Aug 2012
CAYMAN ISLANDS
GRAND COURT
COMPANIES – INVESTMENT FUNDS – CONSTITUTIONAL DOCUMENTS – SIDE LETTERS – PRIVITY – MANNER OF REDEMPTION OF SHARES – COMPANIES LAW SECTION 37
The Petitioners were investors in Matador Investments Limited, a Cayman Islands investment fund (the “Fund”). The Fund was incorporated with a typical form of memorandum and articles of association. The articles referenced a private placement memorandum (“PPM”) that contained a number of detailed provisions, including the power to impose a gate on redemptions in certain circumstances.
The ultimate beneficial owner of the shares held by the Petitioners, Ms. Waters, and the principal of the Fund, Ms. Guerrand-Hermès, were close personal friends. Ms. Guerrand-Hermès was alleged to have made certain representations to her friend to the effect that the gating provisions and other restrictions on redemptions in the constitutional documents would not apply to her investment: she should be able to withdraw as much money from the Fund as she needed each quarter. A shareholder’s agreement was contemplated, but never completed. Following a breakdown in the friendship and the retention of a new financial advisor for Ms. Waters, the Petitioners made a redemption request for all their shares in the Fund. The Fund resolved to impose a 10% gate. The Fund entered winding up, and the Petitioners presented proofs of debt for the full redemption value of all their shares. The proofs were rejected by the Liquidator, who relied on the gate provisions.