Cayman Islands change their beneficial ownership regime

On July 31, 2024, the Beneficial Ownership Transparency Act (“BOTA”) came into force. Issued by the Cayman Islands Ministry of Financial Services, it introduces a new set of guidelines updating the beneficial ownership regime applicable to entities incorporated in the jurisdiction. The new rules must be implemented by January 1, 2025, and failure to comply may result in the imposition of penalties.

The expansion of BOTA brings material changes that require close attention and prompt action from affected entities. We recommend that companies review their current structures and assess the new regulatory requirements to ensure full compliance ahead of the deadline, as non-compliance may lead to fines.

Among the key changes are:

EXPANSION OF SCOPE

With the update to BOTA, additional types of entities now fall within the beneficial ownership regime. As a result, certain legal structures that were previously exempt are now subject to compliance obligations, including, without limitation, limited partnerships (“LPs”).

ADDITIONAL REPORTING REQUIREMENTS FOR IDENTIFIED BENEFICIAL OWNERS

In addition to identifying beneficial owners, entities must now provide further information regarding those individuals, including:

• The manner in which control is exercised;

• A correspondence address; and

• Nationality.

NEW DEFINITION OF BENEFICIAL OWNER

The definition of “beneficial owner” has been revised. While the 25% ownership threshold remains in place, greater emphasis is now placed on the mechanisms through which control is exercised. Other significant changes include:

• Majority Interest for Indirect Ownership: Indirect ownership of a majority interest is determined by assessing the ownership chain through majority holdings until the ultimate beneficial owner is identified.

• No More “Nil Returns”: “Nil” filings are no longer permitted. If no beneficial owner can be identified, a senior managing official must be designated instead.

ALTERNATIVE COMPLIANCE ROUTE

Funds that elect the alternative compliance route must appoint a Cayman Islands–based contact person who meets BOTA requirements and is responsible for providing beneficial ownership information whenever requested by the competent authorities.

As the Cayman Islands remain a widely used jurisdiction for financial and investment transactions, these legislative changes affect not only Brazilian entities but also any entity—regardless of where it is incorporated—whose direct or indirect control is exercised by an entity formed under Cayman Islands law.

BVA’s Corporate and M&A team, with extensive experience in both domestic and cross-border corporate structures, remains at your disposal to provide further clarification on the new provisions, as well as to facilitate coordination and engagement with Cayman Islands counsel to ensure compliance with the updated legal requirements.

Should you have any questions or require guidance on how these new rules may impact your operations or investments, please do not hesitate to reach out. As always, our team stands ready to provide the support you need to refine and strengthen your strategic approach.