Cayman Islands Financial Services

It has been discussed that a recent report named the Cayman Islands the world’s 2nd most secretive finance jurisdiction. This has led Cayman industry insider to call for a better defence against “those who would bury places like Cayman”.

The ex-chairman of the Cayman Islands Monetary Authority (CIMA), Tim Ridley has spoken to comment on the publication of the Tax Justice Network ‘s (TJN) Secrecy Index that accused the offshore jurisdiction of making “shallow efforts” in cracking down on fiscal evasion.

Mr Ridley said: “The recent, highly subjective and somewhat ‘short on substance’ secrecy report by the Tax Justice Network underscores how essential it is that Cayman presents the accurate position whenever and wherever possible and to those that matter”. He stated that “those who would bury places like Cayman are in deadly earnest”, so the future of Cayman financial services industry is at stake.

Carlos de Serpa Pimentel, chairman of STEP Cayman Islands, suggested that the Cayman Island’s dealings as an offshore jurisidiction actually helped the world’s economy by providing a tax neutral platform for international transactions. “In other words, the existence of Cayman facilitates the workings of the world’s financial system and makes it more efficient,” he said.

According to British newspaper Morning Star, tax activists drew their attention to the Cayman Islands. They demanded that Britain bring the jurisdiction, which they called one of the world’s biggest tax havens, to account.

The Tax Justice Network’s financial secrecy index said that the Cayman Islands is one of the world’s most secretive financial centres. The jurisdiction is one of British Overseas Territories having economic autonomy. According to Morning Star, income or corporate taxes has made them the hedge fund capital of the world, with more than 90 000 companies doing their business through this offshore jurisdiction. A study of 72 countries revealed that the Cayman Islands is the 2nd most secretive nation (the 1st is Switzerland).

On October 4, a separate report was released that accused the offshore jurisdiction of playing a “key role” in the 2008 global financial crisis. The report said: “Cayman’s relaxed funds law served as the bedrock of the hedge fund industry which now sees Cayman as its top domicile. It also saw Cayman attract a very large share of major new sectors in financial engineering such as private equity, debt and bond issues and securitisation”.

In February 2011, Barclays admitted to using Cayman subsidiaries to slash its tax bill to 1%. Barclays chief executive Bob Diamond said that the bank had used at least 181 offshore subsidiaries in the Cayman Islands to cull its tax burden to just GBP 113 million despite racking up GBP 11.6 billion in annual profits.

On September 12, it was announced by Consolidated Water Co. Ltd. (NASDAQ: CWCO) that the Board of Directors has declared a quarterly cash dividend of USD 0.075 per share.

The dividend is payable October 31, 2011 to shareholders of record at the close of business October 1, 2011.

Consolidated Water Co., the company that develops and operates seawater desalination plants and water distribution systems where natural supplies of potable water are scarce or nonexistent, operates water production and distribution facilities in the Cayman Islands, as well as the BVI, Belize, and the Bahamas.

The Company was established in 1973 as a private water utility in Grand Cayman and obtained its first public utility license in the jurisdiction in 1979.

Offshore Incorporations Limited (OIL) is opening its first European office in London. This leading global company formation specialist based in Asia commented that the move will allow to further support Asia-based companies which increasingly require international structures to facilitate strong capital flows from Asia to Europe.

Offshore Incorporations Limited serves professional intermediaries. The company specializes in offshore company formation the Cayman Islands as well as Anguilla, the Bahamas, the British Virgin Islands, Delaware, Hong Kong, Mauritius, Samoa, the Seychelles and Singapore.

CEO for OIL, Martin Crawford, said that this is the 1st step aimed to expand OIL’s presence across Europe and it is an exciting milestone for the business that has just celebrated 25 years in Asia. He said: “We wish to continue supporting our clients as they grow globally and require a wider variety of services for their offshore activities. You just need to look at the fact that over 50% of new properties in London are purchased by Asian investors to see the growth in demand.”

Companies residing in the Cayman Islands and Luxembourg have been hit with a tax bill of more than $738 million as the Australian Tax Office (ATO) sharpens its focus on the private equity firm behind the 2009 float of the retailer Myer.

In accordance with the documents filed in the Federal Court, the Tax Office has demanded more details about Texas Pacific Group’s Australian operations and who issued its local head, Ben Gray, with instructions relating to the offshore chain of ownership that controlled Myer from 2006 until 2009.

The Tax Office contends that after pocketing $1.5 billion of Myer float proceeds in November 2009, the Cayman Islands-based TPG Newbridge Myer Ltd and Luxembourg-based NB Queen SARL should have paid $452 million in income tax.

The Tax Office has issued the assessments for companies that demand the outstanding $452 million plus $226.12 million in penalties and $60.49 million interest.
Proceeds from the Myer float were channeled through a corporate structure that spanned 4 jurisdictions: from Australia the funds moved to NB Swanston BV in the Netherlands, then to its parent company, NB Queen in Luxembourg, which transferred the proceeds to TPG Newbridge in the Cayman Islands.

The ATO obtained a Victorian Supreme Court order freezing TPG’s bank account in Melbourne, but this account had already been drained.

Now the Australian Tax Office has obtained fresh orders from Justice John Middleton in the Federal Court clearing the way for it to leave notices of demand at the South Yarra home of Mr Gray, the chief executive of TPG in Australia.

The Australian Tax Office has already demanded details from Gray about the ownership of the Cayman-registered company. According to correspondence released by the court, Gray told the ATO that the Cayman Islands company was owned by 3 funds: NB Asia IV (51.7%), TPG IV (34.5%) and Blum Capital (13.8%).

As part of its global expansion strategy, Investors Trust Assurance SPC has recently joined the Association of International Life Offices (AILO), a non-profit organization comprised of the most important companies of the international insurance industry, based predominantly in financial centres within the European Economic Area and UK Crown Dependencies, such as the Cayman Islands. AILO will be a valuable resource to allow Investors Trust to successfully approach potential markets in Europe, Middle East and Asia.

Investors Trust is an insurance company registered in the Cayman Islands. It offers unit-linked and fixed income investment products to middle market investors worldwide.

The AILO organization has been the main trade consultant for the international financial services industry since 1987. It represents the interests of this particular sector. This international insurance company is licensed and regulated by the CIMA.

Investors Trust will be participating in the next annual general meeting scheduled for October 2011, which will take place in London, which will provide it with an opportunity to share experiences and new challenges as well as to meet colleagues and competitors.

On August 3, 2011, the leading online platform of core technologies for the small and medium enterprise market in China, Cogo Group, Inc., announced the completion of the redomestication merger that was aimed at reorganizing this company as a Cayman company. Initially, Cogo Group, Inc., was a Maryland company.

The change of domicile will provide Cogo Group with the option to dual-list its shares of common stock on the Hong Kong exchange as well as to continue to trade on Nasdaq. At the same time, the company will be able to maintain the existing levels of regulatory scrutiny and financial transparency.

Pursuant to the redomestication merger, each outstanding share of common stock of Cogo Group, Inc., was converted into one ordinary share of Cogo Group, Inc., a Cayman-registered company. The ordinary shares of Cogo Group will remain listed on the Nasdaq Global Select Market under the trading symbol “COGO.”

The economy of Cayman Islands exceeded growth estimates for the 1st quarter of 2011, which was conditioned by higher levels of company formations and tourism.

In accordance with the figures on the Cayman Islands’ economy for January to March 2011 released by the Economics and Statistics Office, growth of 1.2% was achieved by the jurisdiction in the 1st quarter of 2011. This figure is higher than the 0.9% growth that was forecast for the entire 2011.

The government stated that several positive results contributed to this growth. These results include an increase in new company registrations by 11.9%. Also, the tourism industry experienced strong performance, with air arrivals up by 6.8% and cruise ship passenger numbers increasing by 8.2%. The statistics showed that the number of property transfers rose by 20.3%, which complemented a 271.2% rise in the value of properties transferred in the quarter that amounted to USD 253.9 million.

Premier and Minster for Finance McKeeva Bush commented the following: “I, along with the government, am very upbeat with respect to the future performance of the economy – which is based not only on positive results achieved in the first quarter of 2011 but also on the partnerships and initiatives that the government has forged with the private sector. We are encouraged by the 2011 first quarter results and by the Islands’ bright future prospects.”

Although there was a fall in GDP in 2010, the economy of the Cayman Islands is expected to return to growth in 2011. This was stated by Premier and Finance Minister McKeeva Bush.

When “The Cayman Islands’ Annual Economic Report 2010″ was released, Bush commenting on it saying that the positive trend would be repeated through to 2014. These expectations were based on local economic forecasts as well as on the prediction of modest worldwide growth, coupled with the anticipated results of government action in the private sector.

According to the report, the Cayman Islands’ GDP fell by 4% in 2010, which was an improvement on the 7% decline seen in 2009. This decline is attributable to problems in the construction, real estate and financial services industries. As a result, real GDP per capita decreased from KYD 43,363 (USD 52,107) in 2009 to KYD 42,605. Inflation averaged 0.3% in 2010. However, due to rising international food and oil prices, it is predicted to increase to 1.9% in 2011.

The report shows that there were 2 opposing trends in the financial services sector. On the one hand, new company registrations and new partnerships rebounded, while, on the other hand, the report reveals downturns in mutual fund registration, stock exchange listings, insurance licenses and bank and trust licenses.

In accordance with the date provided in the report, the availability of banking credit improved. Domestic credit from commercial banks grew by KYD 171.3 million. Public sector financing from the local banking sector was up by 16.8%, and credit to the private sector rose by 5%.

It is expected in the report that GDP will show a growth of 0.9% in 2011, which will be partially fuelled by a strong recovery in tourism (in 2010 it was up by 5.2%).

According to “The Cayman Islands’ Annual Economic Report 2010″, the Cayman Islands’ government can anticipate a robust performance in the financial services industry.

Ogier Cayman has acted as advisor to BTG Pactual in the deal that is considered to be 1st merger of a licensed financial institution using the revised merger provisions in the recently-enacted Companies (Amendment) Law 2011 in the Cayman Islands.

The leading Brazilian investment bank BTG Pactual S.A. has operations in Brazil, New York and London, is the dominant asset and wealth manager in Latin America. The bank is part of the BTG Pactual Group that has been operating in this offshore jurisdiction since 1998 through its subsidiary BTG Pactual Banking Limited and holds a class-B banking licence.

The reorganization involved merging BTG Pactual Banking Limited into BTG Pactual S.A. with the result that offshore banking operations are now conducted through a Cayman branch of BTG Pactual S.A. rather than by a subsidiary.

The above-mentioned merger was completed under Cayman law. However, BTG Pactual S.A., which is the surviving entity, remains a Brazilian company. Before the amended merger provisions introduced in April 2011, it was possible to merge a Cayman company with a foreign company if the surviving entity was a Cayman company.

A new structure for BTG Pactual S.A. in the Cayman Islands offers greater efficiencies to support the activities of its businesses worldwide. Joao Dantas, Executive Director of BTG Pactual S.A. said that long-standing presence and relationship in the Cayman Islands is key for the company’s international activities and that the new structure will help expand its businesses and products without affecting the services provided in the Cayman Islands.