Cayman Foundation Company Formation

Statutory origin and legal personality

Cayman foundation companies were introduced under the Foundation Companies Act, 2017. The statute places them within the company framework while allowing features associated with foundations and trusts. The central legal point is that the foundation company exists as a separate legal person. It can hold property in its own name, apart from the people who manage it.^[2][5]

A foundation company must initially be incorporated with one or more members, but may later cease to have members if its memorandum permits and it retains a supervisor. A foundation company may have beneficiaries, and its governing documents set out relevant rights. The separate personality and the option to operate without members distinguish the form from arrangements that do not exist as separate legal persons.^[1][3]

A foundation company is incorporated under the statutory framework and must meet prescribed requirements for its memorandum and articles of association. The constitution consists of those documents and is registered with the Registrar of Companies.

Constitutional documents and bylaws

The memorandum and articles form the foundation company's constitutional documents. They set out its governing framework, including provisions about management and the rights or powers assigned to people connected with the company. Requirements prescribed for these documents apply as part of incorporation under the Foundation Companies Act.^[1][7]

A company may also adopt bylaws to add detail to, or modify, aspects of management and operation. Bylaws are separate from the constitution and are not filed with the Registrar. They are private documents, while the constitution is registered. Bylaws can set further internal rules and provide for amendment over time.^[3][6]

The constitutional documents are distinct from optional bylaws. The constitution supplies the formal framework, while bylaws can provide additional operating detail. The rules in either document depend on what the documents state, including any provisions assigning powers to a founder, supervisor or directors.^[6][7]

Founder, supervisor and board powers

The law does not define a mandatory founder role, and a foundation company need not appoint one. Its governing documents can give a founder continuing powers, or leave the founder without an ongoing role. Examples include appointing directors and amending governing documents. These are options described in the documents, not automatic powers that follow from the title founder.^[2]

Day-to-day management is conducted by the board of directors. The constitution may assign rights, powers or duties to the founder or supervisor, including powers concerning the appointment or removal of supervisors and directors. It may also address supervision of the company's management and operations. Directors' exercise of powers can be restricted in the governing framework.^[4][5]

A foundation company may have members, but it can cease to have them if its memorandum permits and it has a supervisor. One or more supervisors are required when a company has no members. A supervisor may also be a director. The constitution may define the supervisor's role, including oversight of the board.^[2][3]

U.S. tax classification of a foundation

A foundation is an entity, so the U.S. result depends on classification under Treas. Reg. sections 301.7701-2 through 301.7701-4, and the absence of a dedicated foundation form does not take it outside U.S. tax. Depending on its terms, a foundation can be treated as a foreign trust (Forms 3520 and 3520-A, with grantor trust status if the founder holds revocation or similar rights), as a foreign corporation (Form 5471, with CFC and PFIC consequences), or as another entity type. A U.S. founder or beneficiary may also have Form 8938 and FBAR duties for its accounts. See Foreign entity tax classification and Panama foundation versus trust: U.S. classification.

Questions and answers

Related resources

Related glossary terms

• Recognition of a trust: The Hague Convention describes recognition of a trust, its minimum legal effects, and limits tied to applicable law. Jersey law also addresses recognition.
• Trust: The Hague Convention describes a trust as a relationship in which a settlor places assets under a trustee's control for beneficiaries or a specified purpose.
• Corporate trustee: A corporate trustee is a corporation under Jersey law. The law explains how it acts for a trust and relates to an individual trustee or trust corporation.

Related articles and guides

• Foundation Councils, Charters, and Rules: Foundation governance for U.S. citizens: councils and boards as well as founders and officials, and the documents that set out each role and its powers.
• Panama Private Foundation Formation and Fees: Panama private interest foundations are governed by Law 25 of 1995 and have a legal basis, defined purposes, governance arrangements and founding documents.

Tools and official documents

• Form 926: transfers of property to a foreign corporation: Form 926 reports a U.S. transferor's transfer of property to a foreign corporation: reporting scope, definitions, required information and filing timing.
• Form 8938: specified foreign financial assets: Form 8938 reports specified foreign financial assets for U.S. citizens: reporting thresholds, asset definitions, required information, related forms and timing.

Related pages

• Topic guides
• Allocating GST Exemption to Trust Transfers
• Annual Gift Exclusion Rules for Trust Gifts
• FBAR Filing Dates and Submission