Redemption of shares in BVI investment funds
This client briefing examines a number of issues that arise on the redemption of shares by an investor in a British Virgin Islands (BVI) investment fund that may lead to disputes between the investor, the fund and other investors. The note also includes an examination of an investor’s status in the investment fund once a redemption request has been submitted, the right to enforce payment of the redemption proceeds, standing to seek the liquidation of the fund on the grounds of non-payment, and the distribution of a fund’s assets upon its liquidation.
Companies domiciled in the BVI are often the vehicles of choice used by investment managers, and the promoters of investment funds, as part of their investment structure, and are often the corporate entity in which investors directly invest and hold shares. Central to any investment fund is an investor’s right to the return of capital, by way of a redemption of his shares. Principally, those rights are set out within the fund’s constitutional documents, most relevantly the fund’s memorandum and articles of association, and offering memorandum; however, those documents must be read in conjunction with a number of statutory and common law principles which are particular to the BVI. These principles can catch an ill-advised investor off-guard, particularly in circumstances where the redemption process is interrupted by the fund’s insolvency and/or liquidation…
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