Oct 2018 – Legal Cases in Investment Funds– Ardon Maroon Asia Master Fund

Krypton will highlight legal cases that are establishing precedent’s in the market from interpretation and provide key take-aways that should be examined in a fund structure. As always Krypton recommends at least an annual review of fund documentation to ensure that the documents are updated to the current standards in the market and as well that an operational review is completed to ensure everyone is operating in line with the documents.

Case: Ardon Maroon Asia Master Fund (in official liquidation)

Summary – Cayman Grand Court rules on the natural and ordinary meaning of fund constitutional documents in preference to following common practice in the funds industry.

Issue – Hon Justice Robin McMillan found that, in a master-feeder fund structure, a feeder fund redemption was ineffective on the basis that there was a failure by the feeder fund to serve a further redemption notice on the master fund in accordance with the procedures set out in the master fund constitutional documents.

Take-Away Points

The main take-away for master feeder funds to consider is that unless the relevant constitutional and offering documents of all master-feeder fund structures not just Cayman are drafted in such a way that a formal process is not required between a feeder fund and a master fund to effect a redemption, then the process, as set out in the constitutional documents, must be followed in order for an effective and valid redemption to take place.

This case illustrates that industry practice is not a defense to non-compliance with constitutional documents and all structure should re-assess the following

  1. What do the constitutional documents state
  2. Review of the workflow and operational process for a redemption and is this in line
  3. If necessary, update the fund documents so that the redemption process and documents for the feeder and master are consistent with what is occurring in practice.

About Krypton Fund Services

Krypton Fund Services (‘Krypton’) is a new boutique fund services company with a sole purpose of providing Excellent Client Service. The core focus of our business is Client focused with service and accountability as the framework of everything we do. We pride ourselves on a very client-centric approach that is not a cookie cutter offering.

Our platform provides regulatory reporting, fund administration, registrar and transfer agent, project management and setup, to a wide range of family office investment portfolios, investment funds, private and special purpose vehicles operating predominantly in the alternative investment arena.

Contact information:
Roderick White, CEO
Email: [email protected]
Suite No. 1222
Rosebank Centre
11 Bermudiana Road
Pembroke, HM08