Privy Council determines scope of Cayman liquidator's power to rectify share registers (Pearson v Primeo Fund)

Privy Council determines scope of Cayman liquidator's power to rectify share registers (Pearson v Primeo Fund)

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) [2020] UKPC 3

What are the practical implications of this case?

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

Subscription Form

Already a subscriber? Login
RELX (UK) Limited, trading as LexisNexis, and our LexisNexis Legal & Professional group companies will contact you to confirm your email address. You can manage your communication preferences via our Preference Centre. You can learn more about how we handle your personal data and your rights by reviewing our  Privacy Policy.

Related Articles:
Latest Articles:

Access this article and thousands of others like it free by subscribing to our blog.

Read full article

Already a subscriber? Login

About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.