Choosing between a Cayman Exempted Company and a Cayman Limited Liability Company (LLC) is the foundational decision for most offshore structures.
The Exempted Company
The Exempted Company is the workhorse of the Cayman financial sector. Governed by the Companies Act, its jurisprudence is deeply rooted in English common law. It is characterized by share capital, strict rules on the maintenance of capital, and rigid statutory fiduciary duties.
For decades, this was the default choice for master-feeder funds and holding companies because its structural familiarity appeals to institutional investors in Asia and Europe.
The Cayman LLC
Introduced via the LLC Act in 2016, the Cayman LLC is heavily modeled on the Delaware LLC. It offers tremendous contractual freedom, allowing members to define their internal workings, profit allocations, and fiduciary duties within the LLC Agreement.
| Feature | Exempted Company | Cayman LLC |
|---|---|---|
| Capital Structure | Shares (par or no-par) | Membership Interests (capital accounts) |
| Fiduciary Duties | Strict common law duties for Directors | Can be modified/restricted by agreement |
| Flexibility | Statutory rigidity on dividends/capital | Extreme contractual flexibility |
| Primary Use | Master/Feeder funds, Holding Co | JV Vehicles, PE Funds, GP Entities |
Which to choose?
If you need a vehicle familiar to Asian markets, or plan an eventual IPO, the Exempted Company is preferred. If you are a US manager familiar with Delaware structures looking to mirror that flexibility offshore (particularly for GP entities or closed-ended PE funds), the LLC is the clear winner.
Frequently Asked Questions
Can I convert an Exempted Company to an LLC?
Yes, the LLC Act provides a straightforward statutory mechanism to convert an existing Exempted Company into an LLC without triggering a taxable event in most jurisdictions.
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