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Cayman Islands trust law is based on the Trust Law 1967, itself very similar to the English Trustee Act 1925. However, there has been considerable subsequent legislation which has distanced Cayman trust law from its English origins. In particular, Cayman has chosen, unlike England, not to adopt the Hague Convention, perferring to maintain the flexibility to set its own path. The most important recent pieces of Cayman trust legislation are as follows: |
• The Perpetuities Law 1985 introduced a perpetuity period of 150 years, plus a 'wait and see' rule whereby a disposition or power will only fail when it tries to bite outside the perpetuity period.
• The Trust (Foreign Element) Law 1987 strengthened the validity of Cayman trust law, established importation and exportation of trusts, provided for the non-enforcement of foreign judgements, and specifically excluded forced heirship provisions (all of this making Cayman trusts more attractive in civil law jurisdictions in particular);
• The Fraudulent Dispositions Law 1989 replaced the Statute of Elizabeth, and strengthened the defences of a Cayman trust against creditors, as long as the trust is not bankrupt in Cayman. There is a 6-year limitation period on creditors' claims.
• The Special Trust (Alternative Regime) Law 1997 introduced purpose trusts.
• The Trust Law 1996 introduced exemption of trusts, whereby in exchange for registration with the Registrar of Trusts they can obtain a 50-year undertaking from the Governor to the Trustees that the trust will not be subject to any future Cayman taxation. Trusts do not otherwise require to be registered in Cayman.
The Banks and Trust Companies Law 1995 introduced licensing for companies providing trust services. Trust licenses are Class B, restricted or unrestricted. Unrestricted Class B Trust Licenses require a minimum paid-up capital of US$500,000; restricted Class B licenses require a paid-up capital of only US$25,000, but a list must be provided to the Inspector of Financial Services of the clients with which the trust company intends to do business, and the list cannot change without further notification to the Inspector. Licensees do not need to be Cayman companies; but foreign licensees will probably have to provide a head office guarantee. All applications include considerable amounts of administrative and financial information.
In common with many other offshore jurisdictions, the Cayman Islands is responding to pressure from the OECD and FATF by tightening up its regulatory regime. Specifically, the Cayman Islands is responding to its inclusion on the FATF blacklist of jurisdictions which have weak anti-money laundering legislation, and the November 2000 KPMG Independent Review of Financial Sectors in the Caribbean Overseas Territories. As a result, amendments to the Banks and Trust Companies Law are expected to be enacted during 2001.
source:www.lowtax.net
