Strategic Turnaround Judgment Provides Welcome Guidance for the Hedge Fund Industry on the Suspension of Redemptions

Among the most debated issues in the funds industry over the last two years are the questions to what extent, and when, can a fund suspend redemptions, and what is the effect on a redeeming investor of a suspension imposed by the fund after the investor’s redemption notice has expired?  The recent judgment of the Judicial Committee of the Privy Council in Culross Global SPC Limited v Strategic Turnaround Master Partnership Limited provides helpful and authoritative guidance about how provisions in a fund’s contractual documentation addressing redemptions and suspensions of redemptions should be interpreted, and how to determine which of the various documents constituting the investment agreement between a fund and its investor should take priority if the documents contain inconsistent provisions.  In a guest article, Jeremy Walton, a Partner and the Litigation and Insolvency Practice Group Head at Appleby in the Cayman Islands: outlines the facts of the Strategic Turnaround matter; discusses the lower court decisions and the Privy Council’s legal analysis; identifies five practice points for hedge fund industry participants arising out of the Privy Council’s judgment; highlights issues that remain unresolved even after the Privy Council’s judgment; and explores whether the decision may be a Pyrrhic victory for hedge fund investors.

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