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09/22/2022

Arbitration and interim measures

In this episode of our Take 10 podcast, Asia Managing Partner Ian Mann and Counsel Andrew Chin talk about how the legislature and judiciary of the British Virgin Islands (BVI) and the Cayman Islands are constructing a favourable landscape for the application of interim measures in aid of international arbitration, no matter where those arbitrations are seated. Key takeaways: The BVI and Cayman Islands have established themselves as one of the key commercial jurisdictions in favour of arbitration by integrating the UNCITRAL Model Law on International Commercial Arbitration into their legislative framework and adopting a pro-enforcement judicial attitude to the enforcement of arbitral awards.The most common type of interim measures taken in support of arbitration in the BVI and the Cayman Islands are Norwich Pharmacal applications to find out the identity and nature of the wrongdoers and applications for a freezing order to restrain the unlawful dissipation of assets.Regulatory arbitrage is more prevalent in international arbitration due to its cross border nature. For example, if one had delayed in seeking a freezing order or could not prove a dissipation of assets, the Hong Kong courts may deny relief. However, this is not a requirement in the PRC where a freezing injunction could be obtained without fulfilling those criteria.

09/22/2022

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17 min
09/03/2024

Silk Roads and Statutes: Learn about our Shanghai Managing Partner Vicky Lord

In this episode, Shanghai Managing Partner Vicky Lord reflects on her career path from criminal barrister in London to leading our Shanghai office. Vicky discusses the importance of teamwork and responsibility in managing a successful office and shares helpful advice for junior lawyers about always continuing to learn. She highlights the strategic significance of the Shanghai office in serving Chinese clients using offshore structures, stressing the value of communication in their local languages.

09/03/2024

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12 min
02/11/2022

Luxembourg: Modernisation of the securitisation law

On 9 February 2022, the Luxembourg Chamber of Deputies (Chambre des Députés), adopted the law modernising the Luxembourg law of 2 March 2004 on securitisation, as amended (the New Securitisation Law). The New Securitisation Law enhances legal certainty and flexibility of the Luxembourg securitisation regime, while ensuring and increasing effective protection for investors. The New Securitisation Law has modernised the following main aspects. New sources of funding The financing of a securitisation transaction is no longer limited to the issuance of securities but is open to the issuance of any type of financial instrument. Furthermore, in addition to the issuance of any financial instruments, securitisation undertakings can have recourse, in whole or in part, to the conclusion of any type of loans, whose yield or repayable principal depends on the risks acquired (eg profit participating loans, asset-backed loans). New legal forms The legal forms that can be used for securitisation companies are now broadened by: The unlimited company (société en nom collectif) The common limited partnership (société en commandite simple) The special limited partnership (société en commandite spéciale) The simplified limited company (société par actions simplifiée) New authorisation and supervision requirements A securitisation vehicle must be subject to the authorisation and supervision of the CSSF, when it issues to the public on a continuous basis. Only securitisation vehicles issuing more than three times per year (on an all compartments basis) non-private placements with a denomination below €100,000 per each unit issued to non-professional investors need to be authorised and supervised by the CSSF. New rules governing the accounting treatment of equity-financed compartments The accounting treatment and distribution of profits and losses of equity financed compartments shall now be done on a compartment basis unless the articles of the securitisation entity provide otherwise. Where compartments are equity-financed: The balance sheet and the profit and loss account prepared for each compartment shall be approved only by the shareholders of that compartment, unless the articles of the securitisation entity provide otherwise Limitations to the distribution of profits and other distributable reserves may be determined by reference to each compartment, without regard to the global situation of the securitisation entity, unless the articles of the securitisation entity provide otherwise The legally required reserve according to the Luxembourg law of 10 August 1915 on commercial companies, as amended, shall be determined on a compartment basis without regard to the global situation of the securitisation entity, if this is provided for by the articles of the securitisation entity Holding of securitised assets A securitisation entity can now: Directly own the assets generating the cash flows that are securitised Acquire such assets or risks to be securitised indirectly, either through a subsidiary or via the acquisition of an entity holding these assets or risks Security interests A securitisation vehicle can now grant security interests over its assets to parties that are involved in a securitisation transaction but are not direct creditors of the securitisation vehicle. Active management Active management of securitised assets is now allowed for Luxembourg securitisation vehicles but only where the following conditions are met: The pool of securitised risks is made up of debt securities, claims or debt financial instruments The securitisation entity is not financed by issues to the public Ranking/legal subordination The following default waterfall of payments/order of priority in respect of debt and equity instruments issued by a securitisation vehicle is now applicable to securitisation entities unless otherwise agreed: The units of a securitisation fund are subordinated to the other financial instruments issued by, and loans contracted by, s...

02/11/2022

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7 min
JUN 18

Lessons from the Evergrande saga: asset disclosure in insolvency proceedings Background Issue Decision Takeaways

In a recent decision involving the China Evergrande Group, the Hong Kong Court of First Instance reaffirmed the policing provisions of disclosure orders under Mareva/freezing injunctions. The liquidators of the China Evergrande Group successfully obtained an ex parte Mareva/freezing injunction with ancillary disclosure orders against certain defendants, including the group's former CEO, Mr Xia Haijun on 24 June 2024. The Court provided numerous extensions of time in light of Mr Xia's unsuccessful attempts to discharge and/or vary the disclosure order. Mr Xia eventually filed an asset disclosure affirmation on 24 April 2025; however, the disclosure only related to his assets around the date of his affirmation, not 24 June 2024 - the date of the original disclosure order. The central dispute before the Court was the relevant reference date for the asset disclosure. China Evergrande's liquidators argued it should reflect the date of the original order - 24 June 2024, while Mr Xia argued it was at the time of compliance - being the date of his affirmation. The Court took a measured approach, focusing narrowly on compliance. It held that any extension of time to comply with a disclosure order does not alter the disclosure's reference date: it only changes the compliance date of that obligation. The Court said that it would be "absurd" for it to allow a 10-month information vacuum as there may have been a disposal of assets in that period. The inherent nature and purpose of an ancillary disclosure order is to ensure the associated Mareva/freezing order is properly policed and effective. The Court stressed the possibility of the disposal of assets in the period between the date when disclosure ought first to have been given, and the date when it was ultimately provided. If that position was not properly identified, one of the primary purposes for making the disclosure order would have been defeated. The fact that a disclosure affidavit is late provides no justification for not providing what had to be provided if the affidavit had been served on time, notwithstanding that a late affidavit should also contain any up-to-date information. Here, the order required disclosure of the assets frozen under the injunction on the date they were frozen - 24 June 2024. Mr Xia was ordered to confirm by affidavit the position as at that date, as well as provide full particulars of any subsequent dealings in respect of those assets. Further, the Court made an 'Unless Order' that any non-compliance within seven days would result in a debarring order against Mr Xia, and also ordered indemnity costs in favour of China Evergrande. Although Harneys does not advise on Hong Kong law, this decision underscores important principles of common law jurisprudence for disclosure orders. For liquidators and creditors, this is a victory for transparency; for defendants, a warning that non-compliance can invite severe repercussions. As experts in offshore disputes, Harneys frequently assists clients with such matters in jurisdictions such as the British Virgin Islands, Cayman Islands, and Bermuda. For example, a helpful summary of the legal position in the Cayman Islands can be accessed here.

Jun 18

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4 min
AUG 13

Contentious estates and temporary administrators

In the course of complex contested succession proceedings in the case of ATH v BNU, Justice Mithani gave an (anonymised) judgment dated 10 July 2025 in the BVI High Court. This is an important judgment of particular significance to practitioners dealing with estates pending a full grant of administration. Two sisters, BNU and ATH, disputed the division of the estate of their late father. Their late father's will named an executor, but the executor renounced his right to apply for probate. While the authority of an executor stems from their appointment in a will and takes effect from the death of the testator, an administrator is in a different position because their title depends on the grant of administration itself. BNU applied ex parte under the Non-Contentious Probate Rules to the BVI Probate Court for the appointment of herself as administratrix ad colligenda bona (AACB) of the BVI estate. A grant AACB is a limited form of authority to collect and preserve the assets of a deceased person's estate before a full grant is issued. Justice Young made an order appointing BNU as AACB and granted BNU permission to bring a derivative action under section 184C(1) of the BVI Business Companies Act, Revised Edition 2020 (Permission Application). Following the obtaining of that order, BNU applied for and obtained ex parte freezing and proprietary injunctions against ATH's husband and a company of which he was the executive director (Injunction Application). ATH, her husband and the company subsequently applied to set aside Justice Young's order and discharge the injunctions respectively. Justice Mithani strongly disapproved of BNU's appointment as an administratrix of an estate on a temporary or emergency basis for multiple reasons, including that the application had been made ex parte, there had been a failure to give immediate notice of the appointment to ATH, and BNU had later applied without notice for a grant to perfect that entitlement. His Lordship concluded that Justice Young's order did not permit BNU to act without taking out a formal grant of representation. The documents necessary for a formal grant of representation to be issued were not before Justice Young and, therefore, Her Ladyship had had no power to issue the grant to follow on from the order she made appointing BNU as AACB. Justice Mithani rejected a further contention that he, sitting in the Commercial Court, should issue a grant, rather than a Judge of the Probate Court. A claim based on a cause of action, where legal capacity to sue is lacking, is a nullity. Accordingly, the High Court held that the Permission Application was simply not valid on account of the lack of authority on the part of BNU to bring it. Further, the Injunction Application, which was brought in the course of the Permission Application, also fell away. In any event, Justice Mithani concluded that Justice Young's order should itself be set aside because the procedure initiated by BNU to apply for her appointment as AACB was wholly inappropriate. This is an insightful judgment that that merits careful reading by all those interested in this specialist field.

Aug 13

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3 min
AUG 8

UKSC holds that shareholders who invest with knowledge of an amalgamation have standing to demand fair value for their shares

In Jardine Strategic Limited v Oasis Investments II Master Fund Ltd the Privy Council (on appeal from the Court of Appeal for Bermuda) held that shareholders who acquired their shares after the date of notice of the meeting at which a proposed amalgamation would be voted on, and with knowledge that the proposed amalgamation would be approved and implemented, had standing to pursue fair value appraisal proceedings under section 106 of the Companies Act 1981 of Bermuda. This decision is likely to be considered in other jurisdictions with similar statutory appraisal regimes. In Jardine, approximately 84 per cent of the shares held by the dissenting shareholders were acquired after the date of the notice and with knowledge that the amalgamation would be approved (due to an undertaking given by the Jardine Matheson group's ultimate holding company to vote in favour of the resolution). The Company sought to argue that only those shareholders who held shares at the date of the notice had standing to bring appraisal proceedings under section 106 - a position which was rejected at first instance and on appeal. On appeal, the Board rejected each of the Company's three grounds of appeal. The Company submitted that as a matter of construction of section 106, the right to apply for a court appraisal is restricted to those who held shares at the date of the notice of the EGM Section 106(6) provides that any shareholder who did not vote in favour of the amalgamation or merger "and who is not satisfied that he has been offered fair value for his shares" may apply to the court, within one month of the notice, to appraise the fair value of their shares. The Company submitted that these words demonstrate that a company putting forward an amalgamation proposal is making an "offer" to its shareholders. The Company argued that an "offer" is made to shareholders entitled to receive the notice, being those on the register of members at the date of the notice of meeting (or any applicable record date), and therefore only those shareholders are entitled to apply for relief. The Board held that: The Company was seeking to place undue weight on the word "offered". No "offer" to shareholders is made in an amalgamation. There is no offer capable of acceptance or rejection and at no stage is a contract concluded between the amalgamating parties and their shareholders. An amalgamation is a statutory process and the rights of shareholders arise and are enforceable under statute. The words "he has been offered fair value for his shares" in section 106(6) refer to the fair value of the consideration under the amalgamation proposal or to the fair value stated in the notice. It is therefore irrelevant to identify the group of shareholders to whom an "offer" is made. There is nothing more generally in section 106 to suggest that the right to apply for a court appraisal is limited to those shareholders to whom notice is sent. The notice is a notice of meeting, not the communication of an offer. As previously noted by Justice Kawaley (in a commercial law publication in Bermuda) a dissenting shareholder is one who does not vote in favour of the amalgamation at the meeting convened by the notice. That is the only means under the statutory provisions by which a shareholder can dissent. Therefore, it is the shareholders at the date of the meeting who have the right to be paid the "fair value". The Company also submitted that the legislation of other countries from which the shareholder appraisal regime took its inspiration, particularly Canada, shows that the purpose of the regime was to protect shareholders as at the time when the proposal was made and not those who subsequently acquired shares. In addition, the Company sought to rely on a decision of the New York Supreme Court (Application of Stern) where the Court held that those in the position of shareholders who had acquired stock after a plan for merger had been adopted and publicised did not enjoy appraisal r...

Aug 8

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10 min
JAN 14

Mutual funds in the Cayman Islands

The Cayman Islands is the leading jurisdiction for the offshore investment funds industry due to its combination of flexible and appropriate regulation, an approachable and effective regulator, professional service provider expertise, high reputation among investors and a tax neutral fiscal regime. Investment funds established in the Cayman Islands fall into two broad categories: open-ended funds and closed-ended funds. Open-ended funds provide investors with voluntary redemption or repurchase rights and closed-ended funds do not provide investors with those rights. Typically, open-ended funds will invest in liquid assets which can be readily realised to fund redemptions (eg listed, liquid, tradable securities) and closed-ended funds will invest in non-liquid assets requiring time to liquidate/realise value (eg real estate, unlisted companies). This guide sets a summary of the regulatory regime of open-ended investment funds, which is supervised by the Cayman Islands Monetary Authority (CIMA). For an overview of the regulatory regime that governs private funds please see Guide to Private Funds in the Cayman Islands. Fund vehicle options Companies Exempted companies limited by shares are the most common form of entity used for the establishment of open-ended investment funds, with an investor's liability being limited to the amount paid or agreed to be paid in respect of their shares. Please see our Guide to Exempted Companies for more details. Segregated portfolio companies An exempted company may register as a segregated portfolio company (SPC), which is similar to a segregated cell company in many other jurisdictions. An SPC may establish any number of segregated portfolios. Assets and liabilities attributed to a particular segregated portfolio are legally separated from the assets and liabilities attributed to any other segregated portfolio. A creditor who is party to a contract involving a particular segregated portfolio will have restricted recourse and will be entitled to recover only against assets attributed and credited to the specific segregated portfolio to which the contract is also attributed. SPCs can be useful as multi-strategy vehicles and platform vehicles. Savings by using multi-strategy SPCs are often not as great as anticipated however and SPCs with multiple segregated portfolios do require a greater degree of care to ensure assets are properly segregated, contracts are entered into on behalf of the correct segregated portfolio and inadvertent cross-collateralisation does not occur. Please see our Guide to Segregated Portfolio Companies for more details. Limited liability companies Limited liability companies (LLCs) can be incorporated in the Cayman Islands in a form closely aligned to the Delaware LLC. LLCs may be used in investment fund structures where a flexible structure similar to a limited partnership is required, but where the vehicle needs to be established as a body corporate distinct from its members. LLCs are regulated by their LLC agreement and the Limited Liability Companies Act. Please see our Guide to LLCs for more details. Exempted limited partnerships While an exempted limited partnership (ELP) is the most common vehicle for closed-ended funds including private equity, venture capital and real estate funds, they are also used for open-ended funds. An ELP has many similarities to its Delaware equivalent vehicle but an ELP is not a separate legal person and for this reason, it is popular with managers and investors in a number of jurisdictions. An ELP is managed by its general partner. Please see our Guide to ELPs for more details. Unit trusts Cayman Islands unit trusts are established under and governed by the Cayman Islands Trusts Act and, save as modified under that law, generally applicable principles of English trust law. With a unit trust, investors contribute funds to a trustee which holds those funds on trust for the investors and each investor is directly entitled to a pro rata s...

Jan 14

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31 min
JUN 13

No trust, no transfer - Singapore Court clarifies crypto ownership in liquidation

The applicants, acting as liquidators, sought court approval to distribute unclaimed digital assets and funds held in Eqonex Capital's custody to customers under a proposed trust arrangement. They also requested indemnity rights and for any remaining assets to vest with the Official Receiver upon the company's dissolution. The case highlights the tension between liquidators' practical challenges in distributing unclaimed assets and the legal requirements for establishing trusts in crypto insolvencies. With only a small fraction of Eqonex's customers engaging in recovery efforts, the liquidators sought a streamlined solution, but the court prioritised strict adherence to trust law principles. Justice Aedit Abdullah dismissed the application, holding that no trust - whether express, resulting or Quistclose - had been created over the cryptocurrencies. The ruling affirms that customers retain full ownership of cryptocurrencies held on exchanges unless terms explicitly transfer title. This aligns with global trends, such as Hong Kong's Re Gatecoin Ltd (in liquidation) (explained further below), where similar disclaimers in terms prevented trust claims. Notably, clauses in the user agreement affirmed that digital assets remained the property of customers and that Eqonex Capital held no fiduciary duties toward them. The judgment emphasised that mere custodial arrangements or operational controls do not constitute a trust. The court also rejected the argument that the assets should vest with the Official Receiver under section 213(1) of the Insolvency, Restructuring and Dissolution Act, as Eqonex Capital had not yet been dissolved and did not hold title to the assets. This decision reinforces the principle that digital asset platforms must clearly define asset ownership and fiduciary responsibilities. It also underscores the importance of customer engagement during liquidation, as only a small fraction of Eqonex's users had responded to recovery efforts. The Singapore decision mirrors Hong Kong's approach in Re Gatecoin Ltd (in liquidation), where the court also refused to recognise a trust due to explicit disclaimers in terms. The specific set of terms and conditions that applied to the majority of account holders in Re Gatecoin (in liquidation) clearly stated the cryptocurrencies were not to be held on trust for the account holders. The ruling provides critical guidance for insolvency practitioners navigating the complex intersection of cryptocurrency and trust law. While Harneys does not provide legal advice on the laws of Singapore and Hong Kong, the judgments in the Eqonex and Gatecoin liquidations underscore a growing common law consensus: crypto platforms must use unambiguous language to define asset ownership. Liquidators must carefully review the terms and conditions issued by the platform to each account holder to determine whether a trust exists over the relevant cryptocurrencies.

Jun 13

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3 min
JUN 18

It would be harsh to judge fund manager performance this year

Here is a way to start an article like no other; what a fantastic year 2020 has been. The obituary of the hedge fund industry has been written many times, but for some, it was written in indelible ink in 2008 following the financial crisis. Commentators blamed the industry for its part in the global collapse, notwithstanding the fact that a huge majority of fund vehicles during that time were actually victims themselves. Ignoring the huge layer of red tape that subsequently encased the industry, this wasn't actually the largest cause for concern. The bigger problem was that once the S&P settled down, its solid and consistent performance led to a benchmark that the industry simply couldn't match. Many funds struggled to provide the exceptional returns they were once capable of and with new products like exchange-traded funds combining performance with a lower risk profile and lower fees, the glitz and glamour of AW Jones' product had truly been eroded. However, the inflow of investment remained, and while the lack of true performance caused general resentment, a shock to the global financial system might cause the passive investment models to fail and suddenly the two and 20 would look like money well spent. So the script for 2020 couldn't have been better written by Hollywood, although probably would have had a little more Dwayne Johnson. The flash crash in March could have lead to the industry flourishing from that point forward. Dog funds Sadly, a record 150 funds were classed as poor performers in the "Spot the Dog" list compiled by wealth manager Tilney Bestinvest, which names and shames the worst-performing investment funds and reported a 65 per cent increase in the number of "dog" funds, up from 91 in February. Interestingly, this is consistent with the tough time value investors have generally had over the last decade. Buying shares in companies which appear cheap given their fundamentals became a true art form, but the markets simply haven't played to the same rule book and one obvious explanation for this is the rise of tech firms, which are simply impossible to analyse using standard valuation tools. Brand strength and user adoption models seemingly become far more important than the profit line, for example. With a pandemic forcing the entire planet to go online simultaneously, the arguably overvalued tech stocks somehow continued to grow exponentially. Those companies that remained well placed to increase in value consistently if the world had continued on its "normal" course, suddenly found that the very solid foundations they were sensibly built on were destroyed from under them. Hugely dependable industries were decimated in a matter of months which even the very best minds in the hedge fund industry couldn't readjust to quickly enough. Where you have such a fundamental and novel shock to the system, the largest funds will always have the biggest problem with turning their tanker around. Just looking at the Top 20 Dogs, all but one of them is over a billion and you can see some truly institutional names. On a wider basis, the ten largest hedge funds reporting to eVestment remain some 4.61 per cent in the red year-to-date, despite posting a 1.31 per cent gain in July. In contrast, hedge funds overall are now flat for the year, having registered a 3.43 per cent rise in July to successfully claw back losses suffered in H1. Market neutrality achieved? Being nimble and able to pivot in this type of market was always going to be advantageous. Digital rise From our own anecdotal evidence, given we have the pleasure of working with a large number of emerging managers, we certainly have clients who are putting some very significant numbers up on the board this year. It has been especially noticeable in the digital asset slice of this market. Whether you believe in the digital gold theory of bitcoin or not, there is no doubt that with so much uncertainty out there, investors are looking for interesting alternatives to ...

Jun 18

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5 min
JUN 16

The Hong Kong OFC. Maybe, Maybe Not?

But will the OFC and proposed tax changes really entice Hong Kong based hedge fund managers to set up funds in Hong Kong? Much of the talk of the "advantage" for a Hong Kong manager in setting up an OFC over a Cayman domiciled fund relates solely to a requirement for dealing only with the Securities and Futures Commission (SFC) and not also the Cayman Islands Monetary Authority (CIMA). This seems to me a little simplistic. As a starting point, with a Hong Kong manager directly managing a Hong Kong fund, and without any offshore manager, there will be no opportunity for any management or performance fees to be earned at the Cayman level and tax-deferred. Moreover, hedge funds are cross-border by their very nature. Most hedge funds have investors from a lot of different countries and have investments in a lot of different countries. Accordingly, managers will already need to be considering the securities laws of various countries. All the investors in a hedge fund will have their own local tax obligations, so as a very base condition a manager is seeking to domicile their fund somewhere with no additional taxes. However, this is not enough. A manager also needs to domicile their fund somewhere that provides investors from a lot of different countries the relevant level of comfort to place their investments in such a vehicle. There are some very important factors that are considered by the type of sophisticated investors that invest into hedge funds in determining this comfort level. Such factors that a jurisdiction must exhibit include the absolute rule of law, respect for property rights and access to a sophisticated judiciary free from political interference. The Cayman Islands is a jurisdiction that fulfils these requirements and has reliably proven itself to do so over decades. As a result, over 85 per cent of the world's hedge funds are domiciled in the Cayman Islands. Hong Kong is a jurisdiction that some might consider is rapidly being subsumed into the People's Republic of China. Even when you drill down into more of the minutiae of the OFC regime it appears that the Cayman Islands remains a clear leader. The level of prescription and oversight which is contemplated by the OFC regime, whilst it may be familiar to operators of Hong Kong retail funds, is far more than would be familiar to hedge fund managers, or than applies to private Cayman funds. The OFC's governing document is required to contain certain prescribed provisions, including the kinds of property in which the OFC can invest. Any change to this governing document will require the SFC's approval. There are no restrictions imposed by the Cayman regime on investment strategies of Cayman funds or their use of leverage. A Cayman fund does not have prescribed provisions in, and CIMA's approval is not required for any changes to, its memorandum and articles of association. The appointments of the directors of an OFC are subject to the SFC's approval, and the SFC will require the directors to be appropriately qualified and experienced. By contrast, CIMA requires directors to register via a web portal but does not impose an approval process nor any requirements as to qualifications, experience or independence. An OFC must appoint a custodian approved by the SFC which meets the eligibility requirements set out. In practice, many hedge funds appoint one or more prime brokers, and many prime brokers may not, and may not wish to, meet these eligibility requirements. A Cayman fund sold in Hong Kong by private placement is not required to appoint a custodian. The OFC regime requires that the valuation and pricing of the OFC's property is the investment manager's responsibility. This is inconsistent with the typical hedge fund model, where valuation and pricing is typically delegated to the fund's administrator. Any change of name of an OFC is subject to the SFC's approval. No approval is required to a change of name of a Cayman fund. Transfers of OFC shares will be subj...

Jun 16

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5 min

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