Claims by funds against investors who have successfully redeemed have hitherto enjoyed limited success in the Cayman Islands. Successful claims have been limited to those where a fairly strict test for fraudulent preference is met, the fund has to show that there was an intention to prefer the particular creditors over the general body. Today’s decision in the Privy Council bucks that trend. The decision overturns decisions of the Cayman Grand Court and Court of Appeal and in doing so opens the door to clawback claims based in constructive trust resulting from the unlawful character of the redemption payment itself.

In a decision that overturns the Cayman Islands Court of Appeal and the Chief Justice of the Cayman Islands at first instance, the Privy Council has declared that redemption payments made at a time when a Cayman Islands investment fund was unable to pay its debts as they fell due were unlawful pursuant to section 37(6)(a) of the Companies Law (2007 Revision) and has remitted the matter to the Grand Court to determine whether the recipient investor is accountable for those payments as a constructive trustee.

Click below to read more. Feel free to get in touch with your usual Appleby contact for further details.

Read more

Type

Insight

Locations

Cayman Islands

Share
Twitter LinkedIn Email Save as PDF
More Publications
13 Sep 2021 |

Loans & Secured Financing in the Cayman Islands 2021

First published in Getting the Deal Through 2021. This practice guide provides topical analysis of L...

Contributors: Alexandra Simpson
21 May 2021 |

2021 - A Jekyll and Hyde Year for SPACs

In this article we offer our views on why this has happened and look ahead to the future for SPACs a...

Contributors: Dean Bennett
13 May 2021 |

The 2021 Cayman Islands Real Estate Guide

The Real Estate 2021 guide provides the latest legal information on the impact of disruptive technol...

Contributors: Norman Klein
13 May 2021 |

British Virgin Islands: Mergers & Acquisitions Comparative Guide

This country-specific Q&A provides an overview to Mergers & Acquisitions laws and regulati...

Contributors: Brittany Cummings
13 May 2021 |

Cayman Islands: Mergers & Acquisitions Comparative Guide

This country-specific Q&A provides an overview to Mergers & Acquisitions laws and regulati...

Contributors: Dean Bennett, Vance Power
15 Apr 2021 |

6 months on: Temporary relocation and residency by investment continues to increase in popularity

Six months on from the new digital nomad programmes, did the predicted upward trend reflect the real...

25 Mar 2021 |

Full Steam Ahead at the Jersey Ships Registry

Against a backdrop of uncertainty surrounding Brexit and the difficulties created by the global pand...

24 Mar 2021 |

Economic Substance update Q1 2021

Economic Substance update Q1 2021

12 Mar 2021 |

Material adverse change clauses in light of the Covid-19 pandemic

Experts from each of our key global offices provide jurisdiction specific advice and answer question...