SEYCHELLES

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 – SeychellesContributed by

Appleby

SEYCHELLES

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.

3

Law and Practice SeYcHeLLeSContributed by Appleby Author: Malcolm Moller

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.52.4 “Sandbox” or Other Regulatory “Neutral Zones” p.52.5 Change of Control Approval Requirements p.52.6 Recent Developments or Notable Proposed/

Forthcoming Regulatory Changes p.52.7 Burden of Regulatory Framework and Protection

of Customers p.52.8 Regulatory Impediments to FinTech Innovation

at Traditional Financial Institutions p.52.9 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.63.3 Recent Legal Changes p.6

4. Legal infrastructure (non-regulatory) p.64.1 Desirable Changes to Facilitate Specified Activities p.64.2 Access to Real-Time Gross Settlement Systems p.74.3 Special Insolvency Regimes p.74.4 Electronic Signatures p.74.5 Standards for Proving Identity in Electronic

Transactions p.7

5. data Privacy and cybersecurity p.75.1 Data Privacy and Cybersecurity Regulatory Regimes p.75.2 Recent and Significant Data Privacy Breaches p.75.3 Companies Utilising Public Key Infrastructures or

Other Encryption Systems p.75.4 Biometric Data p.7

6. intellectual Property p.76.1 Intellectual Property Protection Regime p.76.2 Trade Secret Regime p.86.3 Copyrights, Patents, Trade Marks p.86.4 Protection of Intellectual Property or Trade

Secrets p.86.5 Joint Development of Intellectual Property p.86.6 Intellectual Property Litigation p.86.7 Open Source Code p.8

7. tax Matters p.97.1 Special Tax Issues, Benefits or Detriments p.9

8. issues Specific to the Specified activities p.98.1 Additional Legal Issues p.9

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SeYcHeLLeS Law and PracticeContributed by Appleby Author: Malcolm Moller

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.

authorMalcolm Moller is Managing Partner of the Mauritius, Seychelles and Shanghai offices. He is a member of the Corporate department and both the Insurance and Structured Finance teams. He specialises in advising financial institutions on

financial regulation, regulatory capital issues, financial institution M&A, and insurance-related transactions. He advises on private equity funds, hedge funds, derivatives transactions and securities offerings, as well as a range of corporate and corporate finance transactions. He has

extensive experience representing corporations, financial institutions and other entities. His experience spans public and private M&A, credit, restructuring, bankruptcy, capital markets, fund formation and winding-up, a variety of strategic and advisory corporate assignments. His experience in credit transactions has included representing both banks and borrowers in multi-billion-dollar secured, unsecured and commercial paper facilities for companies. In addition, his experience has included advising on strategic, regulatory, corporate governance, and director and officer liability issues for clients.

1. Fintech Market

1.1 The development of Fintech Products and Services With its main industries resting on the tourism and fishing sectors, the Seychelles is emerging as the second-best coun-try in information and communication technology (ICT) development in the African region as per the International Telecommunication Union’s ICT Development Index, with a mobile penetration of more than 100%. Further plans to develop the ICT sector are equally in view as the geographi-cally isolated position of the Seychelles makes connectivity a key issue.

As part of the efforts to develop the ICT sector, the govern-ment of the Seychelles has published a national ICT policy that seeks to promote the use of ICT in all sectors affecting the economy of the country. Further, as such developments are crucial for the financial sector, during Mobile Money Global 2012, the world’s largest independent mobile money transfer conference and expo, the Central Bank of Seychelles announced its project to launch a total countrywide mo-bile payment solution in the Seychelles. The objective of the conference was to provide a countrywide mobile payment service in the Seychelles and to put Seychelles at the fore-front of technological advancements globally. The project was ultimately put into place with the assistance of Pro-gressSoft as the solution provider, partnering with the main

stakeholders, namely the Central Bank, the government, all commercial banks and mobile network operators (MNOs) in the Seychelles.

ProgressSoft has been associating with the Central Bank to provide a nationwide electronic cheque clearing solu-tion that is running live across all banks in the country, re-alising a same-day clearing cycle and truncation of paper cheques. It is anticipated that this solution will help to reduce money laundering because micro payments and auditing of all cash transactions would now be monitored. Moreover, the Central Bank is seen to be having more control over all payments, resulting in a reduction of the unnecessary over-heads of printing notes. Alongside the launch of this project, Seychelles Payment Services (SPS) has been established to provide a mobile payment service across the country.

The banking sector has been equally marked with another technological development with the launching of the Sey-chelles Electronic Funds Transfer (SEFT) system by the Central Bank in collaboration with ProgressSoft, commer-cial banks and the Seychelles Credit Union (SCU). SEFT is a domestic funds transfer system used to expedite money transfers by the banking institutions safely and efficiently through an online communication channel. The system was recently upgraded to be in line with the Central Bank’s objec-tive to modernise the Seychelles’ payment systems and the

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upgraded version includes additional features such as online access to registered customers to effect payment.

The FinTech market in the Seychelles is still at an early devel-oping stage; however, given the Central Bank’s high interest in making the banking sector more technology-oriented, it is anticipated that FinTech products and services under con-sideration to be offered would be favourably looked upon by the authorities.

1.2 The Market for Fintech Products and Services As mentioned under 1.1 The development of Fintech Products and Services, the market for FinTech products and services in the Seychelles is still at a developing stage, although the market has a promising future given the enthu-siasm on the part of the Central Bank to make its banking sector more technology-oriented.

1.3 The Key Market Participants in the Specified activitiesThere are no key market participants in the specified activi-ties so far.

1.4 Fintech technologies/companies New FinTech companies have not begun to displace tradi-tional financial service providers yet. The FinTech market in the Seychelles is yet to be established so traditional finance service providers continue to dominate the market with their traditional banking systems and payments.

1.5 Partnerships Between traditional institutions and Fintech companiesThere is no knowledge of traditional financial institutions partnering with FinTech companies for co-development, technology testing or other reasons in the Seychelles.

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 companiesA 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 Seychelles a jurisdiction that will allow FinTech innovation to thrive.

2.2 regulatory or Governmental agencies for Specified activities or Fintech companiesThe Central Bank of Seychelles is responsible for licensing and regulating banking business in the Seychelles and the Department of Information Communications and Technol-ogy in the Ministry of National Development (DIC) provides information systems to support decision-making in govern-ment and the delivery of government services in terms of efficiency and effectiveness. Although the FinTech market is at an early developing stage, with FinTech companies con-sidering whether to become established in the Seychelles, it is anticipated that the Central Bank of Seychelles together with the DIC shall be the main regulators for the FinTech sector as it develops in the Seychelles. The role of the Cen-tral Bank is to advise the government on banking, monetary and financial matters, including the monetary implications of proposed fiscal and credit policies or operations, and to promote a sound financial system in the Seychelles.

2.3 capital and Liquidity requirementsFinTech companies are not subject to any specific regulatory requirements, nor any capital, liquidity or transaction limita-tions, other than those required for any normal Seychelles registered company/partnership. Developments in the laws affecting FinTech companies are nonetheless anticipated as the sector develops.

2.4 “Sandbox” or Other regulatory “neutral Zones”There are no such zones or initiatives currently established in the Seychelles.

2.5 change of control approval requirements There is no knowledge of any change of control approval requirements and processes for FinTech companies in the Seychelles. It is unlikely that any such requirements are cur-rently in place in the Seychelles.

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 customersA 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 Seychelles a jurisdiction 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.

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2.9 Outreach by regulators or Government authorities to engage with Fintech innovators The Central Bank has announced plans to make the banking sector more technology-oriented. As such, it is anticipated that the government will be engaging with potential FinTech innovators to promote the development of the FinTech sec-tor in the Seychelles.

2.10 Unregulated Specified activities See 2.7 Burden of regulatory Framework and Protection of customers.

2.11 Foreign Fintech companiesDepending on the type of regulations and requirements to be put in place in the Seychelles, FinTech companies would ei-ther be able to operate as domestic companies incorporated under the Companies Ordinance, 1972 (the “Ordinance”) or an international business company (IBC) incorporated under the International Business Companies Act, 2016 (the “IBC Act”) or as a special licensed company (CSL), incorpo-rated under the Companies Ordinance, 1972 and governed under the Companies (Special Licence) Act (the “CSL Act”). They would, therefore, have to comply with the specific re-quirements as imposed under the relevant acts.

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

2.13 “Shadow Banking” There is a general prohibition against undertaking banking activities without a licence and penalties for breach are seri-ous. Robust money transfer business regulations are in place.

3. Form of Legal entity

3.1 Potential Forms of charterThe main types of entities existing under the laws of the Sey-chelles are:

•A domestic company, which is incorporated under the Ordinance and is required to have a minimum of two shareholders and directors, with 100% foreign ownership allowed. A tax rate of 25% is applicable on the first SCR1 million of profits and 33% above SCR1 million. Financial institutions are incorporated under the Ordinance and li-censed by the Central Bank pursuant to the Financial In-stitutions Act.

•An international business company, which is incorporated under the IBC Act. A minimum of one shareholder and director is required, while business is conducted outside the Seychelles and is tax exempt.

•A special licensed company, which is incorporated under the Ordinance and is governed by the CSL Act. It is tax resident in the Seychelles and is taxable at a rate of 1.5% on worldwide income.

3.2 Key differences in FormSee 3.1 Potential Forms of charter.

The choice of entity to be used will depend on whether the business is incorporated or registered in, but carrying on business outside, the Seychelles, or if the intention is to carry on local trade.

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

The new IBC Act provides more flexibility for IBCs (which could potentially be used by FinTech entities) to address the concerns of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), to be in line with the Fi-nancial Action Task Force (FATF) standards and to work towards a re-enforcement of the anti-money laundering framework of the Seychelles.

Some of the key reforms brought to the new IBC Act include an extended list of prohibited activities for IBCs:

•carrying on securities business in the Seychelles (outside the Seychelles is allowed, subject to the IBC being licensed to do so in the country in which it carries out such busi-ness);

•carrying on gambling business, including interactive gam-bling business in the Seychelles (outside the Seychelles is allowed, subject to the IBC being licensed to do so in the country in which it carries out such business); and

•carrying on business as a mutual fund, unless it is licensed to do so under the Mutual Fund and Hedge Fund Act of Seychelles, or under the laws of a recognised jurisdiction.

4. Legal infrastructure (non-regulatory)4.1 desirable changes to Facilitate Specified activitiesThere are no changes to areas of law (other than regulatory areas) that are necessary or desirable at this stage to facilitate any elements of the specified activities, save for the updated laws referred to in 1.1 The development of Fintech Prod-ucts and Services.

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4.2 access to real-time Gross Settlement Systems In the Seychelles, FinTech companies must access real-time gross settlement systems through regulated financial insti-tutions.

4.3 Special insolvency regimesFinTech companies are subject to the same insolvency re-gimes as any type of company registered in the Seychelles.

4.4 electronic Signatures The Electronic Transactions Act, 2001 (ETA)generally puts electronic signatures on an equal footing with “wet ink” sig-natures under the laws of the Seychelles.

Digital signature under the ETA means the authentication of any electronic record by a subscriber by means of an elec-tronic method or procedure in accordance with the ETA. The authentication of an electronic record is effected by the use of an asymmetric crypto system and hash function. Hash function means an algorithm mapping or translation of one sequence of bits into another, generally smaller, set known as “hash result” such that an electronic record yields the same hash result every time the algorithm is executed with the same electronic record as its input, making it computation-ally unfeasible (i) to derive or reconstruct the original elec-tronic record from the hash result produced by the algorithm and (ii) that two electronic records can produce the same hash result using the algorithm. Any person by the use of a public key of the subscriber may verify the electronic record and the private key and the public key are unique to the subscriber and constitute a functioning key pair.

An electronic record is attributed to the originator if it was sent (i) by the originator himself, (ii) by a person who had authority to act on behalf of the originator in respect of that electronic record, or (iii) by an information system programmed by, or on behalf of, the originator to operate automatically.

4.5 Standards for Proving identity in electronic transactionsThere are no standards for proving identity in electronic transactions prescribed so far under the ETA.

5. data Privacy and cybersecurity

5.1 data Privacy and cybersecurity regulatory regimes The Data Protection Act in the Seychelles is not yet in force. The Computer Misuse Act, 1998 makes it a criminal offence for any person to secure unauthorised access to a computer, program or data held in a company. Further, it is a criminal offence for a person who intentionally and without author-ity:

•impairs the operation of a computer;•prevents or hinders access to a program or data held in a

computer;•impairs the operation of a program or the reliability of data

held in a computer;•alters, erases or adds to the content of a program or data

held in a computer;•uses a program or data held in a computer;•copies or moves a program or data held in a computer (i)

to a different location in the storage medium in which it is held or (ii) to any other storage medium; or

•has a programme or data held in a computer output from the computer in which it is held, whether by having it dis-played or in any other manner.

Computer is defined as an electronic, magnetic, optical, elec-trochemical or other data processing device, or a group of such interconnected or related devices, performing logical, arithmetic or storage functions and includes any data stor-age facility or communications facility directly related to, or operating in conjunction with, such device or group of such interconnected or related devices.

The Electronics Act equally provides for numerous offences under the said act, namely the offence of tampering with a computer source document, of failing to furnish informa-tion, of acting in breach of confidentiality and privacy, and, among others, of fraudulently dealing with the digital sig-nature certificate.

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.

5.3 companies Utilising Public Key infrastructures or Other encryption SystemsThe DIC issued a certification practice statement, effective 20 July 2011, in relation to certification authorities within the OISTE/WISeKey Root Public Key Infrastructure in the Seychelles.

5.4 Biometric dataBiometric data is not subject to specific regulation in the Seychelles. It is equally to be noted that the Data Protection Act is not yet in force in the Seychelles.

6. intellectual Property

6.1 intellectual Property Protection regime In August 2014, the Seychelles introduced its new Copyright Act, 2014, which expressly includes computer programs within the definition of “literary and artistic works” and

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therefore protects them during the life of the author and for 50 years after his or her death.

The Copyright Act provides for only two instances where reproduction and adaptation of computer programs are permitted: (i) for use of the computer program with a com-puter for the purpose and extent for which the computer program has been obtained, or (ii) for archival purposes and the replacement of the lawfully owned copy of the computer program in the event that the said copy of the computer program is lost, destroyed or rendered unusable.

The main IP rights available to protect branding are regis-tered trade marks. FinTech companies will generally own a combination of an established brand or trade name (which can include logos or icons) protected as registered trade marks.

Trade mark rights under the new Industrial Property Act, 2014 (designed to comply with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) compliance for World Trade Organisation Accession) give registered owners the right to prevent others from using identical or confusingly similar marks to their registered mark.

The owner of a registered mark has the exclusive right to prevent any unauthorised person from using in the course of trade any sign that is identical or similar to the registered mark for goods or services that are identical or similar to the goods and services in respect of which the mark is registered where such use would result in a likelihood of confusion.

The owner of an unregistered mark that is well known in the Seychelles has the exclusive right to prevent any unauthor-ised person from using in the course of trade any sign that is identical or similar to the unregistered well-known mark for goods and services that are identical or similar to the goods and services for which the unregistered well-known mark is used provided that such use is likely to confuse the public.

6.2 trade Secret regime The Industrial Property Act prohibits any unfair competition concerning undisclosed information and provides that any act or practice that, in the course of industrial or commercial activities, in relation to industrial property rights results in the disclosure, acquisition or use by others of undisclosed information without the consent of the person lawfully in control of that information (rightful holder) and in a manner contrary to honest business practices shall constitute an act of unfair competition.

The disclosure, acquisition or use of confidential informa-tion by others without the consent of the rightful holder may, in particular, result from:

•industrial or commercial espionage;•breach of contract;•breach of confidence;•inducement to commit industrial or commercial espio-

nage, by breach of confidence or contract; or•the acquisition of confidential information by a third party

who knew or was grossly negligent in failing to know that this acquisition entailed one of the foregoing acts.

Undisclosed information means any information that is a secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among, or readily accessible to, persons within the circles that normally deal with the kind of information in question; has a commercial value because it is secret; and its legitimate holder has taken reasonable steps, under the circumstances, to keep it secret.

6.3 copyrights, Patents, trade MarksFinancial technology is potentially copyrightable. As men-tioned above, under the new copyright laws in the Sey-chelles, copyright will automatically subsist in works such as computer programs.

For FinTech companies, software is not, of itself, patent-able, although processes or methods performed by running software may potentially be patentable. Importantly, such processes or methods would need to be new, involve an in-ventive step and be industrially applicable 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 Sey-chelles, there are no restrictions under the laws of the Sey-chelles preventing collaborations between technology devel-opers and service providers. Co-developers would be able to modify their IP rights contractually and specify such rights in their written agreement. As per the Industrial Property Act, an application for a patent shall relate to one invention only or to a group of inventions so linked as to form a single general inventive concept.

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

6.7 Open Source code Computer source code is regulated under the Electronics Act. As such, it is an offence for anyone who knowingly or intentionally conceals, destroys or alters, or intentionally

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or knowingly causes another to conceal, destroy or alter any computer source code used for a computer, computer program, computer system or computer network, when the computer source code is required to be kept or maintained by law for the time being in force. Computer source code means the listing of programs, computer commands, design and layout, and program analysis of computer resource in any form.

Open-source code is otherwise not separately regulated or protected in the Seychelles. The issues relating to collabora-tion and ownership identified above apply equally to un-planned 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 un-der the same licence as the original work. In such circum-stances it can 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 body that administers the open-source project, thus keep-ing ownership centralised and making enforcement of the licence easier. An alternative approach would be to have contributors license their contributions to the project’s ad-

ministrative body under a licence agreement that permits the body to re-license the contribution.

7. tax Matters

7.1 Special tax issues, Benefits or detriments An IBC incorporated under the International Business Companies Act, 2016 is exempt from income tax in the Seychelles. A special licensed company, incorporated under the Companies Ordinance, 1972 and governed under the Companies (Special Licence) Act, is liable to business tax at a rate of 1.5% on its worldwide income. Beneficial owners are advised to seek independent tax advice in relation to any tax implications in their jurisdiction. There are currently no specific tax conditions or attributes designed for FinTech entities in the Seychelles.

8. issues Specific to the Specified activities8.1 additional Legal issues There are no usury laws or similar regulations under the laws of the Seychelles.

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