Glossary · SearchOffshore
What Is an Exempted Company?
An exempted company is the standard corporate structure used in the Cayman Islands for international business. It is a company incorporated under the Cayman Islands Companies Act that is exempt from Cayman Islands tax and whose objects are to be carried out mainly outside the Cayman Islands. The exempted company is the dominant vehicle for offshore investment funds, structured finance SPVs, holding companies and joint venture vehicles globally.
Overview
What Makes an Exempted Company Different
The exempted company differs from an ordinary Cayman company in that it is specifically designed for offshore use — its business must be conducted mainly outside the Cayman Islands. In return, it receives a statutory undertaking from the Cayman Islands government that no law imposing any tax on profits, income, gains or appreciation will apply to the company for a period of 20 years from the date of incorporation (renewable).
The exempted company does not need to file its register of members or directors publicly — confidentiality is maintained through the registered agent. It does not need to hold an annual general meeting in the Cayman Islands. Its shares may be in bearer form (though bearer share provisions are now significantly restricted). It can be structured with or without limited liability, with par value or no par value shares.
The majority of Cayman Islands investment funds — hedge funds, private equity funds, venture capital funds, real estate funds — are structured as exempted companies or as exempted limited partnerships. The exempted company structure is also used extensively for structured finance SPVs, SPAC vehicles and holding companies in complex cross-border transactions.
Key Features
Exempted Company — Key Characteristics
| Feature | Detail |
|---|---|
| Tax exemption | Statutory 20-year undertaking against Cayman tax on profits, income, gains and appreciation — renewable |
| Business requirement | Objects must be carried out mainly outside the Cayman Islands |
| Public register | Name on public register but register of members and directors not publicly accessible |
| Annual return | Annual return required — simple filing confirming company details |
| Share capital | No minimum share capital requirement — authorised capital stated in memorandum |
| Directors | Minimum one director — no residency requirement for directors |
| Registered agent | Must maintain a registered office and registered agent in the Cayman Islands at all times |
| Beneficial ownership | Must maintain beneficial ownership register accessible by Cayman authorities |
Common Uses
How Exempted Companies Are Used
Investment Funds
Open-ended hedge funds and closed-end PE/VC funds are commonly structured as exempted companies. Hedge fund shares are issued and redeemed as investors subscribe and redeem. PE funds may use exempted limited partnerships instead for pass-through tax treatment.
Structured Finance SPVs
STAR purpose trust-owned exempted companies are the standard orphan SPV structure in Cayman securitisation and structured finance transactions, holding the assets being securitised and issuing notes to investors.
SPAC Vehicles
Special Purpose Acquisition Companies (SPACs) listed on major exchanges including NYSE and NASDAQ are frequently incorporated as Cayman Islands exempted companies due to the flexibility of Cayman corporate law for this transaction type.
Holding Structures
Exempted companies are widely used as intermediate holding vehicles in complex cross-border acquisition structures, sitting between the fund or investor and the operating company to provide tax efficiency and structural flexibility.
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