Private Equity 2019 5Th Edition a Practical Cross-Border Insight Into Private Equity

The International Comparative Legal Guide to: Private Equity 2019 5th Edition A practical cross-border insight into private equity

Published by Global Legal Group, with contributions from:

Aabø-Evensen & Co Dentons Proskauer Rose LLP Advokatfirman Törngren Magnell DS Avocats Samvād: Partners Ali Budiardjo, Nugroho, Reksodiputro Eversheds Sutherland Schindler Attorneys Allen & Gledhill LLP (Luxembourg) LLP Solórzano, Carvajal, González, Pérez-Correa, S.C. (SOLCARGO) Ashurst Hong Kong Faveret Lampert Advogados Udo Udoma & Belo-Osagie Avance Attorneys Ltd Garrigues Van Olmen & Wynant Bär & Karrer Ltd. HBK Partners Attorneys at Law Webber Wentzel British Private Equity & Venture Capital Houthoff Association (BVCA) Johnson Winter & Slattery Zhong Lun Law Firm Bub Memminger & Partner Maples Group Consortium Legal Matheson Davis Polk & Wardwell LLP McMillan LLP Debarliev, Dameski & Kelesoska Morais Leitão, Galvão Teles, Attorneys at Law Soares da Silva & Associados Dechert LLP Pirola Pennuto Zei & Associati chapter 11 cayman islands Julian ashworth

maples group patrick rosenfeld

1 Overview legislation governing the most popular entity types; notably exempted companies, exempted limited partnerships and limited liability companies. The Cayman Islands has also enacted 1.1 What are the most common types of private equity legislation for a limited liability partnership vehicle. transactions in your jurisdiction? What is the current The global regulatory framework is evolving quickly and this is state of the market for these transactions? Have you likely to continue in the near-/mid-term future. The Cayman Islands seen any changes in the types of private equity continues to adopt and embrace international best practice transactions being implemented in the last two to approaches in multiple spheres which interact with private equity, three years? including, by way of example, the regime for anti-money laundering and combatting terrorist financing, economic substance initiatives The Cayman Islands is a popular jurisdiction in which to domicile and tax transparency reporting obligations. private equity funds in light of its legislative and regulatory framework, tax-neutral status, flexible structuring options and experienced service providers. 1.3 What trends do you anticipate seeing in (i) the next 12 months and (ii) the longer term for private equity While private equity fund establishment for acquisition purposes transactions in your jurisdiction? and co-investment opportunities are most common, Cayman Islands structures are becoming increasingly common in transactional Fund raising activity remains at strong levels and we expect this to contexts, particularly buy-out and secondary transactions. continue in the near term. Equally, dry powder levels are also high. The nature, scope and volume of matters being undertaken in the We expect deal activity to remain strong over the next 12 months as Cayman Islands across the entire funds market spectrum makes it capital is deployed. The legal, regulatory and tax environment in the difficult to identify one specific change or trend. Ultimately, there Cayman Islands remains favourable for structuring of both the are many but they are all linked together by a singular overarching raising of private equity funds and for downstream cross-border theme; the nature of offshore practice has become more complex, deal activity in the longer term. involved and multi-jurisdictional due to onshore and global

developments; including US tax reform, more complicated and, at times conflicting, regulatory frameworks, bespoke structures and a 2 Structuring Matters mature funds industry. This will be documented in an appropriate manner in the governing documents adopted for Cayman Islands- domiciled vehicles, which will reflect the nature and terms of the 2.1 What are the most common acquisition structures adopted for private equity transactions in your underlying private equity transaction. jurisdiction?

1.2 What are the most significant factors encouraging or While a Cayman Islands private equity fund can also be structured inhibiting private equity transactions in your as an exempted company, limited liability company or a trust, the jurisdiction? majority of Cayman Islands private equity funds are established as limited partnerships. The Cayman Islands continues to be the leading offshore domicile The Cayman Islands fund vehicle will generally invest via other for private equity funds due to the global distribution appeal of Cayman Islands vehicles, including aggregator, or entities Cayman Islands vehicles, their ease of use, speed to market and low domiciled outside the Cayman Islands, such as in Luxembourg or cost. The Cayman Islands’ tax-neutral status ensures the fund Ireland, depending on where the ultimate operating portfolio vehicle itself does not create an additional layer of tax, creating company or target entity is located. Ultimately, net returns from the efficiencies in raising funds from a potentially global investor base. underlying company or target will be distributed to the Cayman The Cayman Islands is a well-regulated, co-operative and Islands domiciled fund vehicle, which net returns will be in turn transparent jurisdiction and continues to refine its laws and distributed to investors and sponsors and be taxable in accordance regulatory standards to respond and adapt to international standards. with the regimes of the jurisdictions where such investors and This has been most recently demonstrated by the update to primary sponsors are tax resident.

66 www.iclg.com iclg to: private equity 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London of thefundmanager. are restraints considerations regulatory and legal onshore the and by driven typically equity management the to relating provisions regulated are and domiciled funds international other equity or US private a by Islands managed Cayman of majority vast commercial The their to reference with arrangements andtarget returns. appropriate most is what to the management team to determine with a sponsor and will reflect returns are shared among a management team. This is generally left There can be a broad range of approaches as to how profits and other by dictated are matters These commercial, ratherthanCaymanIslandslegal,considerations. vehicle. Islands Cayman any of documents or governing the in reflected be veto can structure a within anti-dilution, as such accommodate to agree parties transaction which rights, information protections, investor Minority a through or partner a as separate vehicle. directly either typically participant carry will a as sponsor/management Apartnership limited exempted the of performance the in participate interest. partnership limited a of form the in partnership limited exempted the in interest equity an for subscribe investors partnerships, limited exempted as Howistheequitycommonlystructuredinprivate 2.3 and streamlinedmanner. efficient an in considerations regulatory and tax onshore satisfies which structure, holding underlying an of advantages structuring and economic the with vehicles fund Islands Cayman of flexibility These structures combine the investor familiarity, sophistication and Whatarethemaindriversfortheseacquisition 2.2 maples group © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London iclg to: privateequity 2019 legal Islands Cayman than rather considerations orrestrictions. agreement commercial by dictated are matters These parties. transaction the of intention more mechanics vesting and generally, are provisions, structured in a wide variety of ways depending on the leaver bad and Good Forwhatreasonsisamanagementequityholder 2.6 Inrelationtomanagementequity, whatisthetypical 2.5 Ifaprivateequityinvestoristakingminority 2.4 As the majority of Cayman Islands private equity funds a investment manager. Therefore, vesting and compulsory equity transactionsinyourjurisdiction(including acquisition provisions? considerations? institutional, managementandcarriedinterests)? structures? your jurisdiction? usually treatedasagoodleaverorbadin what arethetypicalvestingandcompulsory range ofequityallocatedtothemanagement,and position, aretheredifferentstructuring re structured acquisition and properrequest. lawful legitimate upon authorities tax and regulatory enforcement or law agencies with with circumstances disclosed limited be other in to or need consent only will information generally and arrangements commercial of privacy protects Islands Cayman The the in agreement, interests ofthepartnership. partnership limited the of provisions express The general partner has a duty to act in good faith and, subject to the partner.general its by managed is partnership limited exempted An express the by eliminated) not provisions ofthelimitedliabilitycompanyagreement. (but restricted or expanded be or manager a managing member is to for act in good faith. This care standard of care may of liability duty default The limited agreement. company a to respect liability limited the in parties the company,by agreed be can which with arrangements governance to as flexibility significant is There managers. of board separate a A limited liability company can be member-managed or can appoint publicly availableintheCaymanIslands. not is company exempted an of Officers and Directors of Register director owes a duty of care, diligence and skill to the company. The each duties, fiduciary the to addition In shareholders. individual to companies with which the company is associated, to the directors or other to owed not are they Specifically, whole. a as company the to owed are they and individually duties these owes director Every be broadly characterised as duties of loyalty, honesty and good faith. may which nature, fiduciary a of duties various owes and company director The of an exempted company is in a fiduciary relationship to the company. the to vary depending on the nature of the private equity transaction. A of control tends company portfolio a of directors of board the of and composition management overall the for responsible is directors of company,board exempted the an For partnership. limited a or company liability limited a company, exempted an as formed be can company portfolio equity private Islands ACayman enjoy anyvetorights. typically not would investor minority A manager. fund or partner and general the of transactions conflict indebtedness any approve to established be on often purpose, limitations will committee advisory partner business limited A etc.). guarantees, investment, to as on example, (for limitations fund the of partnership agreement limited the in agreed limitations any within partner act general must the partnerships, limited exempted as structured enjoy veto rights over major corporate actions. For funds structures typically not the do fund equity private Islands Cayman a on in Investors based consideration case-by-case commercial circumstancesofeachtransaction. a generally is This . Whatarethetypicalgovernance arrangementsfor 3.1 . Doprivateequityinvestorsand/ortheirdirector 3.2 GovernanceMatters 3 in yourjurisdiction? position, whatvetorightswouldtheytypicallyenjoy? arrangements requiredtobemadepubliclyavailable private equityportfoliocompanies? Are such etc.)? Ifaprivateequityinvestortakesminority disposals, businessplans,relatedpartytransactions, corporate actions(suchasacquisitionsand nominees typicallyenjoyvetorightsovermajor cayman islands www.iclg.com 67 cayman islands 68 cayman islands © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London www.iclg.com owes director such any company, portfolio Islands Cayman a of board the to nominee a appointing from investor equity private a While there are no Cayman Islands statutory restrictions preventing Arethereanylegalrestrictionsorotherrequirements 3.6 geographical scope. relation to the public interest, particularly with reference to time and in and parties the between as both “reasonable”, is restraint the that Islands law. That presumption in can, however, be rebutted by proving provisions Cayman under unenforceable such be to presumed are trade of provisions, restraint non-solicit and generally non-compete to is Islands) policy). Withpublic or law Islands Cayman respect to contrary not Cayman the another is agreement the that (provided Islands Cayman of the in enforceable than laws (other the by jurisdiction governed agreement shareholders’ A Arethereanylimitationsorrestrictionsonthe 3.5 (or shareholders minority to duties other any or duties fiduciary owe generally not does investor equity private a law, Islands Cayman of matter a As Arethereanydutiesowedbyaprivateequityinvestor 3.4 a authorise may documents manager toactintheinterestsofhis/herappointingmember. governing the given ventures joint to well-suited particularly are example, of way by vehicles, Such employed. is company liability limited a where flexibility greater director to opposed as shareholders nominees in light of the fiduciary to duties owed by directors. There is afforded better be may arrangements veto certain company, exempted an as structured If in aspecificcontext. effectively most accommodated be should arrangements such how documents although it requires a case-by-case analysis to determine governing in arrangements veto reflecting on limitation no is There Arethereanylimitations ontheeffectivenessofveto 3.3 agreement. director enhanced shareholders’a include almost would which documents, governing require or approvals. protections, These arrangements would be reflected in the company’s minority or rights various veto include may which thresholds, requisite by acting shareholders to reserved be will matters certain that agree to parties transaction for common very is it level, company operating an At maples group otatal are bten h pris n/r r otherwise are and/or parties expressly setoutingoverningdocuments. the between agreed contractually typically addressed? portfolio companies? equity investorsthatnominate directors toboardsof investors toportfoliocompany boards,and(ii)private liabilities for(i)directorsnominatedbyprivateequity companies? Whatarethekeypotentialrisksand appointing itsnomineestoboardsofportfolio that aprivateequityinvestorshouldbeawareofin non-compete andnon-solicitprovisions)? (including (i)governinglawandjurisdiction,(ii) contents orenforceabilityofshareholderagreements typically addressed? shareholders (orviceversa)?Ifso,howarethese to minorityshareholderssuchasmanagement the directornomineelevel?Ifso,howarethese arrangements: (i)attheshareholderlevel;and(ii) vice versa vice ), unless duties of this nature have been have nature this of duties unless ), will oftenbeestablishedtoapproveanyconflicttransactions. limited partner advisory committee or other independent committee a partnerships, limited as structured are funds equity private Where proceed withavote. to meeting quorate otherwise an at directors of majority a enable to matter, then the articles of association should be sufficiently flexible a such on vote a from himself/herself recuse to wish may director a opportunity.earliest the If at board the to interest this of nature the a which he or she has an interest, provided that of in he or matter she has disclosed a on association vote to director of a permit company Islands articles Cayman relevant the the Typically, of association company. of portfolio articles interest the of in conflicts out the set with provisions comply to required are Directors rae eovn rgltr ted ad lbly dpe best adopted globally and practices. trends regulatory evolving broader as well as markets other and Europe, Asia US, the in developed or of experienced trends context the reflect transactions and the funds equity private in Islands Cayman the in develop that trends The are domiciledorwheretheprivateequityinvestorsresident. assets the where jurisdictions the in required approvals regulatory as such issues, onshore by driven is transactions for timetable The . Howdodirectorsnominatedby privateequity 3.7 appointment totheboard. her or his for responsible investor equity private the of instructions director is accustomed to acting in accordance with the directions or equity private nominee the if director shadow a a be to considered be may circumstances, investor these In Revision). (2018 Companies Law the under company Islands Cayman a of up winding with connection in offences certain of context the in circumstances limited in recognised only is director” “shadow a of concept The company isusedastheportfoliocompany. greater flexibility in this regard if a Cayman Islands limited liability it risks incurring personal liability. As noted previously, there can be company,the to owed duties other and fiduciary its of breach in act company.director the a of Should interests best the in act times all personal their at must and investor) equity private and the of interests the (or interests company the to duty their between conflict a board. the avoid to mindful be must director to Consequently,nominee such any director the nominated that investor equity private the to not and whole a as company the to duties other and fiduciary . Havetherebeenanydiscernibletrendsintransaction 4.2 Whatarethemajorissuesimpactingtimetablefor 4.1 Cayman Islands private equity structures notwithstanding tha notwithstanding structures equity private Islands Cayman There are no competition approvals or regulatory approvals required for or subsequentto,adeal’s completion. filings or notifications may need to be mad Transaction Terms: General 4 of otherportfoliocompanies? terms overrecentyears? disclosure obligationsandfinancingissues? party nominatingthem,and(ii)positionsasdirectors interest arisingfrom(i)theirrelationshipwiththe investors dealwithactualandpotentialconflictsof and otherregulatoryapprovalrequirements, transactions inyourjurisdiction,includingantitrust iclg to: privateequity 2019

cayman islands e contemporaneous t ly with, certain rights andapplytotheCourtsseekingfairvaluefortheirshares. shareholder dissenting of themselves avail to able be may investors such then the merger, a of and way by structured company were acquisition Islands-exempted public is Cayman deal a in the shareholders which in which manner of the were investors equity private the if example, of way By structured. nature on the depend will investors, protections to available protections other be may there law Islands Cayman of matter a as generally, More of thecouncilexecutive. and consideration; of rules against offering favourable conditions except with the consent level minimum a in resulting acquisitions offer rules; an obligation to offer a minimum level of consideration; mandatory include: These shareholders. minority for protections of number a contains Code the entity, CSX-listed a of case the In listed. are shares its which on exchange stock Islands non-Cayman the of the relevant jurisdiction(s) where the target is based and/or the rules instances, the considerations that would apply are driven by laws in public-to-private in companies transactions are target generally not based in the Cayman Islands. In the those noted, previously As Whatparticularfeaturesand/orchallengesapplyto 5.1 maples group © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London iclg to: privateequity 2019 tax andregulatory considerations. onshore by driven typically considerations Islands non-Cayman are portfolio specific for terms investments are generally not governed by Cayman Islands law and deal and companies operating The Whatconsiderationstructuresare typicallypreferred 6.1 Whatdealprotectionsareavailabletoprivateequity 5.2 Substantial the Governing (the apply would Shares Rules of Acquisitions and Mergers and Takeovers ( Exchange Stock Islands Cayman the on listed were company target however,the If, stock exchangewouldapply. Islands non-Cayman such of rules listing The Islands. Cayman the outside exchange stock a on listed be certainly almost would target the company,then Islands Cayman a is company target the Where requirements. diitrd y cucl xctv apitd y h Stock the by appointed executive Exchange Authority, council theCSX’s regulator. a by administered elct o acmoae el em die b onsho by driven terms deal accommodate or replicate regulations ofthejurisdictionwheretarget companyisbased. take into account would be determined with reference to the laws and to considerations applicable The Islands. Cayman the in based not are transactions public-to-private in Generally,companies target the The flexibility of Cayman Islands law allows transacting allows law Islands Cayman of flexibility The Transaction Terms: Private Acquisitions 6 Transaction Terms: Public Acquisitions 5 transactions (andtheirfinancing)andhowarethese private equityinvestorsinvolvedinpublic-to-private acquisitions? commonly dealtwith? on thebuy-side,inyourjurisdiction? by privateequityinvestors(i)on thesell-side,and(ii) investors inyourjurisdictionrelationtopublic “CSX” , hn h Cya Ilns oe on Code Islands Cayman the then ), “Code” ), which Code is Code which ), parties to parties

re tax andregulatoryconsiderations. onshore by driven typically considerations Islands non-Cayman are portfolio specific for terms investments are generally not governed by Cayman Islands law and deal and companies operating The tax andregulatoryconsiderations. onshore by driven typically considerations Islands non-Cayman are portfolio specific for terms investments are generally not governed by Cayman Islands law and deal and companies operating The tax andregulatoryconsiderations. onshore by driven typically considerations Islands non-Cayman are portfolio specific for terms investments are generally not governed by Cayman Islands law and deal and companies operating The by onshoredealcounsel. sellers’ and agreed and negotiated typically are provided and terms agreed commercially comfort reflect commitments financing the to respect with rights such, enforcement As considerations. Islands Cayman by driven nor law, Islands Cayman by governed not generally are investments portfolio specific for terms deal The tax andregulatoryconsiderations. onshore by driven typically considerations Islands non-Cayman are portfolio specific for terms investments are generally not governed by Cayman Islands law and deal and companies operating The tax andregulatoryconsiderations. onshore by driven typically considerations Islands non-Cayman are portfolio specific for terms investments are generally not governed by Cayman Islands law and deal and companies operating The . To whatextentisrepresentation&warrantyinsurance 6.4 Whatisthetypicalscope ofothercovenants, 6.3 Whatisthetypicalpackage ofwarranties/indemnities 6.2 . Howdoprivateequitybuyerstypicallyprovide 6.7 Do(i)privateequitysellersprovidesecurity(e.g. 6.6 Whatlimitationswilltypicallyapplytotheliabilityofa 6.5 the typicalcostofsuchinsurance? equity selleranditsmanagementteamtoabuyer? team toabuyer? under anequitycommitmentletter, damages,etc.)? the managementteam)? warranties, covenants,indemnitiesandundertakings? exclusions fromsuchinsurancepolicies,andwhatis excesses /policylimits,and(ii)carve-outs used inyourjurisdiction?Ifso,whatarethetypical(i) undertakings andindemnitiesprovidedbyaprivate offered byaprivateequityselleranditsmanagement funding, righttospecificperformanceofobligations by thebuyingentity(e.g.equityunderwriteofdebt sellers typicallyobtainintheabsenceofcompliance (ii) equityfinance?Whatrightsofenforcementdo comfort astotheavailabilityof(i)debtfinance,and warranties /liabilities(includinganyobtainedfrom (ii) privateequitybuyersinsistonanysecurityfor escrow accounts)foranywarranties/liabilities,and private equitysellerandmanagementteamunder cayman islands www.iclg.com 69 cayman islands 70 cayman islands © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London www.iclg.com security Islands non-Cayman and Islands Cayman both jurisdiction where “creditor-friendly” leading a is Islands Cayman The Pleaseoutlinethemostcommonsourcesofdebt 8.1 Doprivateequitysellersgenerallypursueadual-track 7.3 the IPO. Typically, these commercial terms are agreed by onshore counsel to listing forsuchtransactions. listed; usually the is Cayman Islands Stock Exchange will not be the primary IPO the exchange which on primarily depend will This Whatcustomarylock-upswouldbeimposedon 7.2 entity forlistingonanIPOexit. of type correct the have we ensure to acquisition on documents the company.in flexibility sufficient a include to taken into be should care partnership Therefore, limited Islands Cayman a convert cannot themselves be the subject of an IPO. It is also not possible to partnership and membership interests in a limited liability company Islands- Cayman a be limited a company.in ordinary interests or partner exempt Limited to need will vehicle listing any that Note listing forsuchtransactions. listed; usually, is the Cayman Islands IPO Stock Exchange will not the be the primary exchange which on primarily depend will This Whatparticularfeatures and/orchallengesshoulda 7.1 tax andregulatoryconsiderations. onshore by driven typically considerations Islands non-Cayman are portfolio specific for terms investments are generally not governed by Cayman Islands law and deal and companies operating The Arereversebreakfeesprevalent inprivateequity 6.8 maples group have seenmoredual-trackdealsultimatelyrealisedthroughsale. we times recent In process. the in late very run can track dual The We often see private equity sellers pursuing a dual-track exit process. listing forsuchtransactions. listed; is primary the be not will IPO Exchange Stock Islands Cayman the usually the exchange which on primarily depend will This Financing 8 Transaction Terms: IPOs 7 exit? If so,whattermsaretypical? bonds). for suchdebt(particularlythemarket forhighyield current stateofthefinancemarket inyourjurisdiction your jurisdictionandprovidean overviewofthe finance usedtofundprivateequitytransactionsin through asaleorIPO? and (ii)weremoredual-trackdealsultimatelyrealised private equitysellerscontinuingtorunthedual-track, exit process?Ifso,(i)howlateintheprocessare private equitysellersonanIPOexit? private equitysellerbeawareofinconsideringanIPO transactions tolimitprivateequitybuyers’ exposure?

nce i te amn sad ipsn ay a t b lve on levied be to tax is any which imposing Islands law Cayman limited the no in undertaking, enacted exempted the of an date or the from trust partnership) exempted an company, liability exempted company) or a period of 50 years (in the case of a limited an of case the (in years 20 of period a for that, effect the to Islands to receive, an undertaking from the Financial Secretary expect of the Cayman and for, apply may partnership limited exempted an or An exempted company, an exempted trust, limited liability company received freeofanyCaymanIslandsincomeorwithholdingtaxes. LLC units, shares, of interests holders or limited partnership interests (as the case may be) will be the to vehicles equity private the gains payable to such private equity vehicles and all distributions by case may be) in such private equity vehicles. Interest, dividends and the (as interests partnership limited or interests LLC units, shares, of holders the (ii) or vehicles, portfolio or funds equity private as liability operate to established limited partnerships limited exempted or companies trusts, exempted companies, Islands-exempted Cayman (i) upon tax withholding or tax gift tax, inheritance duty, legislation, impose any existing income, corporate or capital under gains tax, estate not, does Islands Cayman the of Government The . Whatrecenttrendshavetherebeeninthedebt 8.3 Arethereanyrelevantlegalrequirementsor 8.2 relevant target group’s assets. capital commitments, and leveraged finance facilities secured by the financing equity investors’ on secured private facilities line Common subscription include structures market. the in finance debt seen of options range full the access to able are which vehicles, Islands Cayman to, lending comfortable and with, familiar very are counterparties Financing recognised. and respected are packages . Whatarethekeytaxconsiderationsforprivateequity 9.1 sponsor andinvestorsonlaunchofthefund. the case of a partnership), the terms of which would be agreed by the in agreement partnership limited a as (such vehicle Islands Cayman the of documents constitutional the in contained be however, may, financing debt on Restrictions market. the in seen debt options of finance range full the access to able generally are vehicles Islands the type of debt financing activity that can be undertaken and Cayman There are no specific Cayman Islands statutory restrictions impacting including totalreturnswapsandrepurchasestructures. vanilla loans, note issuances and also various derivative transactions plain include financings These parties. secured the for protection satisfies the lender’s bankruptcy concerns and provides strong credit independent one least at director or manager, as the case with may be, appointed to the board. This bankruptcy-remote as structured are vehicles The Islands. Cayman the in incorporated companies marked a with market increase in financings involving the use equity of wholly owned investment private and the subscription across all facilities of bridge use the of continuation a been has There Tax Matters 9 financing marketinyourjurisdiction? financing) ofprivateequitytransactions? off-shore structurescommon? debt financing(oranyparticulartypeof restrictions impactingthenatureorstructureof investors andtransactionsinyourjurisdiction? Are iclg to: privateequity 2019 cayman islands

a alw fr infcn soe n feiiiy o structure to flexibility and scope significant management equityprogrammesinawidevarietyofways. for allows these law jurisdiction, tax-neutral Islands However,Cayman located. is team management a the where is Islands arrangements are typically driven by the Cayman tax laws of the jurisdictions the As private equity vehicles. by or to made payments any to applicable is that country any with treaty tax double a to party not are Islands Cayman The limited partner(asthecasemaybe)therein. or duty or unitholder shareholder,member, a of interests estate the or vehicle the of nature the of in obligations the of respect in payable tax be not shall tax inheritance any or taxes such any that or unitholder shareholder, member, limited a partner (as the case may of be) therein; and may further provide interest the or the vehicle of assets or operations the of respect in thereof be) may case member,the any (as to partner shareholder,or limited or unitholder profits or income or gains or appreciations shall apply to the vehicle maples group © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London iclg to: privateequity 2019 of demands ever-increasing the regulatory meets it that and ensure to laws framework its refine to continues Islands Cayman The Havetherebeenanysignificantlegaland/or 10.1 Havetherebeenanysignificantchangesintax 9.4 Whatarethekeytaxconsiderationsformanagement 9.3 Whatarethekeytax-efficientarrangementsthat 9.2 s h Cya Ilns s txnurl uidcin thes jurisdiction, tax-neutral a is Islands Cayman the As arrangements are typically driven by the tax laws of th where themanagementteamislocated. IGA and CRS (collectively, the “ (collectively,the CRS and IGA US the effectto give to issued been have regulations Islands Cayman Standard (“ Reporting Common – Information Account Financial of Exchange for Standard Automatic OECD the implement to agreement authority competent multilateral a countries, other 80 over with along signed, euain) r rqie t cml wt te eitain due registration, they areabletorelyonanexemption. the with comply diligence and reporting requirements of the to AEOI Regulations, unless AEOI required relevant are the in Regulations) defined (as Institutions” “Financial Islands with the United States (the “ improve international tax compliance and the exchange of information to agreement inter-governmental an signed has Islands Cayman The 0LegalandRegulatoryMatters 10 investment intoanewacquisitionstructure? shares, deferred/vestingarrangements)? anticipated? private equityinvestorsortransactions andareany regulatory developmentsover recent yearsimpacting anticipated? teams orprivateequitytransactionsandareany impacting privateequityinvestors,management (including inrelationtotaxrulingsorclearances) legislation orthepracticesoftaxauthorities teams thataresellingand/orrolling-overpartoftheir equity acquisitions(suchasgrowthshares,incentive typically consideredbymanagementteamsinprivate CRS ” andtogetherwiththeUSIGA,“ US IGA AEOI ”). The Cayman Islands has also

Regulations

AEOI ”). All Cayman All ”). e jurisdictions ”). e h Cya Ilns niCruto Lw 21 Rvso) (the Revision) (2019 Law Anti-Corruption Islands’ Cayman The particular the on depends diligence sponsor andmayalsovaryonatransaction-by-transactionbasis. due legal to approach The 04Hasanti-briberyoranti-corruption legislation 10.4 Howdetailedisthelegalduediligence(including 10.3 Areprivateequityinvestorsorparticulartransactions 10.2 The published Islands Cayman the 2018, December 27 On ■ resulted inthefollowinglegaldevelopmentsoverrecentyears: has adapt and respond to ability This industry. equity private the cmrhnie eiw n udt t te Exempted the to update and review comprehensive A ■ in Law Companies Liability Limited the of enactment The ■ of introducer early an was Islands Cayman The ■ (“ not subject to regulation by the Cayman Islands Monetary Authority Islands investing in business located outside the Cayman Islands are Cayman the in established funds equity private speaking, Generally CIMA and the Cayman Islands Trade and Business Licensing Board. by scrutiny to subject insurance be may bank, provider services local utility or company a as or such in Islands located Cayman the business in a regulated acquire to transaction equity private A Revision). CIMA diligence, contractualprotection, etc.)? in-house? jurisdiction (e.g.onnationalsecuritygrounds)? approach toprivateequitytransactions (e.g. impacted privateequityinvestment and/orinvestors’ legal /complianceduediligenceorisanyconducted engage outsidecounsel/professionalstoconductall materiality, scopeetc.)?Doprivateequityinvestors prior toanyacquisitions(e.g.typicaltimeframes, compliance) conductedbyprivateequityinvestors subject toenhancedregulatoryscrutinyinyour OECD- all by compliant “nooronlynominaltax”jurisdictions. basis field playing level a on implemented mobile activities. Requirements of this type are rapidly being (“ Shifting Profit and Erosion Base OECD global to response a as 2018 Law, Substance) (Economic Co-operation Tax International atesi Lw vn ute it ln wt Delaware with line Limited into Exempted further concepts. the even bring Law to Partnership industry the by made, suggestions and raised, concerns and issues with specifically promotes freedom of contract and nature, includes provisions to deal the to alterations it Partnerships, Limited Exempted of operation or formation fundamental make not did law new the While 2014. in place took Law Partnership Limited in companies/blockers portfolio acquisitionstructures. same holding the and in investment) investing portfolio are funds structures, related equity multiple private (where in vehicles used aggregator vehicles, governance GP as LLCs particularly seen have we vehicle: the limited liability company.Islands Since its Cayman introduction, new a of formation the for provided 2016 2017. October in international Revision) (2018 Regulations Anti- Laundering meet the money to to made was effort update comprehensive continuing a standards, a In international standards. with line in regulations and rules these to adapt continues and regulations and rules client” your and “know laws laundering anti-money strict and comprehensive ) ne te amn sad Mta Fns a (2019 Law Funds Mutual Islands Cayman the under ”) BEPS ) tnad rgrig geographically regarding standards ”) cayman islands www.iclg.com

71 cayman islands 72 cayman islands rnato dcmns o icue wrat rltn to relating warranty a include compliance withsuchlaws. now documents commonly more transaction although minimal, been has transactions, their the of quality and nature given the and involved parties Islands, the of sophistication Cayman the in transactions equity private on offences for failure to report an offence. The impact of the AC Law or Elected Office; and Secret Commissions. There are also ancillary Government; the Public on of Fraud Abuses foreign); and domestic provides and Code, (both Bribery offences: corruption of Penal categories four for generally the under existed previously which bribery and anti-corruption to relating provisions the replaced Law well as the United Nations Convention Against Corruption. The AC as Transactions, Business International in Officials Public Foreign of Bribery Combating on Convention OECD the to effect giving © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London www.iclg.com company,Islands Cayman a of incorporation of date the from judicial a is it English regard will Court authorities as persuasive (but not Islands technically binding). Accordingly, Cayman a and under law, personality corporate English under established those to similar are law regarding Islands Cayman principles general The its of through toitsshareholders. that from pass generally not does Accordingly,company’sparties. liability a separate third to personality due debts own its for liable separately legal is and shareholders a has company time to time Islands ACayman holds. from she or he shares amount the of respect in the unpaid to limited is capital share a and with liability limited with incorporated been has which company Islands-exempt Cayman a of shareholder a of contrary,liability the As a general rule, in the absence of a contractual arrangement to the Arethereanycircumstancesinwhich:(i) aprivate 10.5 “ maples group AC Law AC the liabilitiesofanotherportfoliocompany? and (ii)oneportfoliocompanymaybeheldliablefor breach ofapplicablelawsbytheportfoliocompanies); the underlyingportfoliocompanies(includingdueto equity investormaybeheldliablefortheliabilitiesof ”) came into force on 1 January 2010 with the intent of intent the with 2010 January 1 on force into came ”) Islands’ Cayman challenges. the with and opportunities new to adapt and change implement to flexibility coupled standards, international and industry-specific laws, transparency commercial initiatives and compliance Islands’with Cayman the to part in attributed be can structures equity private Islands Cayman of popularity the in rise continued 2016. This in 19,937 and 2017 in 22,346 with compared the number of active exempted limited partnerships stood at 26,011, consistent a seen has increase in the number of annual partnership registrations. In 2018, Islands Cayman the the crisis, financial by 2008 issued Statistics the since years the in that confirmed Islands. have Partnerships of Registrar Cayman is the role in This registrations structures. fund partnership limited exempted of equity number growing the by evidenced private in role growing and well-established a play vehicles equity private Islands Cayman being is abused forthepurposeofsomerelevantwrongdoing. personality legal separate company’s a if veil corporate the piercing in justified be may Court the that law English under 11Whatotherfactorscommonlygiverisetoconcerns 11.1 in the “pierce will Court the corporate veil”. These that circumstances are true exceptions to the rule such ignored be can exceptional company in a only is it law of personality legal separate the of principle the common that circumstances English of matter a As Salomon &Co. ( shareholders its from distinct person legal separate a as name own its in obligations, perform and assets, own to ability the includes This capacity. full of person natural a of functions the all body corporate with separate legal personality capable of exercising Salomon v. Salomon 1Other UsefulFacts 11 considering aninvestmentinyourjurisdiction? should suchinvestorsotherwisebeawareofin for privateequityinvestorsinyourjurisdictionor [1897] A.C. 22). , and there is now a well-established principle iclg to: privateequity 2019 cayman islands Salomon v.Salomon maples group cayman islands

Julian Ashworth Patrick Rosenfeld Maples Group Maples Group Ugland House, South Church Street Ugland House, South Church Street PO Box 309, George Town PO Box 309, George Town Grand Cayman, KY1-1104 Grand Cayman, KY1-1104 Cayman Islands Cayman Islands

Tel: +1 345 814 5413 Tel: +1 345 814 5505 Email: [email protected] Email: [email protected] URL: www.maples.com URL: www.maples.com

Julian is a partner in the Maples Group’s Funds & Investment Patrick is a partner in the Maples Group’s Funds & Investment Management team in the Cayman Islands. His practice focuses on Management team in the Cayman Islands. He specialises in the private equity, hybrid and hedge fund structures and downstream formation and restructuring of all types of investment funds and cayman islands transactions, including financing and security agreements, secondary advises clients in the asset management industry. He also has transactions and fund restructurings. He advises sponsors and extensive experience of international debt capital markets, structured management companies on profit sharing and funding arrangements finance and securitisation transactions. and Cayman Islands regulatory matters. Julian is also involved in corporate finance matters, including M&A transactions, joint ventures, co-investments and restructuring matters.

The Maples Group, through its leading international legal services firms, advises global financial, institutional, business and private clients on the laws of the British Virgin Islands, the Cayman Islands, Ireland, Jersey and Luxembourg. With offices in key jurisdictions around the world, the Maples Group has specific strengths in areas of corporate commercial, finance, investment funds, litigation and trusts. Maintaining relationships with leading legal counsel, the Group leverages this local expertise to deliver an integrated service offering for global business initiatives. For more information, please visit: maples.com/services/legal-services.

iclg to: private equity 2019 www.iclg.com 73 © Published and reproduced with kind permission by Global Legal Group Ltd, London Current titles in the ICLG series include:

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