How are Orphan SPVs formed?

Incorporation

Setting up a Cayman Islands exempted company as an Orphan SPV is straightforward and quick, often taking just one business day without needing government approval. The Companies Act of the Cayman Islands requires at least one director, who doesn't need to live in the Cayman Islands, and it’s allowed to have corporate directors. There’s also no minimum requirement for the company's share capital.

Setting up a Cayman Islands Orphan SPV through trusts

In the Cayman Islands, it's possible to set up an Orphan Special Purpose Vehicle (SPV) using trusts. This is often done through a corporate services provider like Mourant Governance Services (Cayman) Limited. There are two common types of trusts used to establish an Orphan SPV:

Charitable Trust

• The shares of the Orphan SPV are given to a licensed trustee in the Cayman Islands.

• This trustee is completely independent and not connected to the company setting up the SPV.

• The trustee holds the shares of the Orphan SPV in a charitable trust, meaning the benefits go to a charity in the Cayman Islands.

• This setup makes the SPV "orphan" because the shares are owned by the trust, not by the company that created the SPV.

STAR Trust (Purpose Trust)

• Similar to a charitable trust, the shares of the Orphan SPV are given to a licensed corporate trustee.

• However, instead of benefiting a charity, a STAR trust is created for a specific purpose, like subscribing for the shares in the SPV and fulfilling the obligations under the transaction documents.

A key difference is that a STAR trust can have an "enforcer" whose job is to make sure the trustee does what they are supposed to do. This enforcer doesn't have to live in the Cayman Islands, and the company that set up the SPV can act as the enforcer if needed, making it a flexible option.