Cayman Non-Profit Entities: July 2018 registration deadline

By 31 July 2018 all Cayman Islands (‘Cayman’) non-profit organisations (‘NPOs’) which solicit contributions from the public need to register with the Registrar of Non-profit Organisations (‘Registrar’) under the Non-profit Organisations Law, 2017 (‘NPO Law’).

What is the deadline?
The deadline for registration is 31 July 2018, but on 27 April 2018 the Ministry of Financial Services (‘Ministry’) recommended NPOs which are required to register that they need to submit their registration application and accompanying documents by 15 June 2018 in order to ensure the application is processed in time, and advising that those NPOs which register ahead of the deadline would also save the CI$300 application fee. That recommended date has passed, but applications can be completed and filed before the 31 July deadline via the Cayman Business Portal (CBP), the General Registry’s online tool for local businesses.

What happens if an NPO is not registered?
NPOs that have not registered by the 31 July 2018 deadline and continue to solicit contributions will be subject to both administrative and criminal sanctions under the NPO Law.  Companies currently registered under s. 80 of The Companies Law (2018 Revision) (‘Companies Law’) which meet the NPO definition but which fail to be registered by 31 July 2018 will be struck off the Companies Register. Also, NPOs which are required to be registered but which have not registered will stop receiving grants, contributions, sponsorships, or other means of contributions from the Cayman Islands Government (‘CIG’). A full list of those NPOs registered as at 23 April 2018 can be found here.

Why is this happening?
As part of measures to counter illegal activity such as financing terrorism and/or money laundering, Cayman introduced legislation to require NPOs which solicit financial contributions from the public in Cayman to register and provide prescribed information. The NPO Law came into effect on 1 August 2017 and helped Cayman meet recommendations on monitoring NPOs of the Financial Action Task Force (‘FATF’) ahead of the evaluation of Cayman’s anti-money laundering and counter-financing of terrorism regime in December 2017 by the Caribbean FATF.

What is an NPO?
The NPO Law defines a non-profit as including a company or body of persons, whether incorporated or unincorporated, or a trust which is:

• established or which identifies itself as established primarily for the promotion of charitable, philanthropic, religious, cultural, educational, social or fraternal purposes, or other activities or programmes for the public benefit or a section of the public in Cayman or elsewhere; and
• which solicits contributions from the public or a section of the public in Cayman or elsewhere;

Does it affect all NPOs?
The NPO Law does not apply to charitable or voluntary organizations that are already regulated by a government entity, trusts that are registered under the Banks and Trust Companies Law (2013 Revision) and any other entities that are exempt through an order of Cayman Islands Government in Cabinet (‘Cabinet’). Businesses that operate as charities can be categorized as NPOs, which will allow them to avoid substantial fees.

What will NPOs have to do under the new NPO Law?
All NPOs must submit an Annual Return which includes financial details. Entities with gross annual revenues of at least CI$250,000 (about US$305,000) that remit at least 30 %t of those earnings overseas must have their financial statements reviewed by an accountant and report the results to the CIG. Those that receive under CI$250,000 per year may still be reviewed on a case-by-case basis.

How does it compare to regulation under s.80?
An NPO will also save time and money by registering under the NPO Law. Limited companies which are charities or NPOs fall under s.80 of the Companies Law which requires Cabinet approval for registration of an NPO and for any changes to the registration (which takes time) and also payment of a fee. Once it is registered as an NPO under the NPO Law, a s.80 regulated company will no longer be subject to the Cabinet’s approval and liable to pay the fee. Under s.7 of the NPO Law, the Registrar must conclude the registration within 30 days, and changes can be filed by notice to the designated registrar.

What is the process for registration as an NPO?
Under s.3 of The Non-Profit Organisations (Registration Application) Regulations 2017 (‘the Regulations’) an application made under s.6(1) of the NPO Law for registration as an NPO shall:

(a) be made in the prescribed form; and

(b) include, where applicable, the following documents -

(i) copies or particulars of the trust, trust deed and any other organisational documents maintained by the NPO;

(ii) copies of the constitution, the memorandum of association and the articles of association of the NPO;

(iii) certified copies of Government issued photo identification of controllers and senior officers of the NPO; and

(iv) any other documentary evidence which reflects the organisational structure and functions of the NPO.

The Registrar can refuse to register an NPO for a variety of reasons, including that it is for illegal purposes, contains words the use of which is restricted in Cayman, such as ‘gaming’, ‘lottery’, ‘bank’ or ‘insurance’, words which suggest Royal patronage, contains profanity, or if the Registrar determines it has no connection with Cayman.

How will the Registrar assess whether the NPO is connected to Cayman?
In determining whether an NPO has a connection with Cayman the Registrar will consider whether the NPO:

(a) maintains a presence at a physical address in Cayman; and

(b) is soliciting (or causing to be solicited) contributions of money or other property from the public, or any section of the public in Cayman; or

(c) is distributing money or other property in Cayman.

Does an NPO’s constitution need to change?
Possibly. The constitution of the NPO will need to contain information indicating that:

• the assets and income of the NPO shall be applied exclusively in the furtherance of its purposes; and
• no portion of the assets and income of the NPO shall be distributed as profit or dividend directly or indirectly to the controllers, shareholders, owners or members of the NPO, unless such distribution is intended for the legitimate purpose of compensating a person for services to further the activities of the NPO or paying for expenses incurred on behalf of the NPO.

How much information will be publicly available?
Under s.5 of the NPO Law the NPO register will include the following information:

• its name, address in the Islands, telephone number and e-mail address, if any;
• its purposes and activities;
• the identity of the person who owns, controls or directs the NPO;
• the date of its registration and if the registration is cancelled, the date of cancellation; and
• any other information  the Registrar considers appropriate.

The register will be open for public inspection, on such terms as the Registrar thinks fit. Under s 5 of the Regulations the register for public inspection will not include:

• the names and personal information of the controllers or senior officers of the NPO; or
• the financial information of the NPO.