When is a Redemption Effective: Reserve International Liquidity Fund Ltd

The British Virgin Islands Commercial Court has recently delivered a decision in Western Union International Limited v Reserve International Liquidity Fund Ltd which addresses the issue of when during the redemption process a redeeming investor becomes a creditor of the fund and is therefore entitled to apply for the appointment of a liquidator.

The BVI Court's decision is significant when considered with the 2009 Cayman Islands decision in Re Strategic Turnaround Master Partnership Limited. While each case turns on its facts, these two decisions seem to adopt different approaches as to when a redeeming investor creases to have rights as a member of a fund.

Background

Reserve International Liquidity Fund Ltd (the "Fund") was a money market daily liquidity fund, which aimed through its investments to maintain a stable net asset value ("NAV") of US$1.00 per share. Following the bankruptcy of Lehman Brothers on 15 September 2008, the Fund "broke the buck" and was