Why the Cayman exempted company is widely used as a holding company for businesses in Egypt and the Gulf, what it costs to maintain, and how we can set one up within one week.
For many startups and groups operating in Egypt, Saudi Arabia and the Gulf, a Cayman Islands exempted company is the holding company of choice, particularly where investors come from several countries rather than mainly from the United States. This briefing explains what an exempted company is, how it is used, and what is involved in establishing and maintaining one.
What is an exempted company
An exempted company is a company incorporated under the Cayman Islands Companies Act that is intended to carry on its business mainly outside the Cayman Islands. Its key features are:
- Tax neutrality. The Cayman Islands do not levy corporate income tax, capital gains tax or withholding tax. An exempted company can also apply for a government undertaking that it will not be subject to any such taxes introduced in the future, for a fixed period.
- Minimal formation requirements. One shareholder and one director are enough, and neither needs to be resident in the Cayman Islands.
- Flexible share capital. The company can issue ordinary and preferred shares with tailored rights, redeem and repurchase shares, and issue convertible instruments.
- An English common law-based system, with final appeals to the Privy Council in London.
Why it is used in regional fundraising
- Familiar to international investors. Regional, Gulf, European and Asian venture funds regularly invest in Cayman holding companies, and many regional startups that have raised significant rounds are structured this way.
- A neutral parent for a multi-country business. A single Cayman parent can hold operating subsidiaries in Egypt, Saudi Arabia, the UAE and elsewhere, with one cap table and one employee option plan.
- A route to international listings. Cayman companies are widely accepted on major exchanges, including in the United States and Hong Kong.
Cayman or Delaware? Delaware is usually preferred where the lead investors are US funds or the business will be US-focused. Cayman is often preferred where investors are international or regional and the group has no US operations, since a Cayman parent is not itself a US taxpayer. Regional alternatives, such as the ADGM and DIFC in the UAE, are also worth considering. The right answer depends on your investors, your markets and your tax position.
Typical structure
Founders, investors and the option pool hold shares in the Cayman company. The Cayman company owns the operating companies in each country, either directly or through an intermediate holding company. Local law continues to govern each operating company, including licensing, foreign ownership rules and reporting obligations such as Egypt's quarterly FDI reporting.
Ongoing compliance
An exempted company is more expensive to maintain than a Delaware corporation, and it carries real compliance obligations:
- Registered office with a licensed Cayman corporate services provider.
- Annual return and government fee, filed each January.
- Economic substance notification every year. A company that only holds equity in other companies is subject to a reduced substance test, but it must still file.
- Beneficial ownership. The company must identify its beneficial owners and keep the required information through its registered office provider.
- Registers and filings. The register of members, register of directors and filings with the Registrar when directors or key details change.
- Anti-money laundering checks on shareholders and directors at incorporation and on an ongoing basis.
How we can help: set-up within one week
We can establish your Cayman exempted company within one week of receiving complete information and identification documents for the shareholders and directors. Our service covers:
- Agreeing the structure, share classes and any option pool with you.
- Coordinating the identity checks required by the registered office provider.
- Preparing the memorandum and articles of association and arranging incorporation.
- Post-incorporation steps: share issuances, the register of members, first board resolutions and founder documents.
We can also assist you in opening a bank account for the company. Account opening remains subject to the bank's own review and approval.
If you are preparing a fundraise or restructuring a regional group, contact us and we will help you decide whether Cayman is the right fit.
This briefing is for general information only and is not legal advice. For advice on your situation, contact us.