The Beneficial Ownership Transparency Act, 2023 (the BOTA) was passed on 24 November 2023 and commenced on 31 July 2024, although enforcement is expected to begin in early 2025, with the exact date yet to be confirmed. The BOTA marks a significant milestone in the Cayman Islands’ efforts to enhance corporate transparency and align with international standards and commitments to combat money laundering, tax evasion, and terrorist financing.
The government first decided in 2021 to convert from a decentralised beneficial ownership disclosure regime—where companies maintained their own records of controlling persons—to a centrally held register compliant with Financial Action Task Force (FATF) recommendations. The BOTA expands the scope of the previous beneficial ownership reporting regime (BORR). The previous BORR applied only to companies, LLCs, and LLPs, but the new BOTA brings new entities into scope and applies to all “Legal Persons,” including companies, LLCs, LLPs, foundation companies, and, for the first time, exempted limited partnerships and limited partnerships. Trusts and registered foreign companies remain out of scope. The comprehensive nature of the Act necessitated amendments to several other key statutes, including the Companies Act, the Limited Liability Companies Act, and the Limited Liability Partnership Act, among others that reference beneficial ownership provisions.
Purpose And Scope
The BOTA’s primary goal is to ensure that all Legal Persons registered in the Cayman Islands maintain and disclose accurate and up-to-date information about their beneficial ownership. A Beneficial Owner is an individual who: (a) ultimately owns or controls 25 per cent or more of the shares, voting rights, or partnership interests in the Legal Person, either directly or through indirect ownership or control; (b) otherwise exercises ultimate effective control over the management of the Legal Person; or (c) is identified as exercising control of the Legal Person through other means.
These are collectively known as the ‘Specified Conditions.’ Individuals acting solely in the capacity of a ‘Professional Advisor’ (e.g., lawyers, accountants) or ‘Professional Manager’ (e.g., liquidators, receivers) are not considered Beneficial Owners under these conditions.
Where no individual meets these criteria, but trustees of a trust do, the trustees are deemed Beneficial Owners if they have ultimate control over the trust’s activities beyond the capacity of a Professional Advisor or Manager. In situations where neither a trustee nor an individual qualifies as a Beneficial Owner, the Legal Person’s Senior Managing Official, such as a director or CEO, must be identified instead. Unlike individual Beneficial Owners, a Senior Managing Official may be a Professional Advisor or Manager. If there are multiple directors, the one with the most authority is designated as the Senior Managing Official. Additionally, the BOTA recognizes Reportable Legal Entities (RLEs), which are entities meeting the same ownership or control thresholds as Beneficial Owners. Both Beneficial Owners and RLEs are considered Registrable Beneficial Owners (RBOs).
Changes To Scope
Many legal entities that were previously exempt or outside the scope of the BORR are now required to identify their Registrable Beneficial Owners (RBOs) and submit the relevant information to their Corporate Service Provider (CSP). Examples of entities that were previously exempt but are now within the scope of the new regime include Cayman Islands general partners, carry vehicles, debt issuance vehicles, special purpose vehicles, trading subsidiaries, and entities registered under the Securities Investment Business Act or the Virtual Assets (Service Providers) Act. However, certain exemptions remain for entities such as those listed on approved stock exchanges or regulated under specific laws, provided alternative compliance measures are followed.
Entities registered as mutual funds or private funds with the Cayman Islands Monetary Authority (CIMA) can elect to either provide details of their RBOs or, alternatively, supply their CSP with details of a Contact Person instead of their RBOs. Additionally, entities licensed under a ‘regulatory law’ or listed on the Cayman Island Stock Exchange (CSX) or another approved stock exchange—or subsidiaries of such listed entities—may choose to provide their CSP with details of their licensed or listed status rather than their RBOs.
Trusts, registered foreign companies, and other non-Cayman Islands entities remain outside the scope of these requirements, and no action is required.
Contact Person
Only entities licensed or registered with the Cayman Islands Monetary Authority (CIMA) to provide beneficial ownership information, such as a CSP or a fund administrator holding a Mutual Fund Administrators Licence under the Mutual Funds Act, are eligible to be appointed as a Contact Person. The Contact Person’s role is to liaise between the Legal Person and the competent authority. Although the Contact Person is not required to maintain a beneficial ownership register, they must have access to the necessary information and be able to provide it to the competent authority within 24 hours, or another deadline reasonably set by the competent authority upon request.
Identification Of Registerable Beneficial Owners
Legal Entities must identify and confirm their RBOs and provide the necessary identifying details, including the RBO’s name, residential address, date of birth, and nature of control. This information must be submitted to the CSP, who must ensure that it is accurate and up to date. CSPs are required to file beneficial ownership details with the General Registry at least monthly.
The Beneficial Ownership Register
Legal Entities are required to maintain a beneficial ownership register. It must be updated promptly to reflect any changes, and entities must notify their CSP of any such changes within 30 days.
Corporate Service Providers’ Responsibilities
CSPs are responsible for gathering information on beneficial ownership and verifying the accuracy of the information before they enter it into the register. CSPs must also send beneficial ownership information to the competent authority at specified intervals, ensuring that the information is current and accurate. If inaccuracies or missing data are identified, CSPs must notify the Legal Person, and failure to resolve these issues within 30 days can result in penalties.
Penalties And Restrictions
The BOTA has strict compliance mechanisms that allow CSPs to issue restriction notices if a Legal Entity fails to meet its obligations under the BOTA. These notices can include invalidating any transfers or exercise of voting rights to restricted interests. Fines for non-compliance can range from CI$5,000 to CI$100,000, depending on the severity and frequency of the breach. Continuous non-compliance may result in additional monthly fines, increasing by CI$1,000 up to a maximum of CI$25,000. Repeat offenders risk having their entity struck off the register.
Access To Beneficial Ownership Information
A search platform will be established under the BOTA that will be managed by the competent authority. The database will provide access to beneficial ownership information for specified bodies, including law enforcement agencies, regulatory bodies, and certain government authorities. The United Kingdom entered into a beneficial ownership information sharing agreement with the Cayman Islands, and other countries may request information pursuant to other agreements and laws. Public access to beneficial ownership information is not mandated; however, there is a consultation process to allow for limited access to those who meet a ‘legitimate interest’ test, such as journalists, civil society organizations, and individuals engaged in bona fide academic research.
International Context And Alignment With Global Standards
The BOTA is a direct response to international expectations and global initiatives, such as the FATF recommendations, the European Union’s directives on anti-money laundering and counter-terrorism financing, and the US Corporate Transparency Act. The Act’s provisions are designed to meet these global standards by ensuring that beneficial ownership information is not only collected and maintained but also readily accessible to those who need it for a legitimate purpose.
The BOTA is a significant step forward for the Cayman Islands as it aligns itself with international corporate transparency standards. All in-scope Legal Persons will need to closely monitor ongoing developments and be ready to ensure compliance when enforcement begins in 2025. Adapting to these changes will not only help avoid penalties but also reinforce the integrity and reputation of the Cayman Islands as a leading financial jurisdiction.
Megan Paget-Brown
Megan is an attorney with Paget-Brown Chambers and is the CEO of the Cayman International Arbitration Centre. Her practice areas include Arbitration and Mediation, Trusts, Corporate Governance, Blockchain Technology and Digital Assets. She is admitted to Practice Law in the Cayman Islands, the District of Columbia, Wyoming and Missouri.