Investment managers frequently negotiate preferred terms with
investors for investment in a fund managed by the IM. Such
preferred terms are typically set out in a side letter agreement.
Clearly it is crucial to ensure that these careful negotiations
result in a binding agreement among the investor and the fund.
The Cayman Islands Court of Appeal has recently considered the
key elements of an enforceable side letter and its decision is
instructive for IMs, directors, and investors.
First, it remains the case that it is the person entered into
the register of members of the fund as a member that may enforce
rights attaching to its shares. Where shares are held by an
investor through a custodian, it is the custodian that is the
registered member and not the ultimate investor.
