11 May 2015
Cayman Islands Quarterly Update - May 2015
FATCA reporting commences
In our March client briefing we noted that the Tax Information Authority in the Cayman Islands (“TIA”) had launched its online portal for the automatic exchange of tax information (the “AEOI Portal”), which can be accessed from its website (www.tia.gov.ky). A user guide to the portal is also available on TIA’s website.
The deadline for reporting Cayman Islands financial institutions (“Reporting FIs”) to register on the AEOI Portal in respect of 2014 reporting, was 30 April. However, TIA is taking a soft approach to enforcement in this first year and has announced that registrations submitted by 12 May will not attract any adverse compliance consequences or enforcement measures.
Reporting FIs are required to report via the AEOI Portal on any US Reportable Accounts for the 1 July – 31 December 2014 period by 31 May. Reports can be submitted manually or in XML format.
Upgrades to intellectual property protection
On 19 March, the copyright sections of the UK’s Copyright, Designs and Patents Act 1988 (with some modifications) were extended to the Cayman Islands by UK Statutory Instrument at the request of the Cayman Islands Government. The extension is expected to come into force later this year following a public education campaign and will upgrade Cayman’s copyright protection to cover the modern world of electronic communications.
A change to Cayman’s Trademarks and Patents Law is also anticipated in the near future. With a separate Trademarks Law expected to permit direct registrations in Cayman for the first time, rather than merely extensions of UK or European Union registrations.
The improvements to intellectual property protection in the Cayman Islands are likely to benefit the rapidly-growing Cayman Enterprise City, a special economic zone, which can include internet and technology, media and marketing, commodities and derivatives, and biotechnology businesses, all of which are heavily dependent on intellectual property
Cayman prepares to implement the Cape Town Convention
The Cayman Islands have recently enacted the legislative framework necessary to implement the Convention on International Interests in Mobile Equipment and its Protocol relating to aircraft equipment concluded in November 2001 in Cape Town, South Africa (the “Cape Town Convention”). The Cape Town Convention seeks to standardise the way property interests in mobile property (in the case of this Protocol, aircraft) are treated internationally. For example, in the world of aircraft finance secured lenders need to know that their security interest (and its priority) will be respected wherever an aircraft might be at the time the security needs to be enforced
Since 2009, the Cayman Islands has had the Cape Town Convention Law, 2009 which sought to mimic the application of the Cape Town Convention, but as a British dependency the Cayman Islands could not directly implement the Cape Town Convention until it is implemented by the UK and extended to the Cayman Islands. This now looks set to happen over the summer.
Case Law update
Director Liability - Weavering Macro Fixed Income Fund Limited (In Liquidation) v Stefan Peterson and Hans Ekstrom, 12 February 2015
The Court of Appeal overturned the Grand Court’s decision of 26 August 2011 that the fund’s directors had been guilty of wilful neglect and default and therefore personally liable for an award in damages exceeding US$100m. The Court of Appeal agreed the directors had been negligent, but held that the facts did not support a finding of wilful neglect or default as there was no evidence that the directors intended to breach their duties. As a consequence the directors are able to rely upon the indemnity and exculpation provisions in the fund’s articles of association.
Security for Costs in Winding Up of Foreign Company - Re Dyxnet Holdings Ltd, 20 February 2015
The Court of Appeal had to consider whether it had inherent jurisdiction to order a foreign company to provide security for costs in winding up proceedings. The Grand Court Rules (GCR) Order 23 provides for security for costs to be provided by a foreign plaintiff, but this rule does not apply to winding up proceedings as such proceedings are governed by the Companies Winding Up Rules, 2008 (as amended). The Court of Appeal held that the court does have an inherent jurisdiction in winding up proceedings to grant an order for security against a foreign company on the basis that it is satisfied the company will not be able to meet any adverse costs award. The Court of Appeal emphasised that the court’s jurisdiction is not inconsistent with the Companies Winding Up Rules because the rules are silent on this issue.