Offshore Trusts Report: Cayman Islands
Legal Framework and Formation Rules and Fees
Trust Management has been a major activity in the
Cayman Islands for 30 years or more, and trust assets in Cayman
now equal or exceed banking assets.
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, preferring
to maintain the flexibility to set its own path.
Trust Licenses at the time of writing require a minimum
net worth of CI$400,000; Restricted Trust Licences and Nominee (Trust)
Licences require a minimum net worth of only CI$20,000. The parent
of a Nominee Trust company must provide a guarantee of not less
than CI$200,000. 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.
Trust companies must pay annual fees which, for a 'Nominee' License
amounts to CI$6,000, for a Restricted License, amounts to CI$7,000
and for an Unrestricted Trust Licence amounts to CI$70,000.
There is no taxation in Cayman other than stamp duty
and import duties.
Recent important pieces of Cayman trust legislation
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
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'
the Special Trust (Alternative Regime) Law 1997 introduced
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
Maples and Calder, the offshore law firm, in January
2007 announced the publication of ‘Drafting Cayman Islands
Trusts’, co-authored by Tony Pursall, a Cayman Islands attorney-at-law
based in the firm’s London office and James Kessler QC,
a leading English Chancery barrister and UK tax adviser.
This is reportedly the first book of its kind on Cayman Islands
law and takes a clear, modern approach to legal drafting.
Whilst the Cayman Islands is one of the main jurisdictions for
establishing offshore trusts, the drafting of effective Cayman
trust instruments can be complex.
The authors have prepared practical precedents in plain English
with a detailed explanation of their terms and related drafting
issues. As a systematic approach to drafting Cayman Islands trusts,
the authors say that this book will be a valuable resource for
practitioners and administrators alike.