Not a Wind Up: A Soft Wind Down of a Mutual Fund

The recent Cayman Islands Grand Court decision in Washington Special Opportunity Fund, Inc, stands as a useful reminder that the winding up of a Cayman Islands open-ended mutual fund is a drastic measure, which will not be too readily granted.  In circumstances where a solvent fund had amended its articles of association so as to permit a "soft wind down", the Grand Court declined to wind the fund up on the basis that its substratum had failed or that it was otherwise just and equitable to do so.

Facts

Washington Special Opportunity Fund, Inc ("Washington") is an open-ended mutual fund. In 2008 Washington experienced financial difficulties and, pursuant to a special resolution of its shareholders, amended its articles of association to permit Washington to redeem its investors' interests on a "slow pay" basis as its assets were liquidated.