Why Cayman Islands Companies Are a Top Choice for IPOs

A Cayman exempted company is widely used as the IPO vehicle for businesses listing on NASDAQ, the New York Stock Exchange (NYSE) and the Hong Kong Stock Exchange (HKEX). Its appeal rests on an English common law foundation, flexible share structures that can be adapted before listing, tax neutrality at entity level and long acceptance by the major exchanges.

Key takeaways

• Cayman law is based on English common law and the Companies Act (As Revised), a framework familiar to international investors and underwriters.
• Exempted companies can issue multiple share classes, including dual-class voting structures, and can be restructured before listing through subdivisions, buybacks and conversions.
• A Cayman company is tax-neutral at entity level; shareholders remain subject to tax in their own jurisdictions.
• Cayman companies are routinely accepted as listing vehicles by NASDAQ, the NYSE, HKEX, the London Stock Exchange and the Singapore Exchange.

Why Cayman companies are used for IPOs

The Cayman Islands has become a jurisdiction of choice for international capital markets transactions, particularly for companies planning an initial public offering on a major global exchange. Exempted companies offer legal certainty, structural flexibility and a vehicle that investors and exchanges already understand, which makes them a common choice for IPO structuring. The process of forming one is set out in our guide to Cayman company incorporation, process and requirements.

A legal framework aligned with international standards

Cayman law is based on English common law and is supported by a modern and flexible Companies Act (As Revised). This gives international investors and underwriters a familiar and reliable legal framework against which to assess the listing vehicle.

Flexibility in share structure

Cayman exempted companies allow:

• multiple share classes with different voting and economic rights;
• pre-IPO restructuring through share subdivisions, buybacks and preference share conversions; and
• dual-class share structures, often used by technology companies so that founders retain control after the IPO.

Tax neutrality at entity level

A Cayman company does not pay corporate income or capital gains tax in the Cayman Islands. This tax neutrality means tax is dealt with at shareholder level rather than creating an additional layer of tax at the level of the listing vehicle. Investors and founders may still be taxed in their own jurisdictions.

Acceptance by the major exchanges

Cayman companies are routinely accepted as listing vehicles by:

• NASDAQ and the NYSE in the United States;
• HKEX in Hong Kong;
• the London Stock Exchange; and
• the Singapore Exchange.

Because exchanges and their advisers see Cayman issuers regularly, the vehicle itself is rarely an obstacle to admission.

Examples of Cayman IPO structures

Alibaba (NYSE)

Alibaba's 2014 IPO used a Cayman Islands exempted company as the holding company, with variable interest entity (VIE) arrangements to address regulatory restrictions in mainland China. The Cayman holding company issued American depositary shares in New York in what was, at the time, the largest IPO in history.

XPeng (NYSE and HKEX)

XPeng listed in the United States through a Cayman holding company in 2020 and completed a dual primary listing on HKEX in 2021. The Cayman structure supported both listings while keeping a single cap table and one set of shareholder governance arrangements.

ZTO Express (NYSE)

ZTO Express, one of China's largest logistics businesses, used a Cayman exempted company for its 2016 IPO on the NYSE. The Cayman vehicle allowed cross-border structuring and flexibility for investors.

Structuring points before listing

Pre-IPO restructuring

A Cayman company is well suited to the equity restructuring that underwriters often require before an IPO, such as share splits, founder share arrangements and employee share option plans. Each step is implemented by board and shareholder resolutions and recorded in the statutory registers.

Articles of association and shareholder rights

The articles of association can be tailored to align with:

• United States securities regulation, for SEC-registered offerings;
• the HKEX corporate governance code; and
• dual-class voting structures.

An experienced board is central to that process, and our article on appointing directors from regulated firms sets out the criteria worth applying.

Speed of incorporation

On the Registry's express service a Cayman company can be incorporated within one to two business days, once the corporate services provider has completed its due diligence. That helps when an issuer needs a vehicle in place quickly to meet an IPO timetable.

After the listing

• Cayman filing requirements. The Cayman-level statutory filings of an exempted company are limited compared with many onshore jurisdictions; the listed company remains subject to the rules of its exchange and securities regulator. The ongoing obligations of Cayman exempted companies still apply.
• Cross-border flexibility. As a tax-neutral entity, the Cayman company gives flexibility for dividend distribution, intercompany lending and intellectual property licensing.
• Exit and transaction options. Cayman companies are commonly used in take-private transactions, redomiciliations and SPAC mergers.

Where Bell Rock fits

Bell Rock acts as a CIMA-licensed company manager. For an IPO-ready Cayman entity it provides Cayman company incorporation, registered office and corporate secretarial support, and independent directors through named individuals who act in their personal capacity. Bell Rock coordinates with the issuer's listing agent and other transaction advisers; it does not act as underwriter or listing sponsor.

Frequently asked questions

Can a Cayman company list on NASDAQ or the NYSE?

Yes. Cayman exempted companies are routinely accepted as listing vehicles on NASDAQ and the NYSE, as well as on HKEX, the London Stock Exchange and the Singapore Exchange.

Does a Cayman listing vehicle pay tax in the Cayman Islands?

No corporate income or capital gains tax is levied on the company in the Cayman Islands. The structure is tax-neutral, and shareholders may be taxed in their own jurisdictions.

Can a Cayman company have dual-class shares?

Yes. The articles of association can provide for multiple share classes with different voting and economic rights, including the dual-class structures often used by founder-led companies.

Related reading

• Cayman economic substance: requirements and compliance
• Cayman company statutory filings and records
• Cayman family offices: structuring and governance
• Cayman Holding Company: A Practical Guide for Groups and Investors
• Redomiciling a Company to the Cayman Islands by Continuation
• Mergers of Cayman Companies under the Companies Act

For incorporation, registered office and governance support for a listing vehicle, see our Cayman company incorporation services.