The Cayman Islands’ Foundation Companies Act (as Revised) (the “Act”) came into force in 2017 and introduced a new type of company structure, called a foundation company (the “Foundation Company”). The Act sits within the framework of the Companies Act (as Revised) (the “Companies Act”) and whilst a Foundation Company bears many of the characteristics of a traditional limited liability company it also blends in certain attributes of a trust or civil law foundation.


Founders of a Foundation Company also have distinct powers unique to this kind of structure. In this article, we will discuss the Foundation Companies in the Cayman Islands and the specific rights and powers that the Founders have under the Act.



What is attractive about Foundation Companies in the Cayman Islands?


Foundation Companies have several potential applications in a range of structures and scenarios which adds to the Cayman Islands’ jurisdiction of offering versatile special purpose vehicles.

A Foundation Company can be an attractive option for private clients who prefer it over a trust. For example, those who operate under civil law or have concerns about their trust's taxation structure may find it more beneficial. The Act exempts the Foundation Company from income, withholding, or capital gains tax, and neither its members, nor beneficiaries, are subjected to any direct or indirect tax for their interests in the Foundation Company.

Since the Act and Foundation Companies were introduced, these vehicles have been used to facilitate various types of structures. As well as being popular amongst civil law clients, these companies are also suitable to use as:

What powers does the founder of a Cayman Foundation company have?


Although the Foundation Company’s management will be generally carried out by its Directors, the Founders of a Foundation Company have distinct powers under the Act, unique to this new kind of structure in the Cayman Islands, which are also expressed in the Foundation Company’s Articles of Association (the “Articles”).

The Articles will name the Founder and state that such person has the power to:

  1. authorise the admission of the Members, or to restrict or prohibit the admission of Members;
  2. appoint or remove Directors;
  3. call for reports, accounts, information and explanations from the Directors;
  4. appoint or remove supervisors, and settle their powers and duties;
  5. designate beneficiaries, give directions as to their benefits, grant them enforceable rights, and to revoke or vary the same;
  6. cause the Company to be wound up; and
  7. adopt, revoke or vary bylaws.

The Articles also typically state that the Founder will also have the right to receive notice of, and attend and vote at, general meetings of the Company.

The Founder’s powers are free of any duty, and may be exercised for the Founder’s own benefit.

The Founder has the ability to terminate or limit their powers by giving notice to the Company. If the Founder makes the termination or restriction irrevocable, it cannot be changed through any means, including amending the Articles. No other person is allowed to use the Founder's powers unless the Articles or law permits it. If the Founder dies, their powers will end. However, any exercise of their powers before their death will still be valid, even after their death or loss of power.


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