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Conyers breaks new ground in Cayman Funds insolvency

October 2010

Nigel Meeson QC, partner and Head of Litigation in the Cayman Islands office of Conyers Dill & Pearman, has achieved a notable victory on behalf of his client Hibistar Pte Ltd before the Grand Court of the Cayman Islands, and in the process has broken new ground in Funds insolvency law.

In Re Founding Partners Global Fund Ltd., Foster J, sitting in the Financial Services Division of the Grand Court, held that Conyers client Hibistar Pte Ltd, the sole Class E series shareholder in the Fund, was solely entitled to the Class E share series assets which had been designated to that share series and segregated by the terms of the Articles.

Importantly, the Judge held that an unpaid redemption creditor in respect of shares in a different share series who had validly redeemed prior to the suspension of redemptions and subsequent winding up order, and was thus a creditor, was not to be treated as a general third party creditor who could look to all the assets of the company, but was bound by the segregation provision of the articles. The unpaid redemption creditor was entitled only to payment out of the assets attributable to the share series in which he had invested.

Accordingly, the Class E shareholder was entitled to the immediate distribution to him of the Class E assets, as no other claims could be established against those assets.

The Fund in this case was established prior to the introduction of segregated portfolio companies into the Cayman Islands. The case demonstrates that asset segregation may be achieved (as least as between the shareholders) through the Articles and that this will be upheld by the Court even on a winding up provided the rights of third party creditors are not involved.

This case is another demonstration of the benefit of having a dedicated Financial Services Division in the Cayman Islands, which is able to provide quick and commercially sensible decisions in Funds and other commercial cases.

Conyers’ Cayman Islands Litigation practice specializes in commercial litigation in courts of first instance and appellate courts including the Judicial Committee of the Privy Council, as well as trust disputes and other disputes involving fiduciaries.

Conyers has considerable experience advising on high profile cases and substantial disputes, and has advised and represented corporate and institutional clients as well as individuals in multi-billion dollar cross border disputes involving matters ranging from international insolvency to shareholder disputes.

The full judgment of this case is available from Conyers Dill & Pearman.

 

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Conyers breaks new ground in Cayman Funds insolvency

 

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