The materials of this articles apply to an exempted company duly registered in the Cayman Islands in accordance with the Companies Law of the Cayman Islands.  After its incorporation, an exempted company is required by the law to maintain certain books and accounts and update the Registrar of any change to its registration particulars, etc. This note describes some of these compliance requirements of an Exempted Company as imposed by the prevailing laws and regulations.

1. Registered Office
   
   Every entity registered in the Cayman Islands must maintain a registered office in the Cauman Islands. The registered office is normally provided by the registered agents/service providers who provides the registration service. The name of the entity must be displayed at the Registered Office in the Cayman Islands.
   
   
2. Annual Return
   
   An Annual Return must be submitted to the Registrar in January of each year following incorporation along with the appropriate annual fee. As the administrator of your exempted company, Kaizen together with its business associates in the Cayman Islands will attend to the filing of the annual return and payment of all fees with the Registrar and the Cayman Islands Monetary Authority as applicable once we are provided with funds to do so.
   
   An annual fee payable on or before 31 January of between USD854 and USD3,132 (depending on the Company's authorised share capital) is payable to the Registrar.  An annual return must also be filed on or before 31 January in every year.  Penalties will be levied for late filings.
   
   An entity which has not filed its annual return or paid its annual return fee to the Registrar within 12 months of its due date is liable to be struck off the Register by the Registrar and any assets held will vest in the Cayman Islands Government.
   
   
3. Registers
   
   

   (1)	Register of Directors and Officers A company is required to keep at its registered office a register containing the names, addresses, date of appointment and resignation of its directors and officers, and shall send to the Registrar a copy of such register.  The register of directors and officers is not open to public inspection. Any changes must be submitted to the Registrar within 60 days to avoid penalties.
   (2)	Register of Shareholders A company shall cause to be kept a register of its members containing the names and addresses of the members of the company, the shares held by each member, the amount paid, or agreed to be considered as paid, on the shares of each member, the date on which the name of any person was entered on the register as a member, and the date on which any person ceased to be a member. The register of members is not open to public inspection and there is no statutory right for any person (including members or creditors) to review it.  The register of members need not be kept in the Cayman Islands and it may be kept in an electronic format or any other medium.   The register of members shall be prima facie evidence of any matters by the Law directed or authorised to be inserted therein.
   (3)	Register of Mortgages and Charges A company is required to keep at its registered office a register of all mortgages and charges specifically affecting property of the company, and to enter in such register in respect of each mortgage or charge a short description of the property mortgaged or charged, the amount of charge created and the names of the mortgagees or persons entitled to such charge. The register of mortgages shall be open to inspection by any creditor or member of the company at all reasonable times.
   (4)	Minute Book An exempted company shall cause minutes of all resolutions and proceedings of its members and of its directors to be duly kept in writing. A minute book should be maintained. Although there is no requirement that the minute book be maintained at the Registered Office most companies and partnerships follow this practice to ensure proper record keeping and certification of documents.

   
   
4. Changes to Registered Details
   
   Certain changes to the registered details in respect of an exempt company must be notified to the Registrar.  The nature of the relevant change affects the filing requirements and the time limits for making the relevant filing.
   
   Amendments of the Memorandum or Articles, or the name of the company, may only be made by special resolution of the voting shareholders.  The change is effective upon passing of the special resolution, but must be filed with the Registrar within fifteen days.  The Registrar nonetheless may reject a change of name and direct that a new name be chosen.
   
   A company may increase, consolidate or sub-divide its share capital.  Increases of authorised share capital may only be made by ordinary resolution of the voting shareholders.  The change is effective upon passing of the ordinary resolution, but must be filed with the Registrar within 30 days.
   
   A company may reduce its authorised (but unissued) share capital if authorised by its Articles by special resolution of the voting shareholders.  A company may only reduce its issued share capital if authorised by its Articles, with the approval of a special resolution of its voting shareholders and with the confirmation of the Court.  It may however be able to redeem or repurchase shares in certain circumstances, even where this leads to an effective reduction in the issued share capital.
   
   Changes to the identity, names and addresses of the directors and officers of the company must be filed with the Registrar within 30 days.
   
   
5. Powers and Liabilities of Directors
   
   The Articles will invariably provide that the business of the company shall be managed by the directors.  Shareholders do not generally participate in the management of the company's business.
   
   Directors owe fiduciary duties to the Company.  These duties include a duty:
   
   

   (1)	of loyalty/duty to act in best interests of the Company;
   (2)	to act for a proper purpose;
   (3)	not to fetter director's discretion;
   (4)	to avoid conflicts;
   (5)	not to make secret profits from the director's position as director;
   (6)	to act fairly as between different shareholders; and
   (7)	to act with skill and care.

   
   These duties are owed to the company itself, and not generally to individual shareholders.  In the event of a breach of duty, the directors may be personally liable to account to the company.
   
   
6. Books of Accounts
   
   An exempted company shall cause to be kept proper books of account, giving a true and fair view of the state of the Company's affairs and to explain its transactions, with respect to:
   

   (1)	all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure takes place;
   (2)	all sales and purchases of goods by the Company; and
   (3)	the assets and liabilities of the Company.

   
   The books of account and related accounting documents should be retained for a minimum period of five years from the date they were prepared.
   
   There are no generally accepted accounting principles in the Cayman Islands and therefore it is open to a company to select whichever accounting conventions it thinks fit.  A complete set of financial statements will normally include a statement of financial position, an income statement, a cash flow statement and notes to the accounts.
   
   For an exempted company that is not regulated or licensed under any other law, no financial statements need to be filed with any Cayman Islands governmental agency, and no annual audit is required.
   
   Kaizen is a licence public accounting firm in Hong Kong and can help clients to prepare financial statements for the Cayman Islands exempted company in accordance with international financial reporting standards or Hong Kong financial reporting standards. Kaizen can also handle the audit of financial statements of an exempted company.
   
   
7. Liability of Shareholders
   
   No contribution shall be required from any member exceeding the amount, if any, unpaid on the shares in respect of which he is liable. In the case that a shareholder does not contribute to the capital of the shares that he or she subscribed as required (e.g. when an exempted company issues a call for capital) by an exempted company, the shares may be forfeited.
   
   As most companies issue shares that are fully paid upon issue, the effect of this provision is that no further sums are payable by the holders of such shares once they have paid for their shares in full.
   
   
8. Transfer of Interests
   
   The transferability of shares will be set forth in the Articles.  Commonly, shares may only be transferred with the prior consent of the directors of the company.  Therefore, when a shareholder intends to transfer his/her shares in an exempted company, he or she should obtain consent from the board of directors before the execution of the transfer. Once after a transfer of shares is executed, the name of the new shareholder will be entered into the register of shareholders (members).
   
   Bearer shares are permitted but there are strict limitations on dealings with bearer shares, which may only be issued to a recognised custodian and they are now extremely unusual.
   
   A company is permitted to hold shares in treasury.
   
   There is no Cayman Islands stamp duty payable on the transfer of shares.
   
   
9. Distributions
   
   An exempted company may make distributions by way of dividend provided that there are no restrictions (either express or implied) in its Memorandum or Articles.  A company may only make distributions by way of dividend out of profits or (provided that immediately following the date that the dividend is proposed to be paid the company is able to pay its debts as they fall due in the ordinary course of business) out of its share premium account.
   
   
10. Tax Status
    
    An exempted company may be granted a twenty year guarantee that it will not be subjected to taxation (even though there are presently no taxes in the Cayman Islands). However, the company should consider the potential value to them of being in possession of a Tax Exemption Certificate ("TEC") in the event that taxes are ever introduced in the future in the Cayman Islands on profits/income of exempted companies.  
    
    
11. Economic Substance Reporting
    
    The International Tax Co-Operation (Economic Substance) Act in the Cayman Islands came into effect 1 January 2019 requires legal entities to report and file relevant information about the business annually. For the company conducting business activity in the scope of Relevant Activities, it requires to demonstrate a degree of economic substance within the Cayman Islands in order to prevent profit shifting. If the company conducts business activity in the scope of Relevant Activities, the company requires to file Economic Substance Report annually. The extra reporting fee will be depended on the type of Relevant Activities.
    
    
12. Beneficial Owner Register
    
    The Cayman Islands introduced the beneficial ownership register regime on 30 June 2017. In accordance with the laws, all entities registered in the Cayman Islands must prepare and maintain a beneficial ownership register (unless otherwise exempted). The beneficial ownership register is not open for public inspection.
    
    Beneficial ownership includes those who have the ultimate beneficial interest and control of the entity. A beneficial owner can be an individual or a legal person. The registrable beneficial owners normally include:
    

    (1)	those persons who directly or indirectly control 25% or more of the shares or equity interest;
    (2)	those persons (separately or jointly) who controls 25% or more of the voting rights;
    (3)	those persons who have the rights to appoint or dismiss the majority of the board of directors or senior management.

    
    
13. Dissolution
    
    An exempted company may be wound up by the appointment of a liquidator either pursuant to a voluntary or compulsory liquidation, or may be struck off following an application to the Registrar. Please refer to our Guide to Dissolution of a Cayman Exempted Company for detailed information regarding liquidation and striking off.
    

See also：
Cayman Islands Company Registration Procedures and Fees
Cayman Islands ELP Registration Procedures and Fees