COMPANIES IN THE CAYMAN ISLANDS

BACKGROUND
The registration and control of companies in the Cayman Islands is governed by The Companies Law (Revised) of the Cayman Islands. Originally enacted in 1961 and modeled on The Companies Law of England, it has been revised substantially over the years, with the latest regulations being enacted in 1998.

There are more than 40,000 companies registered in the Cayman Islands, and growth continues with over 4,000 new companies being registered yearly.

ADVANTAGES OF INCORPORATION IN THE CAYMAN ISLANDS
No Taxation
There is no taxation. No income or corporate tax, no capital gains, no payroll, no property tax or withholding taxes. This can be assured by a thirty (30) year government guarantee.

New companies can be processed for registration within four (4) working days.

Confidentiality
Disclosure of information by government officials, professional agents, attorneys and accountants and their staff is forbidden by law.

Minimal Disclosure
Only on annual return is required with minimal reporting information requested.

TYPES OF COMPANIES
Five types of companies may be registered in the Cayman Islands: ordinary, ordinary non-resident, Exempted, Exempted Limited Duration and foreign.

1. Ordinary Companies
These are companies incorporated for the purpose of carrying on business in the Cayman Islands. These companies must be licensed for their particular activity under the Local Companies (Control) Law and must be sixty percent (60%) Caymanian owned, unless licensed to carry on business by the Immigration Board. In determining whether or not a license to carry on business locally will be granted, the Immigration Board considers among other factors the economic situation of the Cayman Islands and the protection of persons already engaged in business, the nature and previous conduct of the business, the advantages or disadvantages of permitting the company to carry on business in the Cayman Islands, the desirability of Caymanians retaining control of their own economic resources and the extent of any Caymanian participation and any efforts to obtain such participation.

2. Ordinary Non-Resident Companies
This type of company does not qualify for the guarantee against taxation. It must maintain at its registered office a register of past and present members that must be open for public inspection. This type of company must report annually to the Registrar of Companies, giving the name and address of its members, directors and the amount of paid up capital.

The company may deal in shares of exempted companies, foreign corporations or partnerships, but may only carry on such other business in the Cayman Islands as is necessary to the furtherance of its foreign business.

3. Exempted Companies
The exempted company is the most popular form of offshore vehicle. These companies must carry on their activities outside the Cayman Islands. The company may, however, conduct its operations from the Cayman Islands.

Exempted Companies:

- do not need to maintain a register of members in the Cayman Islands, and the register is not available to the public

- do not file annual returns, but rather a declaration stating that there have been no changes in its Memorandum of Association, it has observed the provision of the Companies Law and it has conducted its operations mainly outside the Cayman Islands

- may alter its Memorandum and Articles of Association without restriction

- does not have to include the word 'Limited' after its name

- may express its capital in any currency

- may issue shares with nominal or no par value; it may also issue shares in bearer form, unless the company has any Cayman Island property, or wishes to acquire same

- can continue anywhere by changing its place of incorporation to another country

- can offer its shares or debentures to the public, provided that no such invitation may be made to the public in the Cayman Islands

- does not have to have an annual meeting of members, but must have at least one annual directors' meeting in the Cayman Islands

- can obtain a guarantee of tax free status from the Government of the Cayman Islands for an initial period of twenty (20) years, which can be increased to thirty (30) years

- may be converted to an Exempted Limited Duration Company

4. Exempted Limited Duration Companies
Introduced in 1993, this form of company preserves the limited liability of members, but has the other characteristics of partnership such as limited duration, non-centralized management and non-transfer ability of interests without the consent of all members.

As such a limited duration Company may have favourable tax treatment for its members in certain foreign jurisdictions where it may be treated as a partnership.

5. Segregated Portfolio Companies
This is an exempted company which undertakes to carry on business only of a class which requires the company to hold a Restricted or Unrestricted Class "B" Insurer's Licence granted under the Insurance Law (1998 Revision). A segregated portfolio company may create one or more segregated portfolios in order to segregate the assets and liabilities of the company held within or on behalf of the portfolio from the assets and liabilities of the company held within or on behalf of any other segregated portfolio of the company or the assets and liabilities of the company which are not held within or on behalf of any segregated portfolio of the company. Upon approval a segregated portfolio company may create and issue shares in one or more classes, the proceeds of the issue of which shall be included in the segregated portfolio assets of the segregated portfolio in respect of which the segregated portfolio shares are issued. The assets and liabilities of one segregated portfolio are separate and distinct from the assets of another segregated portfolio.

6. Foreign Companies
These are companies incorporated outside the Islands but carrying on business within the Islands.

Certain registration requirements and fees are require as well as the requisite licenses.

ANNUAL RETURNS

Exempted Companies must hold one directors meeting a year and file an annual return indicating in essence that it has not carried on business in the Islands in the previous twelve (12) months and there has been no change in the Memorandum of Association. In addition the appropriate annual government fee must be paid together with the fees required to maintain the registered office in the Cayman Islands.

COMPANY RECORDS

For Exempted Companies

(1) Register of members

- must be maintained at registered office or wherever directors determine and are not available to the public;

(2) Register of Directors and officers

- must be maintained at registered office and Registrar of Companies must be provided with a copy and notified of any changes. This information is not available to unauthorized persons;

(3) Register of mortgages and charges

- If the company is granting mortgages or charges over its property a register must be maintained and it is available for inspection by creditors;

(4) Minute Book and Seal

- We normally maintain the Minute Book and Seal and will review all corporate resolutions and minutes for compliance to corporate articles and Caymanian Law on a fee for services rendered basis;

(5) Registered Office

- The name of the Company must be displayed in a conspicuous place at the registered office. The Registrar of Companies must be notified of any change in registered office;

(6) Accounting Records

- All companies are obliged to keep books and records as necessary to give a true and fair view of the state of the companies affairs and to explain its transactions;

(7) Special Resolutions of Members

- Notice of any resolution of members requiring a 2/3 vote (special resolution) must be provided to the Registrar of Companies within fifteen (15) days of its passing;

(8) Changes in Authorized Capital

- The Registrar must be notified of any increase of authorized capital and the appropriate fees must be paid within thirty (30) days of same;