(CNS Business): A number of amendments to critical financial legislation were passed through the Legislative Assembly last week on the eve of a visit from the OECD’s peer review group in connection with tax information. The new laws pushed through at the eleventh hour by government are expected to improve Cayman’s tax information exchange regime and address the remaining recommendations, outlined in the Phase 1 Peer Review by the Global Forum on Transparency and Exchange of Information for Tax Purposes. Five bills were gazetted on Friday but there are already concerns that some will have a significant, negative impact on the local offshore industry.

Although government has stated that the changes clarify and confirm the ability of the Cayman Islands to provide information for tax purposes in line with international standards and improve the overall compliance regime at a time when the offshore industry is under increasing pressure, others say that at least one of the laws has been ill thought out.

The laws in question are the Banks and Trust Companies (Amendment) Bill, 2012; the Companies (Amendment) Bill, 2012; the Exempted Limited Partnership (Amendment) Bill, 2012; the Tax Information Authority (Amendment) Bill, 2012; and the Partnership (Amendment) Bill, 2012.

The amendments include the introduction of sanctions against companies and partnerships that fail to comply with requirements to maintain ownership and identity information; a requirement for exempted and non-resident companies to maintain registered offices with service providers that are licenced by the Cayman Islands Monetary Authority; provisions to allow for the Private Trust Companies Regulations to create offences punishable by a fine not exceeding CI$10,000; and technical changes to the Tax Information Authority Law (2009 Revision).

As a result, government says it has now addressed all of the recommendations contained in the Phase 1 of the peer Review Report in time for the arrival of the phase Peer Review onsite visit, which takes place this week (5-7 September).

However, local company management firms may find amendments to the Companies Law somewhat cumbersome. Clause 20 of the new bill amends section 59 (1) of the original law by inserting after the word “kept”, the words “at its registered office”. In essence, this means that local firms here in the Cayman Islands managing the registered offices of myriad international companies will need to keep comprehensive records including supporting documentation, contracts and invoices, relating to all money received and paid, on sales and purchases and all assets and liabilities for companies registered with them at their Cayman offices.

Pulling no punches local Charted Accountant and Insolvency Practitioner, Chris Johnson, of Chris Johnson Associations, said that the new requirement could spell disaster for the offshore industry and questioned whether government had consulted anyone in the sector before imposing what may prove to be an impossible task.

“The amendment to the Companies Law regarding the maintenance of books of account in the Cayman Islands at Registered Offices is nothing short of a disaster for the Cayman Islands which will quickly bring about the demise of the financial industry,” Johnson said. “No other country in the world demands that accounting records be kept at a registered office.  One can imagine the hordes of personnel that would suddenly be upon us and the huge problems being addressed by the immigration department in determining the suitability of staff required to maintain the records, forgetting the language problems.”

He pointed out with over 80,000 companies registered here it could take thousands of people to manage the potential mountain of records generated by the companies the world over but whose offices are merely registered here.

“It is ill conceived and unworkable and clearly shows the calibre of people who are rethinking our laws and composing amendments thereto. I cannot possibly understand why the assistance of the financial community was not obtained and let us hope it is not too late to repair the damage that has been done. Moreover we need an explanation from the premier,” he added.

Companies (Amendment) Bill, 2012

All other amendments are also available at the CIG Gazette Office website