Asia (Other)

Screen Shot 2018-12-14 at 5.18.23 PMBy Joanne Collett and James Gaden, Walkers


The recent case of Ardon Maroon Asia Master Fund (In Official Liquidation) serves as a stark reminder that it is critical that investment funds are built on properly considered, and expertly drafted constitutional documents, including the mechanics for redemptions.

The Ardon case
Ardon, represented by Walkers, is a Cayman Islands company serving as a “master fund” in a typical master-feeder structure. An investor in one of its feeders sent in a request to the Feeder fund to redeem its shares. The Feeder purported to automatically redeem its shares in the Master. However, the Feeder never served a redemption notice on the Master. Subsequently, both the Master and the Feeder (and another feeder) were placed into voluntary, and then court supervised, liquidation.

As part of the liquidation process, the Feeder submitted a proof of debt to the liquidators of the Master, which was adjudicated by the liquidators in the usual way, and, given the lack of compliance with the Master’s articles due to the lack of a redemption notice from the Feeder, was rejected by the liquidators. The Feeder appealed this adjudication. The importance of this decision, as described below, is that if the redemption notice was valid, then the US$15 million redemption amount would be paid to the Feeder as a creditor of the Master (to the detriment of the other feeder fund). If the redemption notice was not valid, then this creditor claim to the monies would not arise and the US$15 million would be shared between both feeder funds (as shareholders of the Master).

The main question for the Court was whether a notice from the Feeder to the Master was in fact required in order for the redemption to be valid.

The Court concluded that, notwithstanding significant evidence as to industry procedure, and arguments about how the offering memorandum of the fund should be interpreted, based on the articles of association of the Master, a notice of redemption was required from the Feeder to the Master before the redemption could be validly processed such that the proof of debt was rejected.

The decision is currently the subject of an appeal, which has not yet been heard.

Screen Shot 2018-12-14 at 5.18.43 PMIs my existing fund affected and
what can I do?

There are many master-feeder structures in the market where, like Ardon, the master fund is required to receive redemption notices from the feeder in order for feeder redemptions to be properly paid and the need for notice cannot be waived.

However, depending on the drafting of the offering memorandum, and possible issues caused by side letters, it should be possible to remedy any issues with the documents without disruption to business operations, or the need to bother ultimate investors. Critical will be how the articles of association have been drafted. These may need to be amended, but there are solutions.

I’m an investor — how do I know I can get my money out of the fund?

The ultimate victim in Ardon was the investor in the Feeder, which had thought that it had made a valid redemption from the Feeder that then would be paid first to the Feeder from the assets of the Master. Investors need to make sure that in investing in a master-feeder structure, the master fund’s articles provide for feeder fund redemptions to be processed and paid in the manner that will actually be implemented. For most investors, at the very least they should confirm that the offering document makes it clear that where a redemption request is made at the feeder level, the master fund will process a back-to-back redemption to ensure feeder redemptions are completed.

What may be most surprising to the industry about the Ardon decision was the vigour with which the Court chose to shun arguments regarding broadly adopted market practice and seemingly singularly look to the construction of the documents in making its decision. However, given the need for commercial certainty, the Court was left with little alternative given the arguments made. Even though an appeal has been filed, what should come as no shock is that the Court indicated that documents drafted in a manner tailored to the operation of funds is absolutely essential.


Screen Shot 2018-10-23 at 1.54.36 PM




Email :

Email :

Tel : (852) 2596 3354, (852) 2596 3433

Related Articles by Firm
Venture capital flourishes in the MENA region on a strong offshore foundation
The recent announcement of Uber Technologies Inc’s acquisition of its Middle Eastern based competitor, Careem, in a cash and stock transaction worth US$3.1 billion, has renewed the spotlight on the burgeoning venture capital market in the Middle East and ...
Square pegs and round holes: Partnerships and trusts in Japanese PE fund structures
Statistics from Japan over the past couple of years regarding private equity (PE) and venture capital (VC) investment have been impressive ...
Venture capital in Southeast Asia — 2018 review
As the preeminent venture capital and private equity practice in the offshore legal arena, Walkers continues to see record activity levels in venture capital fund raisings and fund establishments in Southeast Asia ...
A review of Hong Kong 2018 listing reforms
Hong Kong has emerged as the top IPO market globally ...
Smashing records — venture capital and PE in Asia
Private equity and venture capital financing grew by 37.6 percent in the region.
Cayman Islands schemes of arrangement — an alternative tool for cross-border restructuring
The Cayman Islands remains one of the premier jurisdictions to implement complex cross-border restructurings.
Related Articles
Adopting eDiscovery for internal investigations
In-house counsel are often called on to manage an internal investigation. How can you effectively plan for and manage these investigations? We explore how electronic discovery (eDiscovery) tools help you mitigate risk and achieve your fact-finding mission.
Venture capital flourishes in the MENA region on a strong offshore foundation
The recent announcement of Uber Technologies Inc’s acquisition of its Middle Eastern based competitor, Careem, in a cash and stock transaction worth US$3.1 billion, has renewed the spotlight on the burgeoning venture capital market in the Middle East and ...
Encouraging foreign direct investment in Vietnam's education sector
One of the noteworthy points under Decree 86 is educational association, which is defined as twinning between Vietnamese private kindergartens ...
Related Articles by Jurisdiction
Charity Focus: Yokuk's Suliana Shamsuddin Alias
A conversation with the chairperson and executive director of Yayasan Orang Kurang Upaya Kelantan — the Foundation for the Disabled.
MALAYSIA: Managing risks along China’s belt and road initiative
China’s belt and road initiative (BRI) involves Chinese companies investing in or with companies in the belt-and-road countries ...
Defeatist data security cultures no more
Organisations need to recognise that information security is a question of risk and step up defences now ..
Latest Articles
The Philippine Competition Commission bares its teeth
For the first time since its inception in 2015, the Commission has blocked a merger after conducting its review.
Bridging the Thai-Chinese cultural divide
China will soon become the leading foreign investor in Thailand, but there are still significant challenges for the unwary.