It is interesting to note that Fintech still use the same tried and trusted mechanisms to raise finance, and that those mechanisms have often not been updated for GDPR.
Ian Sinclair-Ford our GDPR Specialist at Glenville Walker and Partners was part of a team called in to carry out a due diligence exercise on a bright, shiny new Fintech which was to operate in the consumer finance space. They had used the crème de la crème of the legal fraternity to create their finance agreements, GDPR policies and processes and the structure through which finance would be raised.
The consumer finance documents were immaculate and the GDPR registers, policies and processes were equally a delight. The financial engineering and security documents were a thing of joy.
Problem was that the financial engineering would not work from a GDPR perspective. That was a problem as the Fintech wanted to use the finance agreements to raise £40 million in loan notes. The problem was that the financial structuring destroyed the legality of any onward flow of personal data, giving each customer a claim worth ten times more than the profit in the deal, so obviously this was an issue.
At first the global giant law firm were reluctant to accept the point. After three days of reflection and conversation they accepted the position and we were able to redraft the documentation to ensure this problem was averted. The Fintech was then able to go to market happy in the knowledge they could all sleep at night.
The law giant was not happy as this flaw infected every other similar deal upon which they advised. What was the deal structure? Our old friend, the sale of receivables.
If you are doing any kind of sale of receivables that involves personal data in any way, then you should think about getting things reviewed. In fact, any secured structure that involves underlying transactions or debts that rest on finance agreements are at risk, and that is a lot of structures.
This isn’t JUST a story about Fintech, it is about every business that raises finance in any way, whether that is lending it out or borrowing it. Whether that is a cutting-edge technology company or a 100-year-old manufacturer, GDPR has a serious impact on how you can structure your finances.
For more information and support please contact our GDPR Specialist:
T: 0151 305 9650 | M: 07786 394 679