CAYMAN ISLANDS Law and Practice Contributed by: Agnes Molnar, Jason Ta, Paul Walters and Gemma Walters, Travers Thorp Alberga
erable material risks, no pending or threatened litigation, regulatory or governmental action. 3.3 Principal Perfection Provisions As a matter of the laws of the Cayman Islands, there is no statutory method for perfection of security per se. For example, there is no public register of security interests. As a result, prin - ciples regarding perfection of security follow other common law jurisdictions. In the context of a securitisation, perfection is usually under - stood to mean the ability for security to become enforceable, in accordance with its terms, by the applicable secured party (or trustee or agent on its behalf). Requirements in respect of perfection of security vary depending on whether the receivables are located in (or governed by the laws of) the Cay - man Islands or are located elsewhere. In respect of receivables located in the Cayman Islands, perfection may involve the provision of notice, registration of a charge and/or the updating of corporate registers of the SPE prior to any such insolvency. 3.4 Principal Covenants Each of the transferor and SPE will provide a standard covenant package. The covenants binding on the SPE are typically more compre - hensive and include: • making timely payments in full; • compliance with applicable laws and regula - tions; • maintenance of separate legal identity and independent directors; • maintenance of security; • not to deal in or dispose of its assets; • not to deduct or offset any amounts due; • not to incur indebtedness;
• not to permit any incumbrance over its assets; and • not to enter into any other transaction or have any other business, change its name, allow its non-petition or limited recourse provisions to be amended, hire employees or dissolve or liquidate itself, in whole or in part. 3.5 Principal Servicing Provisions See 2.5 Servicers. 3.6 Principal Defaults The following summary describes certain princi - pal defaults by an SPE: • a default in any payment due on any debt securities issued by the SPE when due and payable, subject to an applicable cure period; • the failure to maintain asset-level quality tests, overcollateralisation ratios or require - ments to maintain a minimum reserve or liquidity fund; • a default in the performance, or breach, of any other covenant, representation, warranty or other agreement of the SPE which is mate - rially prejudiced, subject to an applicable cure period; or • the occurrence of a bankruptcy event in respect of the SPE. 3.7 Principal Indemnities A broad indemnification package is often given by the SPE in favour of the trustees and their agents, who will require full indemnification to their satisfaction prior to taking any enforcement action, in addition to the other secured parties. The obligation of the SPE to make indemnity payments will be required to be made in the pri - ority set out in the waterfalls in the applicable transaction documents. As SPEs are incorporat - ed on a thinly capitalised basis and have limited
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