5 reasons why the Cayman Islands is a natural fit when looking to set an SPV

26 June, 2024

Americas SPV Administration SPV Accounting, Reporting & Tax Collateral Loan Obligations

The Cayman Islands is a major centre for SPVs, especially those used to facilitate structured finance and asset-based finance transactions. It’s by far the most popular choice for US CLOs. With an engaged and business-friendly government, Cayman is a stable and well-regarded environment for the incorporation of SPVs.

What are the key reasons to consider Cayman for your SPV?

1. Taxation

The Cayman Islands is a tax-neutral jurisdiction, with no income tax, capital gains tax or withholding tax levied on SPVs. What’s more, SPV owners can apply to the government for a tax exemption certificate that ensures tax neutrality for 20 years.

2. Light-touch regulatory regime

The Cayman Islands operates a robust and creditor-friendly regulatory framework, proportionate to the sophisticated nature of its investors and the low-risk status of most SPV transactions. The majority of SPVs are incorporated as Cayman Islands-exempted companies, which offer a high degree of flexibility.

3. International standards

Substance requirements have been reinforced in recent years to comply with international standards. SPVs must have a registered office or agent in the Cayman Islands and one director has to act as an AML officer. These measures have brought Cayman into line with other international jurisdictions.

4. Local support

As an established financial centre, the Cayman Islands has a wealth of service providers, including directors, share trustees, major international banks and experienced legal advisors.

5. Ease of incorporation

Creating an SPV is straightforward and can usually be completed in two to five business days, but there’s a 24-hour express service. No regulator approval is required, so after incorporation SPVs can launch at any time.

How can Ocorian support SPVs in Cayman?

Ocorian has an enviable reputation in the Cayman Islands and our team specialises in collateralised loan obligations (CLOs). We look after the set up of the issuing entity, warehousing of assets, debt issuance, refinancing and resetting of the transaction right through to final liquidation, so support throughout the lifecycle.

The Cayman Islands offers a wide range of benefits for SPVs, such as the tax neutrality, legal certainty and the flexibility required to make them tax efficient and operationally viable. Businesses should be aware of the new focus on compliance, which makes setting up an SPV a little more complicated than it once was, so local expertise is essential.