Introduction

The recent decision in Re Harbinger Class PE Holdings (Cayman) Ltd confirms that the traditional “impossibility” test for loss of substratum will be applied in the context of a Cayman Islands company which is not an open-ended mutual fund. The decision appears, at first glance, to depart from earlier Cayman Islands authorities which deal with the question of what loss of substratum entails in the context of an open-ended mutual fund. Uncertainty remains, however, about the test for loss of substratum of a Cayman Islands open-ended fund, and this decision could be a step toward the traditional test for loss of substratum also being applied in that context.

The Proceedings

On 14 May 2015, a petition was presented by “NYROY/RBC Acct# 1583 pledged to Royal Bank of Canada” (the Petitioner) for the winding up of Harbinger Class PE Holdings (Cayman) Ltd (the Company) and the appointment of official liquidators. The Petitioner was a contributory of the Company, holding a 0.2% interest. The winding up was sought pursuant to section 92(e) of the Companies Law (2013 Revision) on the ground that it was “just and equitable” to wind up the Company as there had been a loss of substratum.

The Company was incorporated on 16 December 2008 as a subsidiary of Harbinger Capital Partners Offshore Fund 1 Ltd (the Offshore Fund). The Offshore Fund had been incorporated in the Cayman Islands in 2001 and operated as a feeder fund to Harbinger Capital Partners Masters Fund 1 Limited (the Master Fund). In 2008, the Offshore Fund was faced with substantial redemption requests from its investors which it, and in turn the Master Fund, lacked the liquidity to meet; the Company was therefore formed in order to restructure the illiquid investments which were valued at US$2.4 billion. The Master Fund issued a new class of shares, Class PE Shares, to which it allocated certain private equity-type and other illiquid investments called the “Private Portfolio”. The Class PE Shares were issued by the Master Fund to the Offshore Fund and were ultimately contributed to the Company; participating shares in the Company were then issued to redeeming shareholders in the Offshore Fund as partial in-kind redemption proceeds.

Read More

Type

Insight

Locations

Cayman Islands

Share
Twitter LinkedIn Email Save as PDF
More Publications
14 Jul 2020 |

Commercial Real Estate in the Cayman Islands: An Overview

First published by Practical Law: Corporate Real Estate Global Guide - Cayman Islands update 2020. ...

30 Jun 2020 |

Protecting Personal Data – the New Normal

One unanticipated consequence of the COVID pandemic has been the huge increase in the collection of ...

Contributors: Jennifer Parsons
29 Jun 2020 |

Cayman Regulatory Newsletter Q2 2020

Appleby Cayman’s second quarterly publication of the year focuses on regulatory developments, incl...

12 Jun 2020 |

Investment Funds: Opportunities During Covid-19

Fund managers are as affected as anyone by the coronavirus shutdown and while many fund managers con...

26 May 2020 |

Economic Substance in the time of COVID-19

Cayman, like many other jurisdictions, introduced its ES Law in response to international pressure t...

26 May 2020 |

Technology & Innovation Update Q2 2020

Technological developments have been accelerating at an unprecedented pace in Asia - the first regio...

7 May 2020 |

Derivatives – Cayman Counterparty Considerations in Market Uncertainty

In this briefing we consider the enforceability of common set-off clauses found in OTC derivative tr...

Contributors: Dean Bennett
7 May 2020 |

E-signatures – Who needs ink anyway?

The global spread of COVID-19 and the sustained containment protocols in place including social dist...

Contributors: Peter Colegate
5 May 2020 |

The 2020 Cayman Islands Real Estate guide

This country-specific Q&A provides features information on the impact of disruptive technologies...