The Cayman Islands has long been recognised as a leading international financial centre, providing modern, flexible and investor-friendly structures preferred by global investors. One structure in particular has become increasingly prominent for Latin American start-ups, SMEs and entrepreneurs seeking to attract international capital and scale efficiently: the Cayman holding company model.
Why Latin America is increasingly turning to Cayman holding structures
Latin America is one of the world’s fastest-growing regions for venture capital (VC) and private equity (PE). In 2022, the region attracted USD 7.8 billion in VC investment across more than 1,000 deals. For founders and investors alike, the real advantages appear when investment is consolidated and governed at the Cayman Islands holding company level.
This structure enables both local and international investors to pool funds in a neutral, well-regulated jurisdiction before deploying capital into a Delaware intermediary and onward to the Latin American operating company. Its blend of legal certainty, tax neutrality and structural flexibility has made it a preferred approach across the VC and PE ecosystem.
Why international investors prefer a Cayman structure
International investors are now involved in nearly half of all venture deals in the region. Their primary requirement, beyond economic potential, is confidence in a predictable legal system. Direct investment into local jurisdictions can raise concerns. In the World Bank’s Ease of Doing Business rankings, Mexico stands at 54th for minority-investor protection, Brazil at 109th and Colombia at 65th.
A Cayman holding structure mitigates these risks. Investors participate at the Cayman level, benefitting from a well-established legal system, strong minority protection frameworks, and efficient corporate processes. For global GPs and LPs, this structure provides clear and reliable governance, giving them the confidence to deploy capital into rapidly expanding Latin American markets.
How the structure works
The model generally consists of three tiers, each serving a clear purpose.
1. Cayman Islands holding company
At the top sits the Cayman holding company, which pools capital from both local and international investors. Cayman offers tax neutrality, a globally trusted legal system, and flexible corporate laws, making it an ideal jurisdiction for cross-border investment.
2. Intermediary entity (typically a Delaware LLC)
Below the Cayman entity sits an intermediary company, often a Delaware LLC. This provides contractual flexibility, a familiar legal framework for US investors, and an efficient platform for transaction execution. The intermediary holds the shares of the operating company, acting as a bridge between Cayman governance and Latin American business operations.
3. Latin American operating company
At the base is the operating company (OpCo), located in countries such as Mexico, Brazil or Colombia. This is where commercial activity occurs: product development, customer relationships and day-to-day operations. Structuring ownership through Cayman provides investors with insulation from local legal uncertainties and operational risks.
This three-tier model streamlines investment flows, supports efficient governance and provides clarity and protection to all stakeholders.
Why choose the Cayman Islands?
Cayman offers a combination of regulatory stability, tax neutrality and investor-focused legislation that few jurisdictions can replicate.
Tax neutrality
Cayman imposes no corporate income, capital gains, or withholding taxes on profits earned outside the jurisdiction. This ensures that cross-border investors avoid double taxation and retain structural efficiency.
Legal flexibility
Cayman law is derived from English common law, supplemented by modern, commercially focused legislation. Investors benefit from the ability to customise governance documents, such as operating agreements and articles of association, to match the needs of sophisticated VC and PE arrangements.
Strong investor protection
The Cayman Islands’ courts, including the Financial Services Division of the Grand Court, provide robust and reliable legal recourse. Governance standards, regulatory oversight, and transparency commitments further strengthen investor confidence.
In short, Cayman offers a neutral, well-regulated, and highly flexible platform for international investment into Latin America.
A broad range of structuring options
Cayman provides a versatile suite of legal vehicles to support different investment strategies:
Exempted company
This is the most common structure for holding companies, offering limited liability, tax neutrality, and straightforward share issuance. Its familiarity to international investors makes it a primary choice for venture and private equity transactions.
Cayman LLC
Modelled closely on the Delaware LLC, this entity provides contractual flexibility through a bespoke operating agreement. Its combination of corporate personality and partnership-style governance makes it useful for joint ventures, founders’ agreements and investor-aligned governance.
Exempted limited partnership (ELP)
The standard structure for private equity and venture capital funds. It offers a clear division between general-partner control and limited-partner liability protection, along with confidentiality and tax neutrality.
Foundation company
A hybrid vehicle combining elements of a company and a trust. It can operate without shareholders and is used for purposes such as succession planning, asset protection, governance structuring and philanthropic initiatives.
Trusts
A long-standing option for estate planning and wealth preservation. Trusts offer confidentiality, asset protection and structural flexibility and may be incorporated alongside corporate structures for long-term planning.
Navigating regulatory requirements
Cayman’s regulatory framework underpins its reputation as a responsible jurisdiction. Key regulations include:
Beneficial Ownership Transparency Act
Requires certain entities to maintain accurate registers of beneficial owners, supporting global transparency standards.
International Tax Co-operation (Economic Substance) Act
A pure equity holding company in the Cayman Islands meets the economic substance test by complying with all applicable filing and record-keeping obligations and by having adequate human resources and premises in the Islands for the holding of equity participations; no heightened activity-based requirements apply. Its obligations are limited because holding equity interests and earning only dividends and capital gains is treated as a reduced-substance relevant activity under the International Tax Co-operation (Economic Substance) Act (revised).
Together, these requirements ensure that Cayman remains a stable, compliant and internationally respected platform for cross-border investment.
Exit strategies
A key purpose of using a Cayman structure is to facilitate efficient exit opportunities. Whether through a merger, acquisition or public listing, investors benefit from predictable processes and globally recognised legal frameworks.
In mergers and acquisitions, Cayman law provides clarity and efficiency, enabling smoother negotiations compared with direct acquisitions of local Latin American companies. International buyers are more comfortable transacting through a jurisdiction they understand.
For IPOs, Cayman entities are well established on major exchanges. As of November 2024, more than 400 Cayman companies were listed on NASDAQ and the NYSE, representing over 30% of all non-US listings. Cayman’s flexibility and tax neutrality allow for streamlined pre-IPO restructuring, making it an attractive option for high-growth Latin American businesses targeting global markets.
Conclusion
The Cayman holding company model is a proven structure for attracting international investors, facilitating cross-border investment and supporting efficient exit strategies for Latin American businesses. However, it requires careful management.
Potential risks include regulatory non-compliance, particularly with beneficial ownership and economic substance rules, which can lead to penalties or structural challenges. Managing entities across multiple jurisdictions also requires disciplined corporate governance and accurate documentation.
Additionally, cross-border fund transfers, currency control regimes and local tax rules require thoughtful planning to avoid delays or unexpected liabilities.
With proper structuring and ongoing compliance, the Cayman model provides a secure, efficient and globally recognised framework for scaling Latin American businesses and unlocking international capital.
Shelley Do Vale is the founder and managing partner of Vale Group.
