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A Strategic Turnaround by the Privy Council

December 2010

In a judgment delivered on 13th December 2010, in the case of Culross Global SPC Limited v Strategic Turnaround Master Partnership Limited, the Privy Council has provided important clarity on the correct approach to the construction of Fund documentation, and has thankfully laid to rest the heresy introduced by the Cayman Islands Court of Appeal as to what it had termed “the process of redemption”.

The issue at hand was whether Culross was a current creditor of Strategic Turnaround Master Partnership Limited or whether it was merely a prospective creditor. According to the Court of Appeal, the “process of redemption” was not complete until payment had been made and the name of the creditor removed from the register. The analysis was manifestly wrong for a number of reasons and was put to rest by the Privy Council, who said that: “Any power to withhold payment of the redemption proceeds must be authorized by or pursuant to the articles of association.”

Ultimately, the Privy Council disagreed with the Court of Appeal in relation to how the Articles were to be construed together with the Confidential Explanatory Memorandum, and ruled that the right of redemption and the right to suspend redemption is governed by the Articles and depend on the proper construction of those Articles. The so-called process of redemption is irrelevant.

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