CAYMAN ISLANDS Law and Practice Contributed by: Sailaja Alla, Matt Mulry, Maree Martin and James Mossetto, Appleby
4.2 Side Letters Side letters are permitted and are widely used by Cayman Islands funds. For a side letter to be valid and enforceable, the fund’s constitutional documents must allow it. Additionally, the scope of the side letter must fall within the side letter disclosure provisions in the offering/constitutional documents and – for com - panies – must not modify existing shareholder rights enshrined in the fund’s constitutional documents. CIMA’s Rules on the Contents of Offering Documents – Regulated Mutual Funds and the Contents of Mar - keting Material – Registered Private Funds require offering documents/marketing materials to include a statement confirming the power to enter into side let - ters that bind the fund, and that contain any terms the effects of which provide an investor with more favour - able treatment than other holders of the same class of interest, enhancing that investor’s ability to either: • redeem interests of that class; or • make a determination as to whether to redeem interests of that class, and which in either case might reasonably be expected to put other hold - ers of interests of that class who are in the same position at a material disadvantage in connection with the exercise of their redemption or withdrawal rights. There is no requirement to offer side letters to inves - tors in a Cayman Islands fund. 4.3 Marketing of Alternative Funds to Investors Non-Cayman Islands Funds A non-Cayman Islands fund is permitted to market without restrictions in the Cayman Islands provided the offering is limited generally to the following types of persons/entities: • sophisticated persons; • high net worth persons; • exempted and non-resident companies incorpo - rated in the Cayman Islands; • foreign companies and limited liability companies registered in the Cayman Islands;
involving a change of control of the licensed fund manager. 3.10 AI and Use of Data The are no regulatory requirements or limitations in connection with the use of artificial intelligence, pre - dictive data or big data, but any use of generative artificial intelligence software, tools or technologies (including natural language processing, deep-learning algorithms or machine-learning models) must com - ply with the requirements of the Cayman Islands Data Protection Act (DPA). The DPA came into full force in 2019 and is drafted around a set of EU-style data protection principles to which data controllers must adhere. Personal data must be collected in a fair and transparent manner and must only be used and disclosed for purposes properly understood and agreed to by data subjects. Any personal data collected must be adequate, kept up to date and not retained for longer than is neces - sary to fulfil the collection purpose. Importantly, the DPA provides a standard framework for both public and private entities in the management of the personal data they use. 3.11 Anticipated Changes for Fund Managers Draft amendments to SIBA were published for industry consultation on 17 September 2025 with the intention of increasing regulation and enhancing supervision of registered persons. 4. Investors 4.1 Types of Investors in Alternative Funds Owing to the reasons set out in 1.1 General Over- view of Jurisdiction , the Cayman Islands is the lead - ing jurisdiction for investment funds, with over 30,000 regulated funds as of Q2 2025. Generally, there are no special requirements or restrictions with respect to investors investing into Cayman Islands funds; as a result, Cayman Islands funds attract investors from around the world. However, owing to various regulato - ry and disclosure requirements in the USA, US taxable investors are the least common for Cayman funds.
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