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Foundation companies in the Cayman Islands

08 June 2020

Introduced by the Foundation Companies Act, 2017 ("FCA"), a foundation company ("FC") is a new type of company, unique to the Cayman Islands, which can function like a traditional trust or civil law foundation but in the form and with the benefits and familiarity of a company.

FCs are incorporated and registered with the Registrar of Companies in the same way as a traditional Cayman exempted company, with a certificate of incorporation providing conclusive evidence of valid incorporation. The creator of the FC may, but need not be, specifically named as the founder. As a company, the FC's constitutional documents comprise a memorandum and articles of association that may be tailored to the client's particular needs. Bylaws can also be used to govern the management of the FC, although they are not mandatory and do not form part of the constitution.


The FCA sets out certain minimum requirements which must be met in order to incorporate an FC (or, alternatively, convert an existing company into an FC).

They are as follows:

  • The FC must be limited by shares or by guarantee, with or without share capital (most are likely to be limited by guarantee, thereby avoiding anything in the nature of equity ownership).
  • The FC must have a memorandum that:
    • states that the company is an FC;
    • generally or specifically describes the objects of the FC (which can be, but do not have to be, beneficial to any other person);
    • provides details for how and to whom surplus assets of the FC will be disposed of on its winding up;
    • prohibits dividends or other distributions of profits to its members or proposed members
  • The FC must have adopted articles.
  • The FC must at all times have a secretary who is a 'qualified person' (i.e. a person licensed or permitted under the Companies Management Act (2021 Revision) to provide company management services). An assistant secretary who is not a 'qualified person' may also be appointed.

In addition, the following requirements should be noted:

  • Just like a traditional company, an FC must have a registered office which must be at the secretary's business address and such that the registered office will only change with a change of secretary.
  • An FC must ensure compliance with Cayman's various ant-money laundering and financing of terrorism laws and shall not accept an asset contribution that is gratuitous or in consideration of a share unless the secretary has given a notice that there appears to be no objection under those laws.
  • Although an FC may exist without members, it must have at least one member on incorporation. Once the FC has been incorporated, all membership can cease provided the FC continues to have at least one 'supervisor'. Further, if the FC ceases to have members, it may not subsequently admit members or issue shares unless permitted to do so by the constitution.
  • The 'supervisor' must be someone other than a member who, under the constitution, has an unconditional right to attend and vote at general meetings, whether or not they have any supervisory powers or duties.
  • Along with the usual corporate registers, a register of supervisors must be maintained by the secretary at the registered office.


  • FCs eliminate the uncertainties and complexities which some associate with trusts. In particular, as a separate legal entity which can sue and be sued, the risk of adverse treatment of an FC from jurisdictions unfamiliar with trusts is reduced. Further, there is no risk of unlimited personal liability inherent in the trustee-beneficiary relationship because FCs do not have trustees. The lack of trustees also means that the complications and negotiations associated with the change of trustees throughout the life of a trust are avoided.
  • Unlike a trust, there is no risk of an FC being declared a "sham" or otherwise invalid as regards, for example, proceedings by former spouses or creditors.
  • Unlike many other jurisdictions which have introduced foundations into their laws in recent years, FCs are not a completely new legal construct yet to be stress-tested by our courts. Rather, the FC has its origin in our Companies Act, which applies to FC save to the extent otherwise specifically stated in the FCA. Accordingly, clients benefit from the certainty of long-established legislation and abundant jurisprudence available in respect of companies, rather than facing the relative unknown of, say, a civil law foundation in a common law jurisdiction.
  • FCs are inherently flexible making them ideal for a wide variety of circumstances. The constitution can be drafted to fit the client's particular wishes and needs. By way of example, the constitution may give rights, powers or duties to any type of member, director, officer, supervisor, founder or other person, including but not limited to appointing and removing members, supervisors, directors or officers, making and altering bylaws and supervision of the management and operation of the FC. This can be particularly useful where the founder wishes to avoid ultimate control resting with one particular individual or group of people.
  • Similar to a trust, an FC could have, for instance, akin to a discretionary class of beneficiaries, a beneficiary being broadly defined as a person who will or may benefit from the FC carrying out its objects.
  • The statutory contract binding a company and its members to the constitution is extended to all persons to whom the constitution bestows rights and powers.
  • The constitution may entrench its object or impose conditions for amending them, thereby giving the founder the assurance that the founder's principal aims will not be defeated after the founder is incapacitated or no longer around.
  • Unlike a trust, beneficiaries can be, but do not need to be, identified from the outset and can be, but do not need to be, given rights. The default position being that beneficiaries have no rights. This may appeal to a founder who is cautious about utilising a trust structure because, to give a couple of common examples, he is unsure at the outset as to whom he may wish to benefit or he is concerned about what might otherwise be the beneficiaries' rights to information.
  • Persons dealing in good faith with an FC are not required to look into compliance by directors and others with its bylaws.
  • The FCA makes specific provision for the court ultimately to resolve any constitutional obsolescence or breakdown in the appointment of directors or supervisors.
  • The constitution may provide for dispute resolution by arbitration or otherwise, something traditionally unavailable in the case of a trust.
  • Like a trust, an FC with enforceable duties may apply to court for directions.
  • The asset protection provided by Cayman's Fraudulent Dispositions Act (1996 Revision) will apply to transfers to an FC.


There are numerous ways in which an FC can be utilised in private wealth and commercial structuring. In the commercial context, the FC can be utilised as a special purpose vehicle in finance transactions and their flexibility can also be very accommodating to an array of blockchain related projects and ventures.

Additionally, given that the FC has many similar advantages to that of the traditional private trust but with the added benefits of a company, the FC can be used as an alternative for succession planning purposes; for philanthropic purposes; to act as the protector or enforcer of a trust; as a private trust company; or as a more modern and flexible alternative to a civil law foundation. As an example, what is often seem as the complexity (and thus cost) of, say, a licensed trust company holding the shares of a PTC on a purpose with the PTC then acting as trustee of a discretionary trust can be compressed down into just one FC entity.

For further information please contact:

Andrew Miller, Partner | | +1 345 949 0488

The information contained in this memorandum is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.

Extracted (and updated) from the Cayman Islands' chapter, as authored by Andrew Miller, of Private Trust Companies, published by Globe Law and Business.

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