Walkers Acts on $1B Asia Deal

Walkers BVI and Cayman advised Didi Chuxing on its highly-publicised US$1 billion acquisition of 99 Taxis.

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GAIM Ops Cayman 2018

Walkers will once again be a headline sponsor of the 2018 GAIM Ops Cayman conference.

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Following the result in the United Kingdom's EU referendum, Walkers has created a Brexit page dedicated to providing our clients relevant information about the jurisdictions in which we practise.

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Walkers Asset Recovery

Fifteen Walkers lawyers were recognised in the 2017 Who's Who Legal Asset Recovery guide. This is more than any other global law firm worldwide.

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Walkers Wins HFM Week Award

Walkers has been awarded the Best Offshore Law Firm Award for Client Service at the HFM Week US Hedge Fund Services Awards 2017.

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Walkers is a leading international law firm. We advise on the laws of Bermuda*, the British Virgin Islands, the Cayman Islands, Guernsey, Ireland and Jersey.
Powerwomen 200

Walkers in IFC Powerwomen Top 200

Six Walkers lawyers have been ranked in the 2017 edition of CityWealth's IFC Powerwomen Top 200.


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Adjusting Shareholder Rights in the Winding Up of a Cayman Islands Investment Fund

A recent judgment of the Cayman Islands Court of Appeal1 (CICA) has over-turned an earlier decision of the Grand Court of the Cayman Islands (Grand Court) which had conferred the power on an official liquidator to adjust the rights of shareholders, in the winding up of a Cayman Islands investment fund, where the rights of shareholders have been distorted by the effects of a pervasive, but external fraud. Unfortunately for shareholders whose net asset values (NAVs) have been adversely affected by such a fraud, based on the current state of the law (as referenced in the CICA’s judgment) it would appear that the toolbox is bare, despite the best intentions of the draftsman.

The CICA decision is the most recent in the ongoing liquidation proceedings of Herald Fund SPC (in Official Liquidation) (Herald), a segregated portfolio company incorporated in the Cayman Islands which was one of the largest so-called feeder funds into the Madoff Ponzi scheme.

This aspect of the proceedings involved an important point of statutory construction, namely whether an official liquidator has a statutory power under section 112(2) of the Companies Law and its subordinate legislation to rectify (or, in other words, adjust) a share register so as to override the contractual rights of investors in the winding up of a Cayman Islands investment fund. Notwithstanding that this power has been exercised previously by official liquidators on at least one occasion (of which we are aware) in very similar factual circumstances without opposition, this was the first time the question of its scope and application had confronted the Grand Court and the CICA.

Herald was incorporated in the Cayman Islands in 2004 as a segregated portfolio company and was one of the largest so-called feeder funds into the Madoff Ponzi scheme (having invested all or substantially all of its assets in the Madoff Ponzi scheme since its inception in 2004). When Madoff was arrested on 11 December 2008, Herald’s business effectively collapsed overnight and its directors focused their attention, with the assistance of lawyers in various jurisdictions, on recovering its assets through litigation. Some years later, following the presentation of a winding up petition by Herald’s largest investor, Primeo Fund (in Official Liquidation) (Primeo), Herald was placed into official liquidation in July 2013.

Herald’s principal asset is its claim in the United States bankruptcy of Bernard L. Madoff Investment Securities LLC (BLMIS), which has been admitted in the amount of approximately US$1.6 billion (less a substantive “clawback” payment) – significantly less than the circa US$2 billion recorded as being held in Herald’s managed account with BLMIS prior to the discovery of the Madoff fraud. Given the hopelessly co-mingled nature of the fictitious managed account purportedly operated by BLMIS (which was, in effect, the world’s largest Ponzi scheme), the Trustee of the BLMIS bankruptcy has, in accordance with US legal principles, determined claims in the bankruptcy by reference to the investors’ individual net cash investment in BLMIS using what has been termed the “Net Investment Method” (that is, total cash invested less total amounts withdrawn prior to the collapse of BLMIS). The real value of Herald’s claim in the bankruptcy of BLMIS is currently estimated to be in the vicinity of US$750 million - US$800 million.

Further complicating matters, in May 2007 Primeo, which was already a shareholder of Herald, subscribed for further shares in Herald, the consideration for which was the in specie transfer to Herald of the assets purportedly held in Primeo’s managed account with BLMIS. At the time, those assets had a notional value of approximately US$463 million. Pursuant to that subscription, Primeo was duly issued shares in Herald at the prevailing NAV per share based on the value of its managed account with BLMIS (approximately US$463 million). However, as a result of the application of the Net Investment Method by the BLMIS Trustee, the component of Herald’s claim in the BLMIS bankruptcy attributable to the in specie transfer from Primeo has been valued at approximately US$149 million (i.e. approximately one third of the notional or face value). It was the substantially lower $149 million figure which was used by the BLMIS Trustee in calculating Herald’s admitted claim which, in turn, formed the basis of distributions received by the Liquidators for onward distribution to investors.


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1Primeo Fund (in Official Liquidation) v Michael Pearson (in his capacity as Additional Liquidator of Herald Fund SPC (in Official Liquidation)), unreported, 27 February 2018.

Updates to the Cayman Islands Beneficial Ownership Regime March 2018

The Cayman Islands beneficial ownership regime (“Regime”), which came into force on 1 July 2017, requires Cayman Islands companies and limited liability companies (together “Companies”) to establish and maintain beneficial ownership registers unless they fall within an exemption to the Regime. Partnerships and foreign companies are out of scope.

Amending legislation which came into force on 13 December 2017 refines the categories of exemption from the Regime so that certain Companies which would have been in scope now fall within an exemption and, conversely, certain Companies which would have fallen within an exemption are now in scope.

Also, a Company that claims an exemption from the Regime is now required to provide its corporate services provider (“CSP”) with written confirmation of the specific exemption. This requirement is new.

Details of the specific information to be included in the written confirmation are now available, in the form of amending regulations which were gazetted on 2 March 2018 (namely the Beneficial Ownership (Companies) (Amendment) Regulations, 2018 and the Beneficial Ownership (Limited Liability Companies) (Amendment) Regulations, 2018) (together, the “Amending Regulations”).

This advisory summarises the key action points for Companies falling within an exemption. Please see our previous Client Advisories of 10 April 2017 and 5 January 2018 for further details in relation to the Regime more generally.


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New Reporting Obligations for Commercial Lenders Commencing Shortly

The Central Credit Register (“CCR”) was established under the Credit Reporting Act 2013 as part of Ireland’s commitments under the EU/IMF Programme of Financial Support. The CCR is a national mandatory database of borrower information which is maintained and operated by the Central Bank of Ireland (“CBI”) and it has been introduced on a phased basis, with the consumer lending phase going live in H2 of 2017. Further details on the CCR are available in our previous client briefing, available here.

Phase 2 (31 March 2018 - 30 September 2018) covers business lending and will have an impact on many Irish businesses. As the 31 March deadline for commencement of business lending reporting approaches, firms that provide commercial credit in Ireland should take immediate action to review their obligations to report to the CCR. Non-Irish lenders (regardless of regulatory status) may be obliged to report to the CCR in certain circumstances. Non-Irish lenders may have prior experience with credit reporting obligations given the existence of public credit registers in countries such as France, Spain, Portugal, Belgium and China.

Scope of the Credit Reporting Act 2013 (“CRA”) and CCR

The CRA imposes reporting obligations on providers of credit referred to in the CRA as ‘credit information providers’ (“CIPs”). CIPs are widely defined to include both regulated and unregulated lenders. “Credit” is defined in the CRA as including loans, deferred payments or other financial accommodation of €500 or more:

  1. extended to a (personal or corporate) borrower who is resident in the State at the time of making the credit application; or
  2. where the credit agreement is governed by Irish law.
Examples of firms that may be impacted by these new requirements might include:

  • any regulated (e.g. a credit institution) or unregulated lender that provides credit to Irish borrowers or credit governed by Irish law;
  • an AIF or other fund that originates loans to Irish borrowers or loans that are governed by Irish law;
  • an asset finance SPV that directly provides credit to an Irish borrower or credit that is governed by Irish law;
  • an SPV that has purchased and now owns loans that were provided to Irish borrowers or were governed by Irish law.
There are some limited exemptions from the scope of the CRA, including:

  1. inter-bank or inter-group credit;
  2. credit in relation to the provision of utilities; and
  3. credit supplied to enable the purchase of goods or services from the person providing the credit (which the CBI has clarified includes hire purchase agreements, personal contract plans or any other type of credit/leasing agreement where the lender is also the owner of the financed good or service).
Following the implementation of the CCR, it will also be mandatory for lenders to check the CCR prior to advancing any credit for an amount of €2,000 or greater.


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BVI Limited Partnership Act, 2017 Is Now In force

Walkers is pleased to confirm that the new BVI Limited Partnership Act, 2017 (the “LPA”) is now in force and theRegistry of Corporate Affairs is accepting the registration of limited partnerships under the LPA.

Providing a modern and up-to-date framework for BVI limited partnerships, the LPA has taken inspiration from legislation in a number of leading jurisdictions for private equity funds, including Delaware and the Cayman Islands, as well as drawing on the BVI’s own highly successful BVI Business Companies Act.

The LPA is aimed firmly at private equity funds, and is specifically designed to provide a platform for subscription finance transactions.

The LPA will also provide an alternative to the BVI business company for other corporate transactions, for example in joint ventures and as a holding entity for other structures where the flexibility of the structure and the confidentiality of the terms of the commercial relationship may be attractive.

We consider the following to be the key features of the LPA:

  • streamlined and cost-effective registration of limited partnerships, with a default model agreement which is intended to facilitate same-day registration while the commercial terms of the partnership agreement are finalised;
  • legal personality as the default position but with flexibility to elect not to have legal personality upon registration;
    no requirement for a BVI based general partner and no requirement for the general partner to make a capital contribution;
  • near complete flexibility as to the commercial terms of the partnership agreement;
    specific recognition of capital commitments as an asset which can be dealt with by way of security to facilitate subscription finance transactions;
  • ability to register a charge against a limited partnership with legal personality on the public register in the BVI and obtain priority under BVI law over unregistered and/or subsequently registered charges;
  • extensive safe harbour provisions for limited partners in their dealings with the partnership;
  • application of certain corporate law concepts to limited partnerships, including merger (with rights for dissenting limited partners), consolidation, plans and schemes of arrangements, redemption of minority partnership interests and continuations; and
  • detailed provisions for the termination, deregistration, winding up and striking off of solvent limited partnerships, and also for winding up insolvent limited partnerships.

The legislation is the result of a collaborative effort by leading legal practitioners in the BVI, including Walkers, together with the BVI Government and experienced legislative drafters.


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The Offshore Angle: An Expert's Perspective

In this edition of Vannin Capital’s In Conversation Series, London Managing Director, Rosemary Ioannou discusses the development of third party funding in offshore financial centres with John O’Driscoll, partner at Walkers in London.

Rosemary Ioannou (RI): Walkers London office performs a unique function as a firm in the UK. What is the focus of your practice in the UK?

John O’Driscoll (JO): A little bit about Walkers, we are a leading offshore firm with offices in ten jurisdictions including London. We practice the laws of BVI, Cayman, Guernsey, Jersey, Ireland and Bermuda (where we operate as Taylors in association with Walkers).

The London market is a very important market for the firm. Our office in London was established in 2001 to provide time zone sensitive advice to our European based clients requiring BVI and Cayman law advice. Since 2001 we have had corporate, finance and funds capability in London. About six years ago, we saw an opportunity to set up an insolvency and dispute resolution (“IDR”) team in London when I came on board. The team now stands at five and works closely with our home offices, particularly in BVI and Cayman, on litigation and insolvency-based matters. As you know, litigation matters can be long running and our clients welcome having their lawyers present in London. Being in London also makes it easy to work alongside leading counsel from chambers in the City and City law firms. When proceedings take place in BVI and Cayman we work with our teams there to ensure a seamless service for our clients. Our other European offices in Dublin, Jersey and Guernsey provide advices to our clients requiring local law expertise involving those jurisdictions.

RI: What types of cases are most frequently crossing your desk at the moment and from which jurisdictions?

JO: We are seeing enforcement actions and shareholder disputes in the oil & gas, mining and shipping space. For example, right now we are working on the insolvency of a global shipping group which has become contentious in Africa and many other jurisdictions where assets are being recovered. We are working with liquidators who have been appointed over mines in South America and Africa. Very often you will find that BVI or Cayman companies sit as holding companies in large international group structures. Appointing a liquidator at the top of the structure can become important to a stakeholder’s enforcement strategy. We often work with clients who require funding to help recover assets or to pursue misfeasance actions against directors or managers.


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