Wed, Aug 31, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

BVI Commercial Court decided in favour of large hedge fund over suspensions

Friday, December 17, 2010
Opalesque Industry Update - Harneys secured an important victory for a large hedge fund this week in the Commercial Court of the British Virgin Islands.

The applicant, a minority investor in a BVI feeder fund, sought to have liquidators appointed on the just and equitable ground. The Fund had suspended redemptions in the wake of the credit crisis in October 2008 and had presented a realisation plan approved by a majority of investors which provided for an orderly wind down of the assets held by its Master Fund. By the time of the hearing some 35% of the assets held by the master fund had been distributed to the investors of the feeder.

The investor argued that as the suspended Fund was no longer taking on new investments or making formal redemptions it had lost its substratum, investors were oppressively trapped in the Fund and it should be wound-up. This sought to follow a developing line of cases in the Cayman Islands where, broadly, the Court has found that solvent hedge funds that had suspended and were in wind down mode were no longer "viable" open ended funds and should be wound-up on that basis.

Bannister J. rejected the Cayman analysis of "viability" preferring the established test of "impossibility" when considering whether a company was able to continue or had lost its substratum. The fact that a fund had suspended, did not mean that it was no longer possible for it to carry on its business which, in this instance of a feeder fund, was the holding of investments in the Master Fund for the benefit of its members.

Snapshot Analysis
All of the recent cases regarding the winding-up of investment funds turn on their facts and one must be wary in applying broad assumptions. There does however appear to be a clear divergence in the developing law between the position for Cayman and BVI incorporated vehicles.

This decision will give some considerable comfort to funds and their managers in circumstances where redemptions have been suspended pursuant to the constitutional and offering documents but the fund continues to operate holding and realizing its assets. Whilst care must be taken to consider the specific circumstances of each fund, it is likely that BVI funds may continue to wind down their positions without the intervention of liquidators on grounds of loss of substratum, especially where the fund enjoys continued investor support.

This decision follows on from another recent BVI case where Harneys successfully acted for a fund by establishing that an investor lacked the standing to bring winding-up proceedings based on unpaid redemptions proceeds...Full press release: Source
PD

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. The Big Picture: Water is single largest environmental investment opportunity[more]

    Benedicte Gravrand, Opalesque Geneva: Water, the world’s most precious and undervalued commodity, is set to lead the socially and environmentally responsible investment themes. This is according to specialist fund manager Thomas Schumann. His firm,

  2. Commodities - Hedge funds pile into bullish bets on U.S. crude by most on record, Rig count steady, hedge funds dump short contracts on 63 million barrels, Hedge funds bail on Copper as Goldman predicts ‘supply storm’, Hedge funds pile up bets against sterling[more]

    Hedge funds pile into bullish bets on U.S. crude by most on record From BRecorder.com: Hedge funds and other speculators raised their bullish bets on US crude oil in the past week by the most on record fuelled by speculation that Organization of the Petroleum Exporting Countries will agr

  3. Investing - U.S. hedge fund Marathon makes Brexit bet on European property, Hedge funds love Liberty and John Malone, DE Shaw could bid for control over TerraForm Power, New York hedge fund increases stake in Tronc as sale talks continue, Don't wait too long to check this +20% value fund's ideas[more]

    U.S. hedge fund Marathon makes Brexit bet on European property From FT.com: Marathon, a $13bn US hedge fund, is building a big Brexit trade, increasing its investments in property across Ireland, France, Germany and the Netherlands, in a bet that they will be among the big beneficiaries

  4. Opalesque Exclusive: Investors struggle to identify the better performing hedge funds[more]

    Komfie Manalo, Opalesque Asia: Fund managers and investors believe that performance is one of the major factors driving change in the hedge fund industry, a Preqin survey showed in its latest Hedge Fund Spotlight. Preqin said that the disappoin

  5. …And Finally - Baby born on Cebu Pacific airplane gets 1 million air miles[more]

    From CNN.com: Here's one kid who'll probably learn to fly before she can crawl. After being born four hours into a flight from Dubai to Manila, baby girl Haven has been gifted 1 million air mile points. Haven's mom went into labor more than five weeks early while flying on an aircraft op