Officials said a summer crackdown on unlicensed companies signals a renewed effort to enforce trade and business licensing laws, now that application approval processes have been streamlined.
After eliminating a backlog in licence applications earlier this year, the Trade and Business Licensing Board is focusing more attention on enforcing the law required of people and companies wishing to “carry on business” in Cayman. Over the next two to three months, the board and Department of Commerce and Investment will investigate roughly 400 businesses that could be delinquent in paying their government fees.
Department officials and appointed board members said this will not be a transitory enforcement effort, but heralds a new long-term emphasis on making sure companies comply with the law.
“In Cayman, enforcement has always been the issue. We have laws, we have policies, but enforcement always seems to be a challenge,” board chair Garth Arch said, adding that the department is working to put in an enforcement arm for trade and business licensing.
Currently, to enforce the law, the board relies on other departments, such as immigration or police. Not having a business licence can place a company in precarious standing with multiple departments. For example, a company must have a valid business licence in order to obtain work permits for expatriates.
The commerce department’s executive director Jonathan Piercy said none of the 400 companies identified are “large, well-organised” businesses, and that the vast majority of the potentially delinquent companies would be classified as small “miscellaneous” businesses outside general categories such as professionals, trade and technical, commerce, or industry and agriculture.
“Just so we are clear, no accounting firms are in violation of this, none of the banks, none of the insurance companies are in violation, none of the service stations, nothing like that,” Piercy said.
However, board members said potential violators include a variety of businesses, in areas including construction, hairdressing, and even restaurants.
“I think it’s a combination of businesses across the board,” board deputy chair Lynn Bodden said.
The department’s head of business licensing Ryan Rajkumarsingh said it would be difficult to determine how many companies are operating illegally, and how many were identified as possibly delinquent due to lapses in paperwork.
“What we’ll find, most likely, are businesses that have been closed and not informed trade and business licensing, or businesses that may be represented by an agent and have transferred and gone to another agency, and have not informed the trade and business department either,” he said.
Arch said, “Sometimes a company is in a financial situation, and they’re not trading or carrying on business, and they fail to let the board know.”
Technically, companies that registered with the board, then stopped doing business and did not notify the board, and now wish to renew their licences would be responsible for backpayments for the years they did not pay their licensing fees, board members said, adding that there’s no way they could know if the companies were actually doing business during those years.
For example, Bodden said after Hurricane Ivan in 2004, about 500 construction companies applied for licences, many to perform short-term jobs related to storm damage. “Then once the jobs were finished in 2005 or 2006, what happened to those companies?” she said.
About 5,000 companies have registered with the board, generating roughly $6 million in revenue for the government, Piercy said.
Business licensing fees range from $150 for men’s barbers, to $3,500 for the largest restaurants, to $400,000 for the largest accountancy firms. Agricultural producers are exempt from fees, while “miscellaneous” companies are liable for $300 in annual licensing fees. In addition, a $75 processing fee is charged for each application for the grant or renewal of a licence.
“Most of the companies that are in violation of this would be paying $375,” Mr. Piercy said.
He said, “This is not a licence that is crippling. This is not a licence that is extremely expensive.”
Each licence expires one year after being issued, rather than at a uniform date such as the end of the calendar or fiscal year.
The trade and business licensing unit has five full-time employees and will also take on two interns during the summer to assist with the enforcement project, Piercy said. The enforcement effort will be funded through the department’s existing budget and is planned to conclude at the end of the summer.
However, Piercy said the government will vigilantly enforce business licence fee requirements in the future.
“From this moment forward, we will be ensuring that the enforcement component isn’t going to be sporadic in nature. It’s going to be something that’s going to be consistent, looked at on a consistent basis,” he said.
The penalty for an owner to operate a company without a valid licence – that expired within the past year – ranges to a maximum $5,000 fine or maximum 12 months in prison, according to Section 26 of the Trade & Business Law (2007 Revision).
Rajkumarsingh said that as the unit becomes more efficient in processing licence applications, it will have more resources available to go after potential violators.
“Businesses need to be aware that we’re focusing more on them now,” he said.
In addition to a trade and business licence, a company with less than 60 per cent Caymanian ownership must also have a Local Companies Licence, carrying an initial fee of $2,700 including processing. No Local Companies Licence fees have been identified as outstanding, and they are not covered by this enforcement project, Mr. Piercy said.
Board members said one of their priorities is ensure companies are not posing a “fronting situation” but truly are Caymanian-owned.