CAYMAN ISLANDS Suspensions of redemptions by investment funds - timely clarification from the Privy Council The Privy Council's decision in Strategic Turnaround confirms our long-standing view that powers of suspensions and redemptions and the status of a redeeming, but unpaid, investor are matters of interpretation of the fund's Articles of Association and, where relevant, its offering documents.

At a hearing on January 13, 2011, the Chapter 11 Lehman Brothers entities in the United States announced their intention to file in the next 10 days an amended plan, which will include a proposed framework for the settlement of unresolved derivatives claims.

A recent decision of the Illinois Supreme Court examined the Illinois Sureties Act, which was originally enacted in 1819. That statute affords certain affirmative defenses to sureties in enforcement actions. The court held that that Sureties Act does not afford such defenses to guarantors. The applicability of the Sureties Act to sureties, and not guarantors, may make important the determination of whether a party is a guarantor or surety.

Note: Reproduced with permission of the publisher from Commercial Insolvency Reporter, Vol. 23, No. 1, October 2010.

Note: Reproduced with permission of the publisher from Commercial Insolvency Reporter, Vol. 23, No. 1, October 2010.

In the current economic and political environment in the US and globally, many leaders are facing difficult decisions regarding their debt holdings. Regulated financial institutions must classify loans as either performing or non- performing. Financial institutions must reserve for non-performing loans, which adversely impacts its capital requirements. In some cases, this dynamic causes lenders to modify loan terms rather than “call the loan”.

At a hearing on January 13, 2011, the Chapter 11 Lehman Brothers entities in the United States announced their intention to file in the next 10 days an amended plan, which will include a proposed framework for the settlement of unresolved derivatives claims.

In Fogerty v Petroquest Resources Inc (In re Condor Ins Ltd)(1) the Fifth Circuit Court of Appeals held that, pursuant to Section 1521 of the Bankruptcy Code, the foreign representatives of Condor Insurance Ltd (appointed by the Nevis court) could use Nevis law in a Chapter 15 case to avoid asset transfers by Condor to a US affiliate, even though the foreign representatives could not have avoided the transfers under US law.

The Privy Council has just delivered its judgment in the Strategic Turnaround appeal which clarifies a number of important points in respect of suspensions and redemptions by Cayman Islands investment funds. The decision makes clear that powers of suspensions and redemptions and the status of a redeeming but unpaid investor is a matter of interpretation of the fund's articles of association and, where relevant, its offering documents.