The joined appeals in Re Asia Private Credit Fund Limited (in Voluntary Liquidation)  and Re Adamas Asia Strategic Opportunity Fund Limited (in Voluntary Liquidation)  concerned applications by the funds’ sole participating shareholder (the Investor) for (i) voluntary liquidations commenced by the funds’ managers to be brought under Court supervision and (ii) the appointment of liquidators of its choice.

The funds were typically structured, with the managers holding the voting rights (including the ability to place the funds into voluntary liquidation) and the Investor holding redemption and income rights. Both funds had suffered significant losses and the managers agreed to the Investor’s request to place them into voluntary liquidation to allow for an investigation. However, the managers ignored the Investor’s instructions regarding identity of the liquidators and appointed liquidators of their choosing (the JVLs). The Investor then brought these applications which the managers resisted.

• the decision to make an order under section 131(b) was evaluative. The Court needed to be satisfied on the materials before it that supervision would make the liquidation more “effective”, “economic” or “expeditious”;
• the terms of section 131(b) were open textured and of broad application, and thus afforded the trial judge an indirect degree of discretion; and
• because of the funds’ circumstances, where an investigation was required and the financially disinterested managers appointed the JVLs in defiance of the only financially interested party, the appointment of official liquidators who could not be replaced in a general meeting would be more effective than continuing as a voluntary liquidation.

The Court also held that where the person with voting power has “no skin in the game”, the wishes of those with the financial interest should generally be respected; and where a fund has ceased trading, the exclusive power conferred on the managers to resolve to wind up the funds is conferred for the benefit of the participating shareholders.

Whilst there is no general rule that managers must seek investor consent before placing a fund into voluntary liquidation, this case confirms that the power to do so should be exercised for the benefit of those with the economic interest.