
A Cayman Foundation is incorporated with one or more members in the same way as an exempted company under the Companies Act. Subject to any restrictions specified at the time of incorporation, any person can be a member of a Cayman Foundation.
A Foundation Company's management will be carried out by its directors. In addition, however, its constitution may give rights, powers and other duties to members, directors, supervisors, founders or others. The rights, powers or duties may, amongst other things, relate to:
admitting, appointing or removing members, supervisors and directors;
making and amending any bylaws;
the supervision of the Foundation Company's management and operations;
calling and attending at general meetings;
voting on resolutions;
altering the constitution; and
winding up and disposing of surplus assets.
The Act is drafted in such a manner that it does not formally establish or define the role of “founder”. A Cayman Foundation will simply be founded on the instructions of the person establishing it in the same way as any other company and the person who disposes of assets into a Cayman Foundation will therefore not have any automatic rights in relation to the Cayman Foundation. However, the Model Constitution included in the Act does provide for rights to be reserved to the founder if considered necessary in the particular circumstances in which a Cayman Foundation is to be established and these provisions of the Model Constitution can be adopted. For example, if the “founder” does not wish for the constitution to be changed at any time; he or she can draft the constitution so that it contains no amendment powers at all.
A Foundation Company must have a Secretary, licensed or permitted by the Companies Management Act (Revised), such as Bell Rock, to provide company management services in the Cayman Islands. The Foundation Company's registered office must be at its Secretary's registered office and the Secretary must maintain a full and proper record of its activities.
The Beneficiaries A Cayman Foundation may have one or more beneficiaries who may benefit from the Cayman Foundation carrying out its objects, or none at all. Importantly, a beneficiary of the Cayman Foundation has no statutory powers or rights relating to the Cayman Foundation, its management or its assets and is not otherwise an “interested person.”
The Board A Cayman Foundation is managed by a board of directors. Any individual of full capacity may be a director of a Cayman Foundation; there are no residency requirements for directors nor any other restrictions as to who may act as a director. The standard of care applicable to directors of a Cayman Foundation is the same as the directors of any other company, and directors will owe the same duties to a Cayman Foundation as the directors of any other Cayman company owe to that company. Directors are required to give interested persons reports or explanations of the business and affairs of the Cayman Foundation.
An “interested person” for the purposes of Act is a member, Supervisor or any other party having the right to bring an action in the name of, or on behalf of the Cayman Foundation.
The Supervisor A Supervisor is defined by the Act as a person, other than a member, who under the Cayman Foundation’s constitution has a right to attend and vote at general meetings (whether or not that person has supervisory powers or duties in relation to the Cayman Foundation). The constitution of a Cayman Foundation may allow a Supervisor to take on the role of a director of the Cayman Foundation.
A Supervisor would typically have the right to access the files, books and accounts of the Cayman Foundation upon notice to the directors as provided for under the model rules. Foundation companies are required to keep a register of Supervisors at their registered office. Any changes to the register must be updated within sixty (60) days.
Taxation Cayman has no corporation tax, income tax, capital gains tax, inheritance tax, gift tax, wealth tax, or any other tax applicable to a company conducting off-shore business. Certain documents are subject to stamp duty which is generally nominal. A Cayman Foundation will be exempt from any Cayman Islands income tax or capital gains tax and is able to obtain a tax undertaking certificate from the Cayman Islands government guaranteeing no change to its tax status for a period of up to 50 years from the date of the undertaking.
We routinely incorporate foundation companies and also provide additional services such as registered office, directors and act as secretary. For further information, please contact us: firstname.lastname@example.org
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