FIA Leveraged Fund: the Cayman Court takes a strict approach to distributions in kind

The Cayman Islands Court of Appeal has recently handed down its written reasons for dismissing the FIA Leveraged Fund’s appeal from a judgment of the Grand Court, which ordered that the Fund be wound up on the petition of three redeeming investors whose redemption requests had purportedly been met by distributions in kind. Although the decision turned on the specific facts of the case, the Court’s judgment emphasises once again the primacy of the investment agreement between the fund and its investors, as well as the importance of valuation and timing issues when a fund is considering paying out a redeeming investor other than in cash.

In April 2012 the Grand Court heard the winding-up petition in respect of the FIA Leveraged Fund which had been presented by three creditors, which were US public employee pension Plans. The fund was a typical Master/Feeder structure, comprised of the Fund as feeder and another Cayman exempted limited company as the Master Fund. The Fund and Master Fund were managed by an investment manager in Bermuda and were members of the wider Fletcher funds group. The terms of the series of shares of the Fund into which the Plans had made their investments as to redemption provided that shares were redeemable at the end of each calendar month on sixty days’ prior written notice and that 90% of the redemption amount was payable with a true-up of the balance when the Fund had finally determined the redemption price of each share. Also, and in respect of this series of shares, a supplement to the offering memorandum provided that the Fund was obliged to pay 90% of the redemption amount in cash or in kind within 15 calendar days of the redemption date, with up to 10% being retained until no later than 30 days after the completion of the Fund’s audit for the year in which the redemption amount was payable…

If you are registered and logged in to the site, click on the link below to read the rest of the Appleby briefing. If not, please register or sign in with your details below.


Sign in or Register to continue reading this article

Sign in

Register

It's quick, easy and free!

It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.

Register now

Why register to The Lawyer

 

Industry insight

In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.

 

Market intelligence

Identify the major players and business opportunities within a particular region through our series of free, special reports.

 

Email newsletters

Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.

More relevant to you

To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.

Briefings from Appleby

View more briefings from Appleby

Analysis from The Lawyer

View more analysis from The Lawyer

Overview

1st Floor
3 Copthall Avenue
London
EC2R 7BH
UK
http://www.applebyglobal.com

Total staff: 528
Partners: 64