Fifty of the states comprising the United States recognise LLCs and now the Cayman Islands is due to join in with the introduction of this useful hybrid company by, hopefully, the end of October 2016.
So, what is an LLC?
Those familiar with Delaware LLCs, probably the most common form of LLC used outside of the US mainland, will recognise these vehicles for their flexibility and innovative characteristics. LLCs can best be described as offering hybrid features akin to a combination of a company with a limited partnership.
The use of LLCs in the Cayman Islands will be of particular interest to asset managers seeking to establish fund structures. The flexibility of an LLC means that it is also ideal for purposes such as joint ventures, holding companies, and serving as the general partner to an exempted limited partnership. They can also be useful property holding vehicles.
LLCs have the following characteristics:
- the owners of an LLC are called members
- members benefit from limited liability
- an LLC may be managed by its members or the LLC Agreement may provide for a separate third party manager
- legally an LLC is a body corporate with separate legal personality and may sue or be sued in its own name
- no share capital – the capital structure of an LLC is determined by an LLC Agreement that may provide for flexible profit/loss allocation arrangements akin to partnership capital accounts and capital commitments/contractual distribution mechanisms
- no requirement to file the LLC Agreement at the Registry
- the standard for fiduciary duties owed by members, managers, the board or committee members is limited to “good faith”
- a person serving on a board or committee of an LLC may act in the interests of a particular member irrespective of whether the act is in the best interests of the LLC or other members
- a tax exemption undertaking of 50 years is available from the Cayman Island government.
For further information on LLCs, please contact your usual Marbury representative.