Sections 92 and 105 of the Companies Law (2007 Revision) as Amended by the Companies (Amendment) Law, 2007 and Herald Fund SPC
| Jurisdiction | Cayman Islands |
| Judge | Hon. Justice Henderson |
| Judgment Date | 09 October 2009 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | Cause No. 373 of 2009 |
| Date | 09 October 2009 |
Hon. Justice Henderson
Primeo, a creditor of the Fund, supported by the fund itself, applies for an adjournment of today's hearing of this winding up petition brought by Natixis S.A.
The petition can fairly be described as equivocal as to whether the Fund is solvent or insolvent. Natixis is a contributory of the Fund but not a creditor. In paragraph11 it pleads that it has a tangible interest in the Fund which it describes in this manner:
‘To the extent that a liquidator makes any recoveries in respect of Herald USA or limits or reduces the potential liability of Herald USA, these recoveries and limitation of liability will benefit Natixis and the other shareholders.’
What are apparently the last set of audited accounts of the Fund as at December 31, 2007 set the NAV at US $1.8 billion.
Substantially all of the Funds's assets were held and managed by an investment advisory business run by Bernard Madoff and called Bernard L. Madoff Investment Securities LLC. I will refer to this entity as ‘BMIS’.
The shareholder investors in the Fund were advised in December 2008 that the Fund had invested almost the entirety of its assets in accounts managed by Mr. Madoff:
‘Therefore [the advice noted laconically] the Fund has an exposure to Madoff’.
In February 2009 the directors advised all shareholders that the suspension of the NAV, which was first effected in mid-December, would remain in place indefinitely. The petition says:
‘…it being impossible to estimate the value of the NAV, or to ascertain Herald USA's assets pending the investigations into BMIS and Madoff’.
Paragraph 23 goes on to allege that:
‘The petitioners … believe that in the circumstances substantially all of the assets of the Fund and Herald USA have been lost.’
In paragraph 25 the petition asserts that:
‘… it is uncertain what, if any, assets Herald USA, or the Fund, currently have.’
A redemption request was submitted by Natixis in December 2008 which has not, of course, been honoured.
In paragraph 30, the petition asserts that:
‘… Herald USA has lost substantially all of its assets. All marketing and investment activities have ceased. No debts are being paid, no redemption requests are being honoured. Herald USA and the Fund have no cash flow and Herald USA and the Fund's principal activities appear to be only the consideration, review and management of their legal options.’
To the same effect is paragraph 33 which reads:
‘The assets of Herald USA and the Fund have almost certainly been completely...
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