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In the most recent decision in the Pearson v Primeo litigation, the Privy Council had to determine the scope of the power given to liquidators of Cayman Islands' funds to rectify a fund's share register. An issue arose in the liquidation as to whether the power under section 112(2) of the Cayman Islands Companies Law provided a liquidator with the power to amend investor's recorded shareholdings so as to achieve what he considers to be a fair result and, in doing so, override an investor's contractual and proprietary rights. The additional liquidator of the Herald Fund SPC (Herald), Mr Pearson, sought to rectify the register on this basis in order to remove the effect of the Madoff Ponzi Scheme on Herald, one of Madoff's ‘feeder’ funds. Primeo successfully argued that section 112(2) of the Cayman Islands Companies Law was not so far reaching and only enabled a liquidator to amend the share register so as to ensure that an investor's legal rights were properly recorded. Written by Peter Hayden, partner, and Christopher Levers, counsel, at Mourant Ozannes (Cayman Islands).
Pearson (in his capacity as additional liquidator of Herald Fund SPC (in official liquidation)) v Primeo Fund (in official liquidation) (Cayman Islands)  UKPC 3
The scope of a liquidator's power to rectify a share register is an important issue to the Cayman Islands funds industry, particularly where open-ended investments funds are common in the jurisdiction and are recognised as important investment vehicles globally. In particular, it is important in the context of solvent liquidations as a liquidator is required by section 140(1) of the Cayman Islands Companies Law to distribute any surplus rateably among shareholders based upon their shareholding as at the commencement of the liquidation.
The Privy Council’s decision confirms that a Cayman Islands' liquidator must adhere to the contractual and proprietary rights of shareholders in a Cayman Islands liquidation process. It ensures that the legal rights which an investor enjoys prior to the commencement of the liquidation process will be respected and that the Cayman Courts will ensure that such rights will be recognised and enforced in the liquidation.
In turn, this will mean that an investor who is participating in the solvent liquidation of a Cayman Islands fund will be a
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