Cayman Islands Investment Funds Audit Service

This legislation included the passage of a new Private Funds Act (“PFA”) for closed ended funds. Further, on 7 July, 2020 the Private Funds (Amendment) Act, 2020 was enacted in order to clarify the intended scope of the PFA.   The Act seeks to strengthen investor confidence in Cayman Islands investment fund vehicles and ensure that the Cayman Islands remain a preeminent jurisdiction for investment fund formation. The Act also seeks to address EU suggestions for investment fund oversight as set forth in a report dated 27 May, 2019, from the EU Code of Conduct Group (Business Taxation).

When a fund is being registered to CIMA, it is required to state its first financial period and an annual audit, is required to be performed. The financial statements audited by a CIMA Approved Auditor within six months of the fund’s year end, along with the Fund Annual Return form. The Fund Annual Return and audited financial statements are filed with CIMA on the “REEFS” electronic filing system, by the CIMA Approved Auditor of the fund.

CIMA may approve extending the fund’s first audit period for a maximum of 18 months from the date of launch. For example, for a fund with a 31 December year end:

• If the fund launches on 30 June 2020 or earlier, the fund will need to submit financial statements covering the period from launch until 31 December 2020.
• If the fund launches on 1 July 2020 or later, the fund may apply for an extension of the first audit period to cover the period from launch to 31 December 2021, if approved by CIMA.

  In certain circumstances audits may be waived or the audit period could be extended, as detailed below.

In certain circumstances, fund operators may apply to CIMA for a waiver of the filing requirement or for an extension of the filing deadline. CIMA will assess each fund’s request on a case by case basis. The most common reasons for waiver applications being considered by CIMA include:  

• a fund has not yet launched (i.e. has not accepted subscriptions from investors);
• a fund has not launched and is being liquidated or wishes to be deregistered;
• a fund is unable to obtain audited accounts due to events such as bankruptcy proceedings, legal or regulatory enforcement actions; or
• a fund has been placed in compulsory liquidation and CIMA is satisfied with the appointment of the liquidator and the scope of the liquidator’s review.

  CIMA charges a non-refundable administrative fee for each waiver/exemption or extension request. A detailed policy is also published by CIMA in this regards.

When a regulated fund is being liquidated, unless a Fund qualifies for an audit waiver, it must provide final audited accounts:

• the date of commencement of the winding up in cases where a third-party liquidator has been appointed; or
• the date of the final distribution if no third-party liquidator has been appointed.

  In cases where a fund is ceasing operations and plans to deregister, it is recommended to discuss the process with your Cayman service providers to ensure the timing of the liquidation and final audit is optimised to minimise the cost of the closing process.

In practice, the financial records of the investment fund are generally located at the office of the fund manager or administrator; resulting in difficulties for the CIMA approved auditors to perform audit on the financial statements. In view of this, CityLinkers Group has partnered with CIMA approved auditors, to carry out necessary audit work and issue audited financial statements recognised by CIMA.