Herald Fund SPC: The NAVs That Bind

In a decision that does much to reassert legal certainty for investors in Cayman Islands funds the Cayman Islands Court of Appeal ("CICA") has overruled a decision of the Grand Court concerning the circumstances in which an official liquidator of a solvent company could rectify the register of members, in In the matter of Herald Fund SPC (in official liquidation). 

The Grand Court had held that section 112(2) of the Companies Act ("section 112(2)") empowered an official liquidator to go behind a contractually binding (but misstated) NAV and substitute a correct NAV in its place.  The CICA disagreed and, while noting the potential for harsh and indeed arguably unfair outcomes for some investors where a binding (but misstated) NAV was upheld, preferred to uphold the principle of legal certainty for all investors, and followed the recent line of authority from the Privy Council decisions in Fairfield Sentry and Pearson v Primeo.