The liability to shareholders can be limited by shares or by guarantee in a Cayman Island company. Liability is limited by guarantee is in essence where a shareholder does not put up any money for shares but instead they pledge that if the company fails the shareholder will pay a certain amount to the company’s creditors. What this means is that company does not issue any shares, which creates interesting possibilities for estate planning. Hybrid companies under Cayman law are allowed, which can be limited both by shares and by guarantee.
There is no minimum capitalization required where liability is limited by shares except in the case of banks, insurance companies, and mutual funds, which have a higher required minimum share capital. Shares can be issued with a par value of as little as one US$1.00, or with no par value. The majority of the time there are no stamp or any type of duties for transferring the shares.
Companies in the Cayman Islands can be created with limitless liability. In this case, if a corporation is sued for a certain amount of money, then all the shareholders will be responsible and liable for the amount. These corporations do have practical uses, such as where one wants to create liability as a shield against creditors.
The bearer shares may be issued however, they have to be paid in full. Share can have a par value or they can have no par value. The register of shareholders or members of an exempted company in the Cayman Islands are not open to public inspection. In addition, only the names of directors and officers can be filed with Registrar of Companies.
A Cayman company has to have one shareholder. This can be a corporation or a person and nationality is not considered. On the other hand, a company that does business on the islands has to be owned 60% by Cayman citizens.
Shareholders of any Cayman company can loan funds to the company to capitalize it or can guarantee a bank loan for the same purpose. However, a specific resolution has to be made by the company in order for this to occur.
Shares of a Cayman company can be denominated in any currency or a combination of different currencies. Shares are also allowed to be changed into fractions. Different share classes can be created, with a variety of rights for each class. Additions in registered capital can be done by ordinary resolution at the meeting of shareholders including a reduction of share capital down to the amount of issued capital that was done by the special resolution with a 2/3 majority of the shareholders. On the other hand, a reduction of authorized capital below this issued capital does require the approval by the Grand Court of Cayman.