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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