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Holding IP with your Cayman company
Holding IP with your Cayman company
Updated over a week ago

It is possible for your Cayman Island Exempted company to hold and own your Intellectual Property (IP). One point to be aware of is how this might impact how your company complies with Cayman economic substance law.

Typically start ups using a Cayman Island Exempted company are categorised as pure equity holding companies and are subject to lower economic substance requirements that are easily met by appointing Clara as your corporate service provider.

Pure equity holding companies are those that are only holds equity in other entities s (i.e. your operating companies) and only earns dividends or capital gains from this equity. Pure equity holding companies are passive and should not generate revenue. A pure equity holding company can hold IP ancillary to the business and remain compliant with the lower economic substance requirements.

If your company will license the IP to subsidiaries and third parties and/ or monetise it, the company would instead be considered a Intellectual Property business for the purpose of economic substance law. An Intellectual Property business has higher economic substance requirements to meet under the economic substance law. They are (in summary):

  1. Conduct income-generating activity related to the IP in Cayman Islands

  2. Be directed and managed in the Cayman Islands

    1. Inc. meetings of the board of directors are held in the Cayman Islands at adequate frequencies; There is. Quorum of directors present in the Cayman Islands; the minutes of the meetings are kept in the Cayman Islands.

  3. Have adequate physical presence in the Cayman Islands, adequate amount of operating expenditure incurred in the Cayman Islands; have an adequate number of full time employees with appropriate qualifications in the Cayman Islands

Most start ups simply assign the IP generated by founders and employees to the Cayman pure equity holding company and it is held as ancillary to the business and therefore the economic substance is satisfied by appointing Clara as your Corporate Service Provider.

In this scenario you can use Clara's IP Assignment Agreements to assign the IP to the Cayman Hold Co and have it effectively own the IP of the start up.

If you are unsure about how your start up will be affected by economic substance law in the Cayman Islands, please reach out to [email protected] and we can offer some guidance.

*Clara is not a law firm and cannot provide legal advise. Whether or not a particular company is an IP company is always specific to the facts of that particular company and its business. Please consult a legal professional for advice on how to meet your obligations in Cayman.

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