Appleby merges first registered mutual fund structure

Appleby became the first law firm to merge two registered mutual funds under the merger provisions of the Cayman Islands Company Law, according to the Cayman Islands Monetary Authority.

The Certificate of Merger, dated 3 August 2009, was issued by the Cayman Islands Registrar of Companies to Appleby’s client and represents the first CIMA registered mutual fund structure to take advantage of the 2009 Companies (Amendment) Law.

Before the Companies Law was amended in April 2009, a Cayman company could only combine with another company by way of ‘arrangement’ which required the parties involved to apply to the Grand Court of the Cayman Islands for approval.

“The revision to the Companies’ Law has been long overdue,” commented Bryan Hunter, partner and group head of Appleby’s Cayman Corporate and Commercial Practice.

“Feedback has been great and we have already been instructed by other clients to merge or consolidate companies.

“We expect to see a significant number of clients using these new provisions in the near future not only in the funds arena but in all areas of Cayman corporate law,” Mr Hunter said.

The new legislation distinguishes between a ‘consolidation’ and a ‘merger’. In a merger, one company remains as the surviving entity, having in effect absorbed the other merging parties that are then struck off and cease to exist. In contrast, in a consolidation, a new entity is formed from the combination of each participating company. As a result both participating companies cease to exist and are struck off by the Registrar of Companies.

Appleby associate Andre Ebanks, the funds lawyer involved with the transaction, stated: “During these turbulent economic times, investment managers are constantly seeking ways to restructure their investments and the structures that lie beneath. 

“This new legislation allows companies to combine without the need to go through a potentially costly court-driven process or, as Cayman mutual fund companies have done in the past, a somewhat cumbersome transfer process; involving a subscription-in kind, redemption, transfer of assets and the liquidation of the terminating fund,” Mr Ebanks said.

“The provisions allow greater flexibility whilst providing clients with the benefit of reduced costs and time as the merger of the terminating fund and surviving fund is effected by operation of law.”