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Updated Procedures For De-Registration Of Cayman Islands Mutual Funds And Private Funds – Fund Management/ REITs



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On 17 August 2022, the Cayman Islands Monetary Authority
(“CIMA”) published a set of new
regulatory measures in connection with the de-registration of
mutual funds and private funds (the
Procedures”) as regulated funds in
the Cayman Islands. The revised Procedures represent the outcome of
a consultation process that CIMA has undertaken in order to
simplify and standardise the de-registration process for regulated
funds, so that mutual funds and private funds can terminate their
registrations on a consistent basis.

While the Procedures largely codify CIMA’s longstanding
practices, they also introduce some significant
simplifications:

  • For funds undertaking an ordinary-course solvent wind-down, the
    former ‘two-step’ de-registration process (typically
    involving a period of ‘Licence under Termination’
    followed by final de-registration submissions) has been removed.
    These funds will simply notify CIMA when they commence their
    wind-down, stay registered until the final payments to investors
    (often the release of an audit-related holdback) have been made,
    and make a final submission once they have completed their final
    liquidation audit and have completely redeemed all investors.

  • For funds that are required to commence a formal winding up
    upon the expiration of their term, or whose constitutive documents
    contain similar liquidation triggers, the former
    ‘two-step’ de-registration process triggered by a
    liquidation (involving a period of ‘Licence under
    Liquidation’ followed by full de-registration) has also been
    removed. These funds will follow the same process as outlined
    above: an initial notification to CIMA at the commencement of the
    wind-down and liquidation of the fund, followed by a final
    submission following the completion of the process. Separate
    provisions apply where a third-party liquidator is appointed.

  • While funds remain registered, they continue to be subject to
    all of the obligations of registered funds, including with respect
    to submission to CIMA of annual audits, Fund Annual Returns, and
    annual fees. As the Licence Under Termination and Licence Under
    Liquidation routes are no longer available, annual fees will not be
    subject to the prior 50% and 100% discounts, and funds will need to
    accrue accordingly. While in limited circumstances waivers from
    certain filing requirements may be available, we do not expect
    these to be a routine part of most funds’ de-registration
    submissions.

The documents to be submitted on ordinary-course
de-registrations have not changed significantly, and the related
requirements that many clients will be familiar with (such as the
requirement to be in ‘good standing’ with CIMA) all remain
applicable. The Procedures still provide for de-registration
scenarios beyond the ordinary-course ones mentioned above, such as
entities transferring out of the jurisdiction, or changing their
circumstances such that they are no longer operating as a fund

As a practical matter, the changes mean that there is no longer
any significant advantage to making de-registration submissions
prior to a given year-end (as there is no fee break to be secured).
Unless the fund has completed its final payments to investors,
submitted its final audit and made all its required submissions, it
will need to remain registered into the following year until those
items have been completed. However, the Procedure still requires
funds to notify CIMA within 21 days of commencing the wind-down of
their business (this is unchanged from the prior position), and so
clients with funds approaching the end of their life should build
this initial notification into their process. Your Walkers team
will guide you as to the required steps.

CIMA has yet to specify what will happen to funds currently in
Licence Under Termination or Licence Under Liquidation status. Our
expectation, until guided otherwise, is that they will remain in
this status (and continue to benefit from fee discounts), but that
no new de-registrations will be permitted to enter either
status.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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