Tue, Sep 27, 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. Star names struggle as smaller hedge funds make hay[more]

    From eFinancialnews.com: Many big-name funds have been hit by sharp reversals in markets, including US government bonds and UK stocks, and have struggled to extricate themselves from positions that have gone bad. According to data group eVestment, hedge funds below $250 million in size are up 4.1% t

  2. North America - Acela fight splits hedge fund Connecticut and old money enclaves[more]

    From Bloomberg.com: Connecticut’s residential coastline is two worlds, the one of newcomer millionaires and one whose wealth and New England roots span generations. Now, their differences over a rail route threaten to gum up plans for the U.S. Northeast’s fastest-ever trains. About 30 miles from Man

  3. Activist News - Caesars offers creditors another $1.6bn, would spell end of hedge fund ownership, Activist investors double chance of CEO exits[more]

    Caesars offers creditors another $1.6bn, would spell end of hedge fund ownership From Calvinayre.com: Casino operator Caesars Entertainment has improved its offer to junior creditors to over $5b, but the offer is only good until Friday. On Wednesday, Caesars added an extra $1.6b to the $

  4. Nobel Sustainability Trust, Prince Albert II of Monaco help launch major new initiative to drive sustainable technologies[more]

    Matthias Knab, Opalesque: The Nobel Sustainability® Trust ("NST") is leading a major new initiative to finance, incubate and accelerate the development of clean technologies. The initiative will start with the formation of the Nobel Sustainability Fund® ("NSF"). NSF will drive faster access t

  5. Comment - ‘Gut feeling’ measurable in hedge fund traders, How hedge fund managers can use blockchain to maximize benefits[more]

    ‘Gut feeling’ measurable in hedge fund traders From Laboratoryequipment.com: “Gut feeling” is an intangible – an automatic hunch – based on prior experience for some people. But the “gut feeling” is actually a measurable response developed in professionals doing some high-risk work, acco