Cayman Private Funds Law Amended

The Private Funds Law, 2020 (“PFL”) has been amended in several important ways:

1) In the definition of “private fund”:

• “principal business” has been removed so that, for example, a limited partnership engaged mainly in non-fund business, but with some private fund business would not be automatically excluded.
• “offering and issuing of its investment interests” has been replaced with “offers or issues or has issued investment interests” which broadens the definition so that, inter alia, an ongoing offering of investment interests is not required.
• “with the aim of spreading investment risks” has been removed, so that closed end funds with only one investment will not be automatically excluded.
• “for reward based on the assets, profits or gains of the company, unit trust or partnership” has been removed so that a lack of fee payment, or fee payment at a different point in a closed end fund structure will not, in and of itself, create an exclusion from the requirement to register.

2) In Sections 16(4)(b)(ii), 17(4)(b)(ii) and 18(1)(b)(ii) by inserting after the word “identified”, where it appears in those sections, the words “, managed, monitored”. If the disclosure of conflicts of interest option is selected in order to comply with the Section 16, 17 or 18 investor protection provisions, then the management and monitoring requirements would create ongoing compliance obligations.

3) Section 31(1)(d) has been repealed, which means that the Cabinet (effectively the executive part of the Cayman Islands Government) will no longer be able to make regulations “exempting any person or class of persons or business or class of business from any provision of this Law”. Any such exemptions would therefore have to be made by amendment to the PFL itself, which requires the approval of the Legislative Assembly (the parliamentary body).

These changes expand the scope of the definitions in the PFL and may bring into scope vehicles previously excluded, so careful consideration should be given to these changes.

The amendments in full can be found here.

Please note that the deadline for registration and compliance with the Private Funds Law remains 7th August 2020, see our previous update for full registration information.

Should you have any questions or would like to find out how DMS can assist, please contact your usual DMS representative or contact us below: