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. The judgment also makes it clear that a power in the Articles to suspend payment of redemption proceeds after the redemption date has passed, and with retrospective effect, must be in absolutely clear and unambiguous terms in order to be effective. For more information click here.
Further guidance in the Cayman Islands for "soft" wind-downs, but a different tune emerges from the BVI
It is now clear that the Cayman Islands and BVI Courts are taking different approaches on how to deal with applications to wind up funds that are undergoing soft wind-downs. Two recent judgments of the Cayman Islands Court have ruled that soft wind-downs of open-ended corporate investment funds were inappropriate in the circumstances and therefore the Court ordered that the two funds be wound up. However, a recent BVI Court decision expressly disagreed with one of these Cayman Islands decisions and dismissed an application to wind up a fund that was in soft wind-down. For more information click here.
Stick to the deal - share class segregation upheld in an insolvent liquidation
In Re Founding Partners Global Fund Limited (unreported) 21 September 2010, the Cayman Islands Court upheld the effect of share class segregation in the context of an insolvent fund liquidation, focussing on the parties' overall commercial intention and the "deal" struck between them, as evidenced in the fund's constitutional documents.
Out of the ordinary – a reminder on when validation orders should be sought
On 16 September 2010, the Cayman Islands Court delivered a ruling in Re Freerider Ltd. (in official liquidation) clarifying the meaning of "ordinary course of business" and serving as an important reminder of the principles governing the validation of post-petition dispositions. For more information click here.
BRITISH VIRGIN ISLANDS
Member or creditor? - rights of a redeemed, but unpaid, fund investor still in flux
In Western Union International Limited v Reserve International Liquidity Fund Ltd., a redeemed investor sought the winding up of the fund on just and equitable grounds. The BVI Court had to decide whether the applicant had standing to apply as a creditor or shareholder. The BVI Court found that a fully redeemed, but unpaid, past member of a company was a creditor and that its claim did not arise "in [its] character as a member". The redeemed investor therefore had standing to apply for the winding up as a creditor. For more information click here.
Mixed up in wrongdoing? - registered agents and Norwich Pharmacal relief
In the absence of any provision for third party disclosure orders in the BVI Civil Procedure Rules, persons seeking information about BVI-incorporated companies for use in prospective proceedings have relied on the Norwich Pharmacal jurisdiction to obtain disclosure of the identity of wrongdoers and/or other information relevant to any decision to take proceedings involving a BVI-registered company. Such applications have often been made against the BVI company's registered agent. On 9 November 2010, in JSC BTA Bank v Fidelity Corporate Services Limited, the BVI Court held that a registered agent acting as such for a company did not, without more, satisfy the test for making a party the subject of an order for Norwich Pharmacal relief. For more information click here.
Lender rejects valid tender of a loan - what interest is payable?
In a recent instalment of the long-running Alfa v Cukurova dispute, [1] the BVI Court considered whether interest is payable by a borrower in circumstances where that borrower has validly tendered repayment of the loan, but the lender has wrongfully refused to accept the tender. For more information click here.
Happy to help – the BVI Court assists the Madoff Trustee and clarifies the scope of "recognition"
In November 2010, Irving Picard, the court-appointed trustee for the liquidation of the business of Bernard L Madoff Investment Securities LLC, applied to the BVI Court for general recognition as a "foreign representative" in foreign proceedings within the meaning of Part XIX of the BVI Insolvency Act 2003. The BVI Court held that the form of the application did not meet the specific requirements of Part XIX. However, when Picard made a new application under Part XIX to have permission under section 175 of the Insolvency Act to file claim forms against certain BVI Madoff feeder funds, which are in liquidation in BVI, his application was granted.
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