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CAYMAN ISLANDS

LAW AND PRACTICE: p.3Contributed by Appleby

The ‘Law & Practice’ sections provide easily accessible information on navigating the legal system when conducting business in the jurisdic-tion. Leading lawyers explain local law and practice at key transactional stages and for crucial aspects of doing business.

CHAMBERSGlobal Practice Guides

FinTech

2018

Law & Practice – Cayman IslandsContributed by

Appleby

CAYMAN ISLANDS

LAW AND PRACTICE: p.3Contributed by Appleby

The ‘Law & Practice’ sections provide easily accessible information on navigating the legal system when conducting business in the jurisdic-tion. Leading lawyers explain local law and practice at key transactional stages and for crucial aspects of doing business.

Law and Practice caYMan iSLandSContributed by Appleby Authors: Bryan Hunter, Peter Colegate, Katie Fleming

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Law and PracticeContributed by Appleby

CONTENTS1. Fintech Market p.4

1.1 The Development of FinTech Products and Services p.41.2 The Market for FinTech Products and Services p.51.3 The Key Market Participants in the Specified

Activities p.51.4 FinTech Technologies/Companies p.51.5 Partnerships Between Traditional Institutions

and FinTech Companies p.51.6 Approach to FinTech Innovation p.51.7 Laws or Policy to Encourage Innovation p.5

2. regulation p.52.1 Regulatory Regimes for Specified Activities or

FinTech Companies p.52.2 Regulatory or Governmental Agencies for Specified

Activities or FinTech Companies p.52.3 Capital and Liquidity Requirements p.62.4 “Sandbox” or Other Regulatory “Neutral Zones” p.62.5 Change of Control Approval Requirements p.62.6 Recent Developments or Notable Proposed/Forth-coming Regulatory Changes p.62.7 Burden of Regulatory Framework and Protection

of Customers p.62.8 Regulatory Impediments to FinTech Innovation

at Traditional Financial Institutions p.62.9 Outreach by Regulators or Government

Authorities to Engage with FinTech Innovators p.62.10 Unregulated Specified Activities p.62.11 Foreign FinTech Companies p.62.12 Regulatory Enforcement Actions Against

FinTech Companies p.62.13 “Shadow Banking” p.6

3. Form of Legal entity p.63.1 Potential Forms of Charter p.63.2 Key Differences in Form p.73.3 Recent Legal Changes p.7

4. Legal infrastructure (non-regulatory) p.74.1 Desirable Changes to Facilitate Specified Activities p.74.2 Access to Real-Time Gross Settlement Systems p.74.3 Special Insolvency Regimes p.74.4 Electronic Signatures p.84.5 Standards for Proving Identity in Electronic

Transactions p.8

5. data Privacy and cybersecurity p.85.1 Data Privacy and Cybersecurity Regulatory Regimes p.85.2 Recent and Significant Data Privacy Breaches p.95.3 Companies Utilising Public Key Infrastructures or

Other Encryption Systems p.95.4 Biometric Data p.9

6. intellectual Property p.96.1 Intellectual Property Protection Regime p.96.2 Trade Secret Regime p.96.3 Copyrights, Patents, Trade Marks p.106.4 Protection of Intellectual Property or Trade Secrets p.106.5 Joint Development of Intellectual Property p.106.6 Intellectual Property Litigation p.106.7 Open Source Code p.10

7. tax Matters p.107.1 Special Tax Issues, Benefits or Detriments p.10

8. issues Specific to the Specified activities p.108.1 Additional Legal Issues p.10

caYMan iSLandS Law and PracticeContributed by Appleby Authors: Bryan Hunter, Peter Colegate, Katie Fleming

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appleby is one of the world’s leading offshore law firms. The Group has offices in the key offshore jurisdictions of Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Isle of Man, Jersey, Mauritius, and Seychelles, as well as a presence in the international financial centres of Hong Kong and Shanghai. Offering strength and depth across these jurisdictions, Appleby gives clients access to impartial offshore business knowledge and experience, as

well as a talented pool of lawyers in each of its locations. This ensures that the most appropriate jurisdiction and team are always available to meet a client’s requirements. Clients in-clude: financial institutions, global corporations, FTSE 100 and Fortune 500 companies and high net worth individuals. Appleby is a member of Terralex, an international associa-tion of law firms, as well as Lex Mundi, a leading network of independent law firms covering 100+ countries worldwide.

authorsBryan Hunter , the managing partner, is group head of the corporate practice group and global head of the funds and investment services team, as well as a member of the technology and cyber team. Bryan has extensive experience in

the structuring and formation of hedge funds, funds of funds and private equity funds. His practice also includes general corporate matters, corporate finance and M&A transactions. Bryan is a member of the FinTech Profession-als Association and a board member of Cayman Finance, a group that represents Cayman’s financial services sector and that has recently established a FinTech working group to promote the development of the FinTech sector on the Islands. Bryan has also served as a board member of the Civil Aviation Authority, the Caymanian Bar Association (of which he is a past president), the Chamber of Com-merce and as a member of the Financial Services Council.

Peter colegate is a senior associate in the corporate practice group and a member of the technology and cyber team. Peter’s practice focuses on privacy, data protec-tion, cybersecurity and strategic corpo-rate-commercial and regulatory work in

the TMT and financial technology sectors. A privacy and

data protection specialist, Peter is a member of the Cayman Islands Law Society, the International Association of Privacy Professionals, the FinTech Professionals Association and the FinTech working group established by Cayman Finance to promote the development of the FinTech sector in the Cayman Islands, as well as being a representative on the joint committee on the protection of personal data in connection with the Cayman Islands Data Protection Law 2017.

Katie Fleming is an associate in the corporate practice group and a member of the technology and cyber team, with a practice focused on public and private M&A, securities, complex corporate restructurings and data protection. Katie

is an Appleby legal scholarship recipient and joined the firm under its articled clerk programme following comple-tion of her legal studies in England. In September-Decem-ber 2016, Katie completed a secondment with Serle Court Chambers as part of the highly esteemed Cayman Trainee Placement Scheme, which allows Caymanian articled clerks placement with leading Chancery Chambers in England and Wales. Katie is a member of the FinTech Professionals Association, the Caymanian Bar Association and the Cayman Islands Law Society.

1. Fintech Market

1.1 The development of Fintech Products and Services As one of the foremost offshore financial centres, home to approximately 70% of the world’s offshore investment funds and with an absence of any direct taxation on companies or individuals, the Cayman Islands is well placed to become an attractive destination for FinTech entrepreneurs. Cayman’s ambition to become a global FinTech leader is also supported by a sound legal framework, modern infrastructure, state-of-the-art communication systems, a 155% mobile penetration rate and a stable political climate.

While much of Cayman’s financial services legislation was written before the FinTech revolution began, recent years have seen the Cayman Islands take a number of legal and regulatory steps to make the Islands a jurisdiction that will allow FinTech innovation to thrive. In particular, Cayman has the potential to become an important offshore hub for the development and commercial exploitation of IP rights with updated copyright, trade mark and patent laws passed in 2016. Traditionally, the Cayman Islands trade mark reg-istry only served to extend rights that had previously been registered in the UK or the EU. Recent reforms will see the creation of a new standalone trade mark system that will not require a first registration elsewhere. The Islands have also


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established a special economic zone (SEZ) allowing technol-ogy companies to benefit from specific advantages such as zero taxes, an offshore presence and fast-tracked work per-mit applications for relocating employees. Finally, in March 2017, the Legislative Assembly passed the Data Protection Law. Seen by many on the Islands as the final piece in the leg-islative jigsaw enabling the FinTech revolution to take hold in Cayman, the new law is drafted around a set of EU-style privacy principles and protects the processing of all personal data in the Cayman Islands.

1.2 The Market for Fintech Products and Services See 1.1 The development of Fintech Products and Ser-vices and 1.4 Fintech technologies/companies.

1.3 The Key Market Participants in the Specified activitiesAlthough the FinTech sector is still at an early stage in the Cayman Islands, the SEZ provides a useful measure of local FinTech activity. At the time of writing there were approxi-mately 220 active companies that have set up a physical pres-ence in the zone and 40% of those are based in the internet and technology park within the SEZ.

Participants include payment solutions providers, cloud ser-vices providers and data-driven due diligence and analytics companies.

1.4 Fintech technologies/companies New FinTech companies have not begun to displace tradi-tional financial service providers yet, but it is clear that the push to move forward with FinTech in the Cayman Islands is being driven by technology-focused new entrants to fi-nancial services. In particular, the focus is on technology solutions that deliver performance improvements to existing paper-based checks and balances in areas such as customer due diligence, fraud detection and beyond. Customer due diligence procedures in the Cayman Islands continue to fol-low paper-based standards where the customer is required to supply copy identification during a face-to-face meeting. For larger financial institutions with substantial compliance overheads, the promise of FinTech to replace manual pro-cesses with technologies that are cheaper and more cost ef-fective at achieving compliance and managing risk has yet to be realised but the possibilities are certainly being explored.

As the majority of FinTech solutions are ‘data-driven’ — rely-ing upon advanced techniques to analyse large volumes of data to gain insights — now that the Data Protection Law has been passed there are opportunities in Cayman to reinvent the compliance function altogether through advanced data analytics.

1.5 Partnerships Between traditional institutions and Fintech companiesCayman Finance, a group that represents Cayman’s financial services sector, is a key advocate for developing the growth of FinTech in the Cayman Islands. In the past twelve months the group has established a FinTech working group to engage with the financial services industry, regulators, the govern-ment and the media to promote the development of Fin-Tech on the Islands. Informal conversations have also started concerning a potential framework of laws, developed under Cayman Finance and the Cayman Islands Monetary Au-thority, that might direct FinTech towards the institutional market.

1.6 approach to Fintech innovationSee 1.1 The development of Fintech Products and Ser-vices.

1.7 Laws or Policy to encourage innovationSee 1.1 The development of Fintech Products and Ser-vices.

2. regulation

2.1 regulatory regimes for Specified activities or Fintech companiesThe FinTech sector is still at an early stage in the Cayman Islands but a number of legal and regulatory steps (described in 1.1 The development of Fintech Products and Services) have been taken in recent years to make the Islands a juris-diction that will allow FinTech innovation to thrive.

2.2 regulatory or Governmental agencies for Specified activities or Fintech companiesThe Cayman Islands Monetary Authority (CIMA), which has responsibility for licensing and regulating banking and trust business in the Islands, will be the main regulator for the FinTech sector as it develops. One of CIMA’s obligations is to promote and maintain a sound financial system in the Cayman Islands.

CIMA regulates banking and trust business in accordance with the:

•laws and regulations specifically governing banking and trust services, as well as with the legislation that applies to all licensees;

•relevant rules, guidance, policies and procedures issued by CIMA; and

•international supervisory standards articulated by the Ba-sel Committee on Banking Supervision and other interna-tional bodies.


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CIMA has membership in the Offshore Group of Banking Supervisors, the Caribbean Group of Banking Supervisors and the Association of Supervisors of Banks of the Americas.

CIMA’s Banking Supervision Division is responsible for processing applications for licences and making recom-mendations to the management committee on the issue (or non-issue) of a licence. The division is also responsible for ongoing supervision and regulation of the activities of banks.

2.3 capital and Liquidity requirementsFinTech companies at present are not subject to any specific regulatory requirements, nor any capital, liquidity or trans-action limitations, other than those required for any normal Cayman Islands-registered company/partnership.

2.4 “Sandbox” or Other regulatory “neutral Zones”No such zones or initiatives have been established in the Cayman Islands at the time of writing.

As mentioned in 1.1 The development of Fintech Products and Services, the Cayman Islands government has estab-lished the SEZ, which enables technology companies from outside Cayman easily and cost-effectively to set up and op-erate offshore with a genuine physical presence.

2.5 change of control approval requirements No governmental consents are required from a Cayman law perspective; however, subject to limited exceptions for publicly listed companies, regulated entities and the like, all registered Cayman Islands companies are required to main-tain due diligence on certain beneficial owners within the company.

2.6 recent developments or notable Proposed/Forthcoming regulatory changesSee 1.1 The development of Fintech Products and Ser-vices.

2.7 Burden of regulatory Framework and Protection of customersThe FinTech sector is still at an early stage in the Cayman Islands but a number of legal and regulatory steps (described in 1.1 The development of Fintech Products and Services) have been taken in recent years to make the Islands a juris-diction that will allow FinTech innovation to thrive.

2.8 regulatory impediments to Fintech innovation at traditional Financial institutionsAt present, there are no additional specific FinTech require-ments.

2.9 Outreach by regulators or Government authorities to engage with Fintech innovators As described in 1.5 Partnerships Between traditional institutions and Fintech companies, Cayman Finance is engaging with the financial services industry, regulators, the government and the media to promote the development of the FinTech sector in the Islands.

The establishment of the SEZ has also attracted a number of technology companies to establish themselves in the coun-try.

2.10 Unregulated Specified activities See 1.1 The development of Fintech Products and Ser-vices.

2.11 Foreign Fintech companiesThere are special limitations, requirements and barriers to entry for foreign FinTech companies. Companies incorpo-rated in the Cayman Islands fall into two principal catego-ries: companies formed to trade primarily in the Cayman Islands and companies incorporated for the purpose of conducting business outside the Cayman Islands. FinTech companies seeking to carry on business within the local Cay-man Islands market will be required to have certain levels of local ownership and participation, or an exemption from such requirements.

However, see 2.4 “Sandbox” or Other regulatory “neu-tral Zones” regarding the exemption available to technology companies establishing themselves in the SEZ.

2.12 regulatory enforcement actions against Fintech companies There have been no regulatory enforcement actions against FinTech companies in the Cayman Islands recently.

2.13 “Shadow Banking” Within the Cayman Islands there is a general prohibition against undertaking banking business without a licence, banking business being defined as the business of receiv-ing (other than from a bank or trust company) and holding on current, savings, deposit or other similar account money that is repayable by cheque or order and may be invested by way of advances to customers or otherwise. Penalties for a breach are serious. Robust money-transfer business regula-tions are in place.

3. Form of Legal entity

3.1 Potential Forms of charterCompanies incorporated in the Cayman Islands fall into two principal categories: companies formed to trade primarily in the Cayman Islands and companies incorporated for the


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purpose of conducting business outside the Cayman Islands. FinTech companies seeking to carry on business within the local Cayman Islands market will be required to have certain levels of local ownership and participation, or an exemption from such requirements.

The main types of companies/partnerships in the Cayman Islands consist of:

Exempted companies: where the proposed activities of a company are to be carried out mainly outside the Cayman Islands.

Exempted limited partnerships: may be formed for any law-ful purpose to be carried out and undertaken in or from within the Cayman Islands or elsewhere.

Limited liability companies: a limited liability company is a corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities.

Exempted limited duration companies: this form of ex-empted company, while preserving the limited liability to its members if desired, offers the possibility in certain juris-dictions of advantageous treatment as a partnership.

Resident companies: companies carrying on business within the Cayman Islands. A company conducting banking and/or trust business must obtain a licence under the Banks and Trust Companies Law. Companies engaging in the insur-ance business must obtain a licence under the Insurance Law and those wishing to operate in company management must obtain a licence under the Companies Management Law.

Non-resident companies: the company may deal in shares of exempted companies, foreign corporations and partner-ships, but may only carry on such other business in the Cay-man Islands as is necessary for the furtherance of its foreign business.

Foreign registered companies: a foreign company is a com-pany incorporated outside the Cayman Islands. Registration as a foreign company in the Cayman Islands is necessary to enable non-Cayman Islands companies to hold land or carry on business in the Cayman Islands, or to act as the general partner of a Cayman Islands Exempted Limited Partnership.

Special economic zone companies: a special economic zone company is a type of exempt company that is authorised to carry on business in a special economic zone pursuant to any law in force in the Islands.

Segregated portfolio companies: the segregated portfolio company (SPC) is a form of exempted company. The law

provides for an exempted company, a company by way of continuation and an exempted limited duration company to re-register as a segregated portfolio company.

All the above entities can be used for FinTech specified ac-tivities and the regulations mentioned in 2 regulation may be applicable.

3.2 Key differences in FormSee 3.1 Potential Forms of charter.

All the entities described above can be used for the specified activities. The best choice, however, will depend on whether the business is incorporated or registered in — but carrying on business outside — the Cayman Islands, or if the inten-tion is to carry on local trade.

The Cayman Islands predominantly sees exempted compa-nies or exempted limited partnerships being utilised and business conducted outside the Islands.

3.3 recent Legal changes See 3.1 Potential Forms of charter and 3.2 Key differences in Form.

Limited liability companies are new and increasingly popu-lar for their commercial flexibility. The legislation provides only the basic requirements for such entities and the parties are largely free to operate their business in accordance with a contract agreed between them.

4. Legal infrastructure (non-regulatory)

4.1 desirable changes to Facilitate Specified activitiesAt this stage there are no changes to areas of the law that are necessary or desirable to facilitate any elements of the speci-fied activities, save for the updated laws referred to in 1.1 The development of Fintech Products and Services. The FinTech sector is still at an early stage in the Cayman Islands.

4.2 access to real-time Gross Settlement Systems In the Cayman Islands, FinTech companies must access real-time gross settlement systems through regulated financial institutions.

4.3 Special insolvency regimesThere are no special insolvency regimes or other regimes that apply differently to FinTech companies as compared to regulated financial institutions. FinTech companies are sub-ject to the same insolvency regimes as any type of company or partnership registered in the Cayman Islands.


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4.4 electronic Signatures The Electronic Transactions Law (2003 Revision) (ETL) gen-erally puts electronic signatures on an equal footing with “wet ink” signatures in the Cayman Islands.

Technologically neutral, the ETL was established to promote public confidence in the validity, integrity and reliability of conducting transactions electronically and recognises elec-tronic records as records created, stored, generated, received or communicated by electronic means.

However, the ETL could present challenges to more ad-vanced FinTech solutions, such as smart contracts that en-visage a blockchain solution executing as well as recording the transaction.

4.5 Standards for Proving identity in electronic transactionsThe Cayman Islands does not have standards for proving identity in electronic transactions. While the ETL contains a certification mechanism, to be effective this would rely on a third party verifying the identity of the person or entity controlling the signature device. The government is consid-ering updating the ETL and digital identification is likely to feature in that discussion.

5. data Privacy and cybersecurity

5.1 data Privacy and cybersecurity regulatory regimes The Data Protection Law was passed by the Cayman Islands Legislative Assembly in March 2017 and will govern all per-sonal data processed in the Islands.

Drafted around a set of internationally recognised privacy principles, the new law will provide a framework of rights and duties designed to give individual data subjects greater control over their personal data. The new law is a welcome move for Cayman and supports a growing expectation from international businesses and their clients that organisations operating in offshore jurisdictions have in place comprehen-sive data protection compliance policies backed up by robust data privacy legislation.

At the time of writing, a date has not yet been set for the Data Protection Law to come into force, but it is expected that the law will be introduced in stages over 12-18 months to enable organisations to achieve compliance. This period will also be used to prepare secondary legislation, draft guidelines and staff the Information Commissioner’s office, which will be responsible for enforcing the new law.

It is intended that the new law will allow the Cayman Islands to be recognised by the EU Commission as providing ad-

equate data protection for the free flow of EU national data between the Islands and the EU.

The new law grants to living individuals (“data subjects”) specific rights in relation to their personal data, including, subject to specified limitations:

•the right to be informed by a data controller whether their personal data is being processed;

•the right to access their personal data and certain informa-tion about its use and source;

•the right to require that processing of their personal data cease;

•the right to require that processing of their personal data for the purpose of direct marketing cease; and

•the right to require that a decision that significantly affects him or her is not made solely by the processing by auto-matic means of personal data.

The law also imposes specific obligations on the persons who control the processing of personal data (“data controllers”), including:

•the duty to apply the data protection principles;•the duty to respond in a timely fashion to requests from

data subjects in relation to their personal data; and•the duty to notify data subjects and the Information Com-

missioner of any personal data breaches.

If the processing of personal data is to be carried out on behalf of a data controller by a data processor, the process-ing must be carried out under a contract that conforms to specific requirements.

In order to be a “data controller,” a person must be the one who, alone or with others, determines the purposes, condi-tions and means of the processing of personal data.

The regulated activity of “processing” personal data is very widely defined to include obtaining, recording or holding data, or carrying out any operation or set of operations.

In order to ensure that personal data can be used in appro-priate circumstances, the Data Protection Law recognises a number of exemptions to the obligations noted above, in-cluding national security, law enforcement, legal proceed-ings, personal family or household affairs, corporate finance, negotiations and legal privilege.

The Information Commissioner will be responsible for en-forcing the legislation.

The new law establishes a number of offences and penal-ties for failure to comply with its requirements. Penalties includes fines of up to KYD100,000 per breach, monetary


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penalties of up to KYD250,000 and prison sentences of up to five years. The Information Commissioner also has the power to ‘name and shame’ organisations found to be in breach of the new law.

5.2 recent and Significant data Privacy Breaches There have been no recent and significant data privacy breaches or other cybersecurity attacks involving FinTech companies. In May 2016 CIMA issued a notice to each of its licensees to confirm that CIMA will be reviewing each licensee’s approach to cybersecurity. Separately, data breach notification is a requirement for all data controllers under the new Data Protection Law.

5.3 companies Utilising Public Key infrastructures or Other encryption SystemsThere are no laws relevant specifically to companies utilis-ing public key infrastructures or other encryption systems at this stage.

5.4 Biometric dataBiometric data is not subject to specific regulation in the Cayman Islands. However, to the extent that biometric data is also personal data, the general principles of the Data Pro-tection Law will apply to its use. Personal data is defined widely under the new law to include any data that allows an individual to be identified. Biometric data may also be sensitive personal data under the new law that benefits from enhanced protection under the new Data Protection Law.

6. intellectual Property

6.1 intellectual Property Protection regime The Cayman Islands is a common law jurisdiction that has a robust IP protection regime.

In 2015 and 2016 the Cayman Islands updated its copyright laws to bring them in line with the most recent develop-ments under the UK Copyright, Designs and Patents Act 1988, which expressly includes computer programs and da-tabases within the definition of “literary works” and there-fore protects them as such for a duration of 50 years.

For FinTech providers, the principal IP right that protects software is copyright: the right to prevent others from, among other things, copying the software. In the Cayman Islands, copyright vests in the author on creation.

The main IP rights available to protect branding are reg-istered and unregistered trade and service marks. FinTech companies will generally own a combination of an estab-lished brand or trade name — and this can include logos or icons — protected as registered or unregistered trade marks.

Trade mark rights give registered owners the right to prevent others using identical or confusingly similar marks to their registered mark. Brand owners can also rely on unregistered trade mark rights through the law of passing off. This allows the owner to prevent others from damaging their goodwill with customers by using branding or get-up that is identical or confusingly similar to its own.

The Trade Marks Bill 2016, which at the time of writing was expected to enter into law during the second half of 2017, will allow companies incorporated in the Cayman Islands and foreign companies to obtain trade mark protection without completing a first registration in the UK or EU. At present, trade marks registered in the UK or at the European level can be separately extended to apply in the Cayman Is-lands.

Patents and industrial designs registered in the UK or at the European level can also be protected in the Cayman Islands by extension with the Cayman Islands Register of Patents and Trademarks. In addition, the patent regime has been amended to provide innovators with additional protections against abusive challenges to their rights by entities that ob-tain patents for the sole purpose of taking legal action against those who innovate and develop new products. The Cayman Islands patent laws have been amended to prohibit bad faith infringement claims by so-called patent trolls.

6.2 trade Secret regime Trade secrets are protected in the Cayman Islands through a combination of common law and rules of equity. A range of remedies are available where trade secrets have been im-properly acquired, disclosed or used.

Confidential information is protected through a contrac-tual agreement to keep certain information confidential or through the common law obligation to keep information confidential, because of the nature of the relationship be-tween the discloser and disclosee, the nature of the com-munication or the nature of the information itself.

Whilst most kinds of information are capable of being pro-tected, to establish that there has been a breach of confidence, something extra is needed: a situation or relationship that imposes on the recipient an obligation to keep the informa-tion confidential. Even where there is no such relationship, a non-disclosure agreement or confidentiality clause in a com-mercial contract can impose such an obligation. There is no restriction as to the type of information that can constitute a trade secret. Anything beyond mere trivia can be protected.

Equitable remedies such as injunctions preventing the use or disclosure of trade secrets are available. Injunctions may be available even after the information has become public, if the party who used the information while it was still confidential


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had obtained an advantage to market over others who waited to obtain the same information legitimately.

Another available remedy is damages. Unless the informa-tion formed part of a package that was subject to an estab-lished licence fee, the court will look at a range of issues and factors to come to an assessment.

6.3 copyrights, Patents, trade MarksUnder the updated copyright laws in the Cayman Islands — the Copyright (Cayman Islands) Order 2015 and the Copy-right (Cayman Islands) (Amendment) Order 2016 — copy-right will automatically subsist in works such as computer code and software. Copyright will only be infringed where copying occurs; independent development of the same tech-nology will not infringe.

For FinTech companies, software is not, of itself, patentable, although processes or methods performed by running soft-ware may be. Importantly, such processes or methods would need to bring about a technical effect or solve a technical problem in order to be patentable.

6.4 Protection of intellectual Property or trade SecretsThere are no other ways for FinTech companies to protect their IP or trade secrets, save as described above.

6.5 Joint development of intellectual Property Although the FinTech sector is at an early stage in the Cay-man Islands, there are no restrictions under Cayman law preventing collaborations between technology developers and service providers. These collaborations can happen in a variety of ways; for example, through funding FinTech start-ups, but the IP rights issues will be broadly similar, irrespec-tive of the model used.

Where FinTech is developed by employees within an organi-sation, for the IP rights to vest with the employer, the devel-opment work must be done in the course of employment. If an employee is not employed to develop new technology, the employer may not have any rights to claim ownership of work created outwith the employee’s normal role.

FinTech developed by team members engaged as consultants will generally be owned by the individual consultant, unless there is an agreement providing otherwise. Pre-existing IP rights (background IP) should be addressed in an agreement to make it clear who will own the IP going forward and what happens if the IP becomes incorporated in new FinTech that is developed.

As FinTech solutions are often required to interact with other third-party solutions, arrangements permitting inter-opera-

bility may also be required. At its simplest, collaboration can occur through a process of cross-licensing.

Where all the FinTech development is being conducted by a third party and the solution is being offered to, or im-plemented for, an organisation by an external vendor, the organisation may not acquire any IP rights and may, as a customer, only obtain a licence to the solution.

6.6 intellectual Property LitigationIP for FinTech companies is not a significant source of litiga-tion in the Cayman Islands at this stage but could be as the sector grows.

6.7 Open Source code Open-source code is not separately regulated or protected in the Cayman Islands. The issues relating to collaboration and ownership identified above apply equally to unplanned collaborations over a period of time. It is possible for every contributor to the open-source code to own the copyright to their contribution, although in practice most contributors are likely to agree to license their material under the same licence as the original work. It can sometimes be difficult to ascertain who should make a legal complaint if someone decides to use the program in a way that violates its licence. To avoid this issue, contributors can explicitly assign the copyright in their contributions to a centralised body that administers the open-source project, making enforcement of the licence easier. An alternative approach would be to have contributors license their contributions to the project’s administrative body under a licence agreement that permits the body to relicense these individual contributions.

7. tax Matters

7.1 Special tax issues, Benefits or detriments The Cayman Islands is a tax-neutral jurisdiction and there-fore a registered Cayman Islands entity is not subject to Cay-man Islands tax. There may be tax implications for beneficial owners in their own jurisdiction, however.

8. issues Specific to the Specified activities8.1 additional Legal issues There is no usury or interest limitation legislation in the Cay-man Islands. However, interest levels that are so high as to be considered penal in nature may not be upheld by the courts.

The use of anonymised and aggregated data by FinTech com-panies for commercial gain will be governed by the Data Protection Law. Aggregation of data for commercial gain will only be permissible where the collection, aggregation


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and commercial use of the data meets all the data protec-tion principles, is legitimate and meets the fair processing disclosure requirements as outlined in 5.1 data Privacy and cybersecurity regulatory regimes. The standard required for data to be truly anonymised (and therefore not be per-sonal data) is a high one. The rise of social media and the increase in online public data sources means the ability to ‘re-identify’ individuals by combining that information with anonymised or aggregated datasets has never been easier.

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