GEARING UP FOR WINDING DOWN Inevitably, a fund will end. Some will reach a natural end of life while others will experience an unfortunate series of events that ultimately results in the decision to terminate. Regardless of the reason, it makes sense to step back and take a fresh look at the fund prior to commencing the wind-down to ensure that it is being operated in the optimal way. As the focus of the fund’s operators shifts to maximising the return of shareholder capital, operators should look specifi cally at service provider arrangements and whether they are still the best fi t. Here we will discuss how relationships with existing service providers can be adapted as the fund prepares to close. Directors Directors should remain active and engaged all the way through to formal liquidation but as stated above, there is a shift in focus at this time to asset preservation and ensuring that the fund does not unnecessarily incur ongoing expenses. Having the oversight of an engaged and experienced board is benefi cial to ensuring optimal decisions are taken. If the process is going to be complex, it may be benefi cial to bring on new directors with greater experience dealing with distressed funds, or partnering with insolvency specialists, to help guide the process. If, however, the wind-down is expected to be straightforward and noncontentious, there are options relating to the composition of the board that can be considered if ongoing expenses are material versus the assets remaining in the fund. Operators should consider whether shareholders would feel comfortable reducing the number of board members. Restructuring If the structure in question is a typical master fund with onshore and offshore feeder funds where one of those feeder funds has already closed, it may be advantageous to consolidate the remaining feeder with the master. It may be worth paying the one-time restructuring fees to increase ongoing effi ciency and to reduce the future costs associated with maintaining the former structure. This will of course depend on the legal forms of the entities, expected tail of the wind-down, and jurisdictional requirements. 36 CAYMAN FUNDS | 2016 Shutterstock / Roman Prishenko When a fund approaches its end, it makes sense to ensure that it is being operated in the optimal way. Michelle Morgan and Christopher Bodden of Harbour explain the options.
Cayman Funds 2016
To see the actual publication please follow the link above