Wed, Feb 10, 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. How Einhorn survived a nightmare year[more]

    From Bloomberg.com: Even when a hedge fund has an awful year, which was the case for David Einhorn's Greenlight Capital, there are lessons to be learned. Many funds would have had a tough time surviving a year like Einhorn experienced in 2015, when all the stars seemed to align against him and Green

  2. Legal - Hedge fund founder wins early release in U.S. insider trading case, Gramercy seeking $1.3 billion from Peru over land-bond dispute[more]

    Hedge fund founder wins early release in U.S. insider trading case From Reuters/Streetinsider.com: Former hedge fund manager Doug Whitman on Tuesday won a reprieve from serving the remainder of his two-year sentence for insider trading after several judges expressed skepticism that his 2

  3. Investing - David Einhorn finds a winner in Michael Kors[more]

    From Thestreetinsider.com: Greenlight Capital hedge fund manger David Einhorn took his lumps in 2015. The fund lost over 20 percent on the year amid bets gone bad being long a plunging SunEdison and short a couple high-flying FANG stocks. However, today Einhorn is again showing his stock picking pro

  4. Investing - Avenue Capital's Marc Lasry: We like European bank loans, Comment: A bunch of hedge fund managers are chasing the 'dream of crushing a major structural problem'[more]

    Avenue Capital's Marc Lasry: We like European bank loans From CNBC.com: European banks are under immense pressure, but at least one prominent hedge fund has found what it thinks is a good opportunity in the wreckage. Marc Lasry, co-founder and chief executive of hedge fund Avenue Capital

  5. Credit Suisse cherry picks hedge fund ideas[more]

    From FT.com: Credit Suisse Asset Management plans to cherry pick profitable concepts from hedge funds with the launch in Europe of a “best ideas” strategy. The investment arm of the Swiss bank said the strategy will separate it from other funds blighted by “overcrowding problems”. It comes at a time