BVI Ruling on the Status of a Redeemed Shareholder

Western Union v Reserve International

The BVI Commercial Court, which was established last May, has handed down an important decision on the status of a redeemed shareholder and the application of Section 197 of the Insolvency Act 2003 to the investor's status. In summary, the redeemed shareholder was viewed as an unsecured creditor and, as such, able to petition for the liquidation of the company in which they were previously a shareholder and to rank alongside other, third party, unsecured creditors.

The facts presented to the Court involve a Fund ("Reserve") that operated daily redemptions which were ceased following the collapse of Lehman Brothers. Western Union, as one of Reserve's shareholders ("WU") had submitted redemption requests for its entire shareholding on 15 September 2008. These requests were received and acknowledged on the same day and Reserve announced an NAV of US$1 per share for that day. Redemptions were subsequently suspended. The redemption