Cayman Islands Financial Services

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.”

It has been announced by the government of Guernsey that a Tax Information Exchange Agreements (TIEA) was signed between Guernsey and the Cayman Islands.

Guernsey Chief Minister, Lyndon Trott expressed his delight to announce that, with the signing of the agreement with the Cayman Islands, Guernsey has signed its 1st TIEA with a Caribbean territory. The signing of the TIEA further underlines Guernsey’s ongoing commitment to the international standards of wider transparency and exchange of information in tax matters, as well as brings the number of countries which have signed TIEAs with Guernsey to 26.

In accordance with the terms of the agreement, the signatories will, on request, exchange bank and other information relating to both criminal and civil tax matters.

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.”

A special economic zone is to be launched by the Cayman Islands, in partnership with Cayman Enterprise City (CEC). The zone is aimed to attract global science, technology, commodities and derivatives, media, as well as educational entities to the jurisdiction.

On July 18, an agreement was signed to allow CEC the exclusive right to construct, develop, operate and maintain the special economic zone. The government of the Cayman Islands has announced its intention to start establishing the legislative framework for CEC to operate. More than USD 327 million is to be invested over the next 8 years.

CEC is to develop 5 “parks”: Cayman Internet Park, Cayman Media Park, Cayman Biotech Park, Cayman Commodities Park, and Cayman International Academic Park.

Cayman Premier, McKeeva Bush, commented on the deal: “CEC represents an opportunity for the Cayman Islands to diversify its economic base. It’s also worth noting that this project requires no government investment, as it will be completely privately funded, and the developer also has not requested waivers for duties on materials or stamp duties.”

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.

Certain types of hedge funds for the first time will be regulated and taxed by the Cayman Islands. This measure has been introduced under a new measure brought in by the Budget.

The Budget that was delivered by Premier and Finance Minister McKeeva Bush on June 10, 2011 introduced only one new revenue measure.

This provides for the regulation of “master funds” in particular by the Cayman Islands Monetary Authority (CIMA). As noted by Bush, this is the general practice in other offshore jurisdictions. Such funds are not currently regulated in the Cayman Islands, but, under the new rules, will be obliged to pay a KYD 1 500, which is USD 1 842 fee per year.

On June 1, 2011, the Tax Information Exchange Agreement (TIEA) signed between Canada and the Cayman Islands entered into force. The document was signed by the jurisdictions on June 24, 2010.

The treaty is applicable to taxes on income and taxes on capital in each territory. The TIEA provides for the exchange of information relevant to the administration of domestic tax laws, and to the collection of tax, and investigation or prosecution of criminal matters. It also permits the request of information held by banks and other financial institutions, and information relating to the ownership of companies, partnerships, trusts and foundations.

The Grand Court of the Cayman Islands has reached a ground-breaking decision that assumes the power to grant asset-freezing injunctions over Cayman assets in support of certain foreign legal proceedings.

The Cayman Islands’ court has made the decision to grant a free standing Mareva injunction, so-called in reference to a 1975 UK case, “Mareva Compania Naviera S.A. v International Bulk Carriers S.A.”.

According to Ogier, the offshore legal firm, such an injunction permits a court to prevent a defendant from transferring assets until the outcome of the law suit is decided, with a view to ensure the assets of the defendant are not dissipated to avoid a satisfactory judgement. Ogier noted that the Court has held that it has power to grant asset-freezing injunctions over Cayman assets in support of foreign proceedings, where the only relief claimed in the Cayman Islands Court is the asset-freezing injunction itself. It also has been said that there is no other cause of action against the defendant within the jurisdiction of the Cayman Islands courts, other than the freezing order relief sought.

When commenting on the court’s decision, Ogier Cayman Partner and Head of Litigation Chris Russell, stated that this case follows a modernising trend and it is expected to be widely welcomed, therefore, this is a significant contribution to cross-border co-operation and protection”.

Walkers, leading international financial centre law firm has recently announced a series of senior management changes within the global group.

With the forthcoming retirement of Global Chairman Wayne Panton, an attorney with Walkers since 1988 and a partner with the firm since 1997, this key strategic role will be taken on by current Global Managing Partner Grant Stein. The appointment will be effective from July 1, 2011.

Also from July 1, 2011, Diarmad Murray, the current Managing Partner of Walkers’ Cayman Islands office, will become Walkers’ Global Managing Partner. He joined the company in 1994 and became its partner in 2000. As Global Head of Walkers’ Commercial Litigation and Dispute Resolution Group and having been Managing Partner of Walkers’ Cayman Islands office since 2009, Murray’s appointment as Global Managing Partner ensures a successful transition for Walkers in this position.

Stein commented: “We are delighted to have Diarmad taking over the reins as Global Managing Partner, following the unanimous support of the partnership. He has done an excellent job in reshaping the Cayman Islands office over the past two years and our senior management team is extremely strong as we embark on the next phase of the firm’s growth.”

It should be noted that, along with its Cayman Islands office, the Walkers Group has offices in Hong Kong, Jersey, the BVI, Singapore, Delaware, Dubai, Dublin, and London.