US clients have reportedly been requesting this legislative development for some time to provide a better match with the Delaware limited liability company, reports CNS Business.
The new legislation meets demand from US fund sponsors and promoters for an offshore vehicle that is more closely aligned with their onshore corporate framework.
Mimic
This is not the first time that Cayman has modelled its laws on America’s tax haven, with the Cayman exempted limited partnership (ELP) legislation also based on the equivalent and equally popular Delaware version.
Richard Addlestone, partner with law firm Solomon Harris, said: “The Delaware LLC is a vehicle which is very familiar to the Americans and has a broad use from investment fund structures to family holding companies. It is probably long overdue for us to have in our stable something that equates to it.”
“In the investment funds context, the LLC may displace the Cayman exempted limited partnership (ELP) and its biggest impact may be on the formation of Cayman private equity funds, where the Cayman ELP is usually the vehicle of choice.”
The Cayman LLC is a corporate body, which has a separate legal personality, but instead of having share capital, it is limited by the capital accounts and financial commitments of its members.
A better fit
Historically, legal practitioners in Cayman have found it somewhat of a challenge to fully translate Delaware LLC concepts into the range of Cayman vehicles currently available, Addlestone said.
“Employee incentive schemes for private equity managers, for example, designed with Delaware LLC characteristics in mind, do not easily fit within the framework of a Cayman exempted company.
“In the investment funds context, the LLC may displace the Cayman exempted limited partnership and its biggest impact may be on the formation of Cayman private equity funds, where the Cayman ELP is usually the vehicle of choice,” Addlestone said.
