No Path To Redemption: Privy Council Rules On Pearson vs. Primeo

"The path to redemption is not always smooth."

So begins the judgment of Lord Mance in the Privy Council in the case of Pearson v Primeo¹ – the latest but almost certainly not the final word on redemption rules in Cayman Islands hedge funds. Indeed, Lord Mance's decision is likely to mean that there is, in fact, no path to redemption for those investors who have not already "redeemed" their shares when a fund is suspended and then goes into liquidation.

This case revolved around section 37(7) of the Cayman Islands Companies Law – a provision which the Grand Court called a "comprehensive code"² for redeeming investors. Following Pearson v Primeo, that section looks less like a comprehensive code than a dead letter. As Lord Mance says in his judgment, "The likelihood in practice of successful section 37(7) claimants may [...] be slight."³