The Private Funds (Amendment) Law, 2020, which came into effect in the Cayman Islands on 7 July, may result in entities previously not required to register pursuant to the original definition of “private fund” being forced to reconsider whether they are within the scope of the PFL based on the new broader definition.
That is according to a legal note by Conyers, which details several types of entities this may apply to. These include: funds formed to hold only a single investment; funds whose operator does not charge fees or where fees are unrelated to the assets, profits or gains of the entity; certain master fund structures; and certain alternate investment vehicles (AIVs).
The main purpose of the change is to clarify the types of investment vehicles which will be required to register with the Cayman Islands Monetary Authority (CIMA) by a deadline of 7 August 2020 pursuant to the Private Funds Law (2020 Revision).
The definition of “private fund” has been revised to mean a company, unit trust or partnership that offers or issues or has issued investment interests, the purpose or effect of which is the pooling of investor funds with the aim of enabling investors to receive profits or gains from such entity’s acquisition, holding, management or disposal of investments.
This may include instances where: the holders of investment interests do not have day-to-day control over the acquisition, holding, management or disposal of the investments; and the investments are managed as a whole by or on behalf of the operator of the private fund, directly or indirectly.
Conyers noted that certain licensed or registered entities and a specified list of “non-fund arrangements” are excluded from the definition. The list of non-fund arrangements has not been amended and includes, amongst other things, securitisation SPVs, joint ventures, officer, manager or employee incentive schemes, holding vehicles, individual investment management arrangements, debt issues and debt issuing vehicles, structured finance vehicles, sovereign wealth funds and single family offices.
The Amendment Law also removes the ability for Cabinet to make regulations exempting any person or class of persons or business or class of business from the provisions of the PFL and introduces a requirement that in relation to potential conflicts of interest arising in relation to asset valuations, safekeeping of fund assets and cash monitoring that they be managed and monitored, Conyers noted.
Conyers, Private Funds (Amendment) Law, CIMA, Law, Cayman Islands