Gov’t aims to increase access to LCCL businesses
(CNS): The Department of Commerce and Investment (DCI) has rolled out a new requirement for overseas investors applying for Local Companies Control Licences. They must now place their adverts looking for local partners on the DCI website as well as in the print media. Officials said the aim is to put these opportunities before a wider audience and encourage Caymanians to be more involved in the country’s economic success. Going forward, the public will be able to see these business proposals all in one place. But in most cases, applicants are looking for significant cash injections, presenting a barrier to local involvement.
“Our objective is to ensure that news of these investment opportunities reaches as wide an audience as possible, and we are committed to exploring various means to achieve this,” said Trade and Business Licensing Board Chairman Garth Arch.
The granting of LCCLs is a controversial issue as the decision-making process remains opaque since the final decision is made by Cabinet behind closed doors. This happens after the TBL board has examined these applications, also behind closed doors. The licensing process has given rise to allegations of ‘fronting’, where foreign investors open a proposed business with a Caymanian in name only. The local ‘partner’ will be paid a fee in exchange for keeping their name on the company documents but has little or no input in the actual venture.
As of 30 September, there were 251 LCCLs recorded with the DCI. Officials confirmed that the majority are property-related companies formed by owners to lease commercial buildings, to provide tourism accommodations or for development projects. Financial services and healthcare providers also form a large number of businesses currently operating here with no Caymanian partners.
There are however some surprising exceptions, such as spas and a goat farm. The current list also shows that the controversial company formed to develop the former government’s proposed cruise berthing facility, Verdant Isle Port Partners, continues to have a valid licence.
Officials from the DCI told CNS that, depending on the nature of the proposed business, the board has the power to include various requirements as it deems necessary, such as the period of the licence. But there are no prohibitions on any specific types of business being considered for an LCCL.
“Every application is vetted and considered against the provisions in the Local Companies Control Act (2019),” the DCI said in response to CNS questions. “If an applicant is of the belief that they can meet the requirement of ‘exceptional circumstances having regard to the public interest’, they may request that Cabinet consider waiving the requirement to seek Caymanian participation.”
The DCI, which serves as the secretariat to the Trade and Business Licensing Board, conducts a due diligence review of all applications, the results of which inform the board’s consideration, together with other criteria as set out in law, officials stated.
“If the Board has determined that a substantive application has merit and a request has been made for Cabinet to consider waiving the requirement for Caymanian participation, Cabinet will consider the evidence of ‘exceptional circumstances having regard to the public interest’ provided and determine whether or not the circumstances are compelling enough to warrant a grant of the exemption,” the DCI explained.
The board also has the responsibility to make sure those granted LCCLs abide by the terms.
“Where it finds the law has been breached, the board has the power to revoke licences and impose penalties, including fines and imprisonment,” a spokesperson stated. “Throughout the lifespan of the licence, the Board can require companies to provide additional information about their operations as they see fit, summon directors to appear before it and may also require a Caymanian who claims to be the beneficial owner of shares in such a company to submit proof.”
Although applicants have always been required to show the DCI their efforts to advertise for and find a local partner, the new measure now mandates in the regulations that those adverts are posted on the DCI portal at the start of the application process as well as in print media.
Commerce Minister André Ebanks said the new measure was in keeping with the government’s policy commitment to help Caymanians play a more active role in the success of the country.
“We encourage potential Caymanian investors who see these opportunities advertised on the website or in the media to respond to the companies and to copy their expression of interest to the board,” Ebanks said in relation to the new requirement.
- Fascinated
- Happy
- Sad
- Angry
- Bored
- Afraid
Category: Business
Pointless! Fronting has already passed the level that this is intended to “prevent”. Or…it’s like closing the gate after the horse has bolted!
There is now the murky world of those CEC, Tech City and other excluded entities that set up saying they are doing one thing but quickly start operating directly in the Cayman marketplace. As the owner of a Cayman regulated financial business we are always coming up against other firms that are not regulated but hide behind their CEC licence or T&B for an completely unrelated business.
Tell us more about this “Goat Farm” on Cayman Brac. This sounds like a crazy scam…
Andre trying to stay relevant. Check out who his campaign contributors were, because that will tell you all you need to know.
8:03 pm His main campaign contributor was Wayne Panton. Andre campaigned as if he’d join the PPM then did the big switch after elected, per his promise to Wayne.
He played both sides and the constituents of WBS.
The sheer volume of this happening in Real Estate while the decisions are made behind closed doors should be ringing alarm bells.
4:15 pm Exactly. Many many developers (mostly smaller scale) are foreigners with no trade and business license, let alone LCCLs. And it is precisely the smaller scale builders that take away opportunists for similar sized Caymanian builders and entrepreneurs
Way to late and defiantly not going to stop fronting
A welcome move but about 20 years too late. How many politicians have association with LCCLs under the table? Hmmm🤔
LCCL Licenses have and will always be a hot bed of corruption.
One Example:
Up to the 1950s petroleum products were imported and sold by Caymanians business people.
Government allowed these petroleum companies to push the Caymanian business people aside to become direct importers.
Their original LCCL limited them to only import and wholesale petroleum products.
All “Gas Filling Stations” were privately owned by Caymanians.
Over time the petroleum companies developed “Good Political Connections”, gradually they began to sell automotive products and to own stations, in violations of their LCCL terms. This was because of good connections, in full knowledge, government turned a blind eye!
Eventually after a court case the full extent of the LCCL terms violations were revealed
…. even then government took no action to protect Caymanians against the predatory petroleum companies.
Welcome to the corrupt Cayman Islands Government.
Without effective enforcement the LCCL violations will continue unabated.
That case was poorly decided.
Whilst this is a step in the right direct, at least in theory, why is it that law firms (the majority of which are not Caymanian owned and controlled) not subject to the same rigorous scrutiny to obtain a Local Companies Controlled Licence (LCCL)?
It appears that, with respect to Caymanian attorneys’ participation in ownership and control of law firms and legal practices in the Cayman Islands, there is an extant double standard, does it not?
When, if ever, will this be addressed by Parliament or the Cabinet?
Or, like other matters relating to the legal profession in the Cayman Islands and the practice of Cayman law, which are being swept under the rug, when will this be addressed (if ever)?
* Meant to say “…right direction…”, not “…right direct…”.
2:26 pm Orrie you’re just a bunch of words. Get a grip. To answer your question….I suppose you will get your way when Cayman attorneys can pass muster and measure up with the experience, customer service and knowledge as their “non-Caymanian” counterparts.
The grip he’s got, squeezed to the point you had to comment. Very valid point made. You sound very defensive, and rightfully so. How dare Caymanians try to ruin your cash cow!?
One important thing to note about this is the idea of the cash injection requirement. Let’s say xyz overseas company has $10m to build some project. Just because a real Caymanian wants to be involved in project and has the knowhow to add value, doesn’t mean that the $10m in foreign funds evaporates just because the Caymanian doesn’t have it.
You could make the case that the foreign entity would need to inject that $10m anyways, so the addition of a true and valuable Caymanian partner should not alter the capital needs of the company. Granted, the foreign investor still needs to be compensated for their injection; but a 60/40 stock split does not preclude that.
Now in a case where the interested Caymanian adds no value either through experience or cash that’s a different story and an LCCL is probably appropriate. However, if there is a Caymanian with experience in the field who can make a meaningful contribution to the company then the lack of capital alone should not be a reason to do this as an LCCL.
The particular case of Indigo Bay mentioned in the CNS story is interesting seeing as this particular batch of foreign investors went totally BUST and Bankrupt because they had absolutely no idea what they were doing. Partnering with a Caymanian who did know what he/she was doing (even with zero cash) could have prevented that.
Nice try. No cigar.
Interesting!
Interesting! Many Caymanians also regret this! Put them in bad situation!
This is just nonsense . No one on earth is going to put up the vast majority of the funding for a project in return for a 40 percent interest with no control. It isn’t just a stock split- it’s a director split, and a profit split, and any departure from that requires an LCCL.
However good an idea some local knowledge and experience is, it’s unrealistic to expect that to transfer into majority ownership: the only people who actually benefit here are the limited number of Caymanians who can afford to put up serious amounts of funding for projects, so it just makes the rich guys richer.
It’s a stock split, a director split and yes a “profit split”. That does not mean the the capital provider can’t take a fee to cancel out profits and change things around. That person can take a salary equal to the total profits and then there is no profit left to split 60/40. There are many ways around things like this. The overseas entity can also be paid fees etc to even it out.
But in the case you’ve said that they’re not happy to do whatever deal is on the table, then LCCL it is. Otherwise involve a Caymanian Company at least a little bit.
Be creative and not so pessimistic.
All of those things would be a breach of the law.
I am delighted by this – but it is not enough. Fronting is prevalent. The activity is criminal but no one does anything. Prominent lawyers are involved and act with impunity. It is sickening.
Lawyers accessories to crimes.
It appears to be the largest scam since the big dock for the cruise ships, but this hocus pocus will be mostly on land. It might be interesting who is sponsoring all of this “Everybody gets rich” scheme.