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In September 2011, the Cayman government passed the Special Economic Zones Law, in an effort to provide legal certainty in this area. Under the law, the Special Economic Zone Authority was created and concessions including customs duty relief, reductions on building planning costs, and reduced permit fees for foreign workers may be offered to businesses that move into this zone....

In September 2011, the Cayman government passed the Special Economic Zones Law, in an effort to provide legal certainty in this area. Under the law, the Special Economic Zone Authority was created and concessions including customs duty relief, reductions on building planning costs, and reduced permit fees for foreign workers may be offered to businesses that move into this zone. One partner remarks that the law has "provided a framework for the possibility of a third pillar of the Cayman economy".

Following that, the Cayman Islands Monetary Authority (CIMA) issued the Mutual Funds (Amendment) Law in December 2011, which requires master funds to register with CIMA. Under the provisions of this law, Cayman master funds are required to comply with certain duties and obligations, including the payment of initial registration and annual fees and the requirement to file with CIMA annual audited financial statements and the Fund Annual Report within six months of year-end unless an extension is approved by CIMA.

Another key development in the legal market is the government's intention to reinvent the exempted limited partnership law. With the majority of Cayman private equity funds formed as an exempted limited partnership, the revised law is anticipated to be more compatible with its counterpart law in the US, the Delaware Limited Liability Company Act. "The changes we are making are very positive for the jurisdiction and will make the law more user-friendly for the funds industry, particular the private equity industry," one partner says. "There're no plans to make any radical changes." In regards to when the revised law could come about, attorneys agree that "things are moving quickly" and most expect the law to be enacted "in the next few months".

Another potential change that is "on everybody's mind" in Cayman is the Alternative Investment Fund Management Directive (AIFMD). Sponsored by the EU, the regulation looks to bring various jurisdictions in line with each other, which could complicate things for jurisdictions like Cayman, considering authorities might have to make legislative changes to accommodate the implementation of AIFMD. "It's going to affect our world directly," one partner concludes.

CONTEXT AND TRENDS "We've seen a continued pickup in corporate and business activities," one partner says. M&A activities are on the rise, driven by active clients in natural resources and insurance sectors....

"We've seen a continued pickup in corporate and business activities," one partner says. M&A activities are on the rise, driven by active clients in natural resources and insurance sectors. The changes in Cayman's merger regime, brought in by the Companies (Amendment) Law 2011, have also contributed to the increase in M&A activities, enabling companies to do mergers in a much faster, simpler and less expensive way.

With banks stabilising after the credit crunch and looking to invest again, work in repackaging products like CDOs and collateralised bond obligations (CBOs) is also starting to come back. The market in CLOs is also on the rebound, as investors are looking for straight-forward deals. "In general, business in the finance markets in Cayman is coming back but is still fragile," one partner assesses.

Cayman Enterprise City (CEC) is one highlight raised by attorneys. Opened in February 2012, the technology-based special economic zone is the first in Cayman and the Caribbean region. CEC is expected to develop into the third pillar of the Cayman economy, alongside financial services and tourism, by attracting new technology based industries and global brands into establishing a physical presence in the Cayman Islands. "When companies have physical presences here, the multiplier effect to local economy is huge," one attorney says. "This is going to be a model for all offshore financial centers in the future."

On the funds side, attorneys report a modest pick-up in work volume. Restructuring is one area where a considerable amount of work has been seen. "We did a lot of restructuring work at the end of 2011, as small funds that didn't have a good work record deciding to wine down," one partner says, with another adding that "there have been fewer new companies coming into the market. People are looking to tweak the existing funds, for example, turning existing funds into segregated portfolios." Emerging market fund activity is another area of growth, with Latin America and Africa being the focus. In addition, as a result of the new rules requiring master funds to be registered, lawyers have also been busy assisting clients in relevant regulatory compliance.

Additionally, fund formations have been on the rise during the past year. According to statistics released by the Cayman Islands Monetary Authority, there are 9,990, just a bit short of the 10,000 benchmark, mutual funds licensed or registered with the Cayman authority, suggesting the number of fund set-ups in Cayman is coming back to normality, although still not back to the level before the economic downturn. However, there is a consensus among lawyers that it remains a difficult time for start-up funds while big private equity funds are able to raise money. "We are getting fewer instructions from small groups of fund managers setting up new funds," one attorney says. "Most of the new funds being formed are sponsored by larger institutions."

MAJOR LEGISLATION CHANGES

Special Economic Zones Law
Passed September 2011

Mutual Funds (Amendment) Law
Passed December 2011

Companies (Amendment) Law
In effect as of July 2011

MAJOR LATERAL HIRES

Julian Ashworth
From: Walkers
To: Maples and Calder

Sheryl Dean
From: Walkers
To: Maples and Calder

Heidi De Vries
From: Walkers
To: Maples and Calder

David Marshall
From: Walkers
To: Maples and Calder

Philip Millward
From: Walkers
To: Maples and Calder

Gwyneth Rees
From: Walkers
To: Maples and Calder

Linda Martin
From: Walkers
To: Thorp Alberga

Anne Todd
From: Walkers
To: Thorp Alberga

RISING STARS

Walkers
Ramesh Maharaj