Investment Funds, Companies and Miscellaneous Provisions Act 2005

• Permanent Page URL

“Segregated liability of investment company sub-funds.

256A.—(1) Notwithstanding any statutory provision or rule of law to the contrary, but subject to subsection (2), any liability incurred on behalf of or attributable to any sub-fund of an umbrella fund shall be discharged solely out of the assets of that sub-fund, and no umbrella fund nor any director, receiver, examiner, liquidator, provisional liquidator or other person shall apply, nor be obliged to apply, the assets of any such sub-fund in satisfaction of any liability incurred on behalf of or attributable to any other sub-fund of the same umbrella fund, whether such liability was incurred before, on or after the date this section commences.

(2) Subsection (1) shall not apply to an umbrella fund which was authorised and commenced trading prior to the date this section commences unless:

(a) the members of the umbrella fund shall have resolved by special resolution that the provisions of subsection (1) should apply to that umbrella fund, and

(b) the special resolution has taken effect in accordance with subsection (4).

(3) For the purposes of subsection (2), an umbrella fund shall be deemed to have commenced to trade prior to the date this section commences if—

(a) shares, other than the subscriber shares issued for the purposes of incorporation of the umbrella fund, were issued in any sub-fund of that umbrella fund prior to that commencement date and one or more of those shares remains in issue on that commencement date, or

(b) the umbrella fund, or any person acting on its behalf, entered into an agreement with a third party prior to that commencement date, which remains in force on that commencement date and pursuant to which the assets of any sub-fund may be applied in satisfaction of any liability incurred on behalf of or attributable to any other sub-fund of the same umbrella fund.

(4) If—

(a) no application to the court is made pursuant to section 256C, a special resolution passed pursuant to subsection (2) shall take effect on the date on which such resolution is passed or the 31st day following the date of service of notice on creditors issued pursuant to subsection (5)(b), whichever is the later, or

(b) an application is or applications are made to the court pursuant to section 256C, a special resolution pursuant to subsection (2) shall not take effect until—

(i) in the event that all applications made are withdrawn, the day on which such resolution is passed or the day next following the withdrawal of the last outstanding application, whichever is the later, subject to this day being no earlier than the 31st day following the date of service of notice on creditors; and

(ii) in the event that all applications made are not withdrawn, whichever of the following is the later, that is to say, the later of the day on which such resolution is passed, and:

(I) where an order is granted by the court pursuant to section 256C or on appeal pursuant to section 256D, the date specified in that order or, if no such date is specified, the day next following the date on which the period for which the order is specified to remain in force expires or, as appropriate, following the day on which it otherwise ceases to be in force; or

(II) where no appeal against any decision of the court is lodged pursuant to section 256D, the day next following the date on which the time period for such an appeal in relation to the last such determination of the court shall have elapsed; or

(III) where an appeal is lodged against any decision of the court pursuant to section 256D, the day next following the date on which the last outstanding such appeal is disposed of or withdrawn,

unless a court has otherwise ordered under section 256C or 256D.

(5) Any notice of a meeting to consider a special resolution of the type referred to in subsection (2) shall be—

(a) accompained by audited accounts for the umbrella fund which include a statement of the assets and liabilities of each sub-fund of the umbrella fund and which are prepared as at a date which is not more than four months before the date on which the notice convening the meeting is served (hereafter referred to in this section and section 256B as ‘statement of assets and liabilities’);

(b) given to all creditors of the umbrella fund accompanied by a copy of the statement of assets and liabilities, in accordance with the provisions of section 256B; and

(c) delivered to the registrar of companies, accompanied by the statement of assets and liabilities, no later than the third day after the date on which the notice is first sent to members of the umbrella fund.

Notice to creditors of special resolution under section 256A.

256B.—(1) The requirement in section 256A to give all creditors of the umbrella fund notice of a meeting to consider a special resolution shall be met if—

(a) a notice in writing, accompanied by the statement of assets and liabilities, is sent to each relevant creditor of a sub-fund, and

(b) a notice is published in at least one national newspaper in accordance with the terms of the prospectus for the umbrella fund, stating that the umbrella fund intends to avail of section 256A(1) and that an application may be made in accordance with section 256C, for an order pursuant to that section.

(2) For the purpose of this section, a relevant creditor of a sub-fund is any creditor for whom provision was made, in accordance with the articles of association, in the net asset value of the sub-fund calculated—

(a) in the case of a sub-fund in respect of which the net asset value is not calculated on a daily basis, as at the last valuation point for that sub-fund prior to the date of service of the notice pursuant to section 256A(5)(b); and

(b) in the case of a sub-fund in respect of which the net asset value is calculated on a daily basis, as at the second last valuation point for that sub-fund.

Application to court opposing special resolution under section 256A.

256C.—(1) An application may be made to the court in accordance with this section for an order preventing any resolution passed or proposed to be passed pursuant to section 256A(2) from taking effect in relation to any umbrella fund to which that section applies.

(2) An order under this section may be granted only if the court considers that it would be just and equitable to do so.

(3) Each order granted pursuant to this section shall specify the period in respect of which the order shall remain in force and, without prejudice to the powers of the court to specify such period, may specify that the order shall cease to be in force on the date on which the applicant ceases to be a creditor of the umbrella fund or the date on which the applicant consents to the application of section 256A(1) to that umbrella fund, whichever is the later.

(4) An application under this section may only be made by a relevant creditor or relevant creditors constituting not less than 1 per cent in number of the creditors of any sub-fund, or whose debts account for not less than 1 per cent in value of the debts owed by any sub-fund, in each case as provided for in the net asset value of that sub-fund referred to in section 256B.

(5) Any application pursuant to this section must be made by a relevant creditor within 28 days after the date of service of the notice referred to in section 256A(5)(b), and may be made on behalf of the creditors entitled to make the application by one or more of their number as they may appoint in writing for such purpose.

(6) Notice of an application to the court for the purposes of this section shall be sent by the relevant creditor or relevant creditors to the umbrella fund and to the Central Bank within two days after the date on which the application is made, and the umbrella fund and the Central Bank shall each be entitled to make representations to the court before an order is made.

(7) In considering whether it is just and equitable to make an order pursuant to this section, the court shall have regard to the following matters:

(a) the terms of any agreement or arrangement between the creditor or creditors and the umbrella fund or its delegates;

(b) the course of dealings between the creditor or creditors and the umbrella fund or its delegates;

(c) the conduct of the umbrella fund or its delegates towards the creditor or creditors;

(d) the extent to which the umbrella fund or its delegates represented to the creditor or creditors that it would have recourse to the assets of any other sub-fund to discharge the liabilities owed to the creditor or creditors;

(e) the extent to which it was reasonable for the relevant creditor or relevant creditors to expect to have recourse to the assets of any other sub-fund; and

(f) any other matters which the court shall deem relevant.

Appeal from court order under section 256C.

256D.—(1) Any creditor who has made an application pursuant to section 256C, or the umbrella fund in respect of which the application is made, may appeal to the Supreme Court against any decision of the court in respect of that application.

(2) Notice of any such appeal must be lodged within five days after the date on which the order is perfected by the court.

(3) Notice of any appeal lodged by the umbrella fund shall be sent to the Central Bank and to the relevant creditor or relevant creditors who made the application pursuant to section 256C within two days after the date on which the appeal is made.

(4) Notice of any appeal by the party which made the application pursuant to section 256C shall be sent to the Central Bank and to the umbrella fund within two days after the date on which the appeal is made.

Requirements to be complied with by, and other matters respecting, an umbrella fund to which section 256A applies.

256E.—(1) Every umbrella fund to which section 256A applies shall be required to include the words ‘An umbrella fund with segregated liability between sub-funds’ in all its letterheads and in any agreement entered into in writing with a third party, and shall be obliged to disclose that it is a segregated liability umbrella fund to any third party with which it enters into an oral contract.

(2) There shall be implied in every contract, agreement, arrangement or transaction entered into by an umbrella fund to which section 256A applies the following terms, that—

(a) the party or parties contracting with the umbrella fund shall not seek, whether in any proceedings or by any other means whatsoever or wheresoever, to have recourse to any assets of any sub-fund of the umbrella fund in the discharge of all or any part of a liability which was not incurred on behalf of that sub-fund,

(b) if any party contracting with the umbrella fund shall succeed by any means whatsoever or wheresoever in having recourse to any assets of any sub-fund of the umbrella fund in the discharge of all or any part of a liability which was not incurred on behalf of that sub-fund, that party shall be liable to the umbrella fund to pay a sum equal to the value of the benefit thereby obtained by it, and

(c) if any party contracting with the umbrella fund shall succeed in seizing or attaching by any means, or otherwise levying execution against, any assets of a sub-fund of an umbrella fund in respect of a liability which was not incurred on behalf of that sub-fund, that party shall hold those assets or the direct or indirect proceeds of the sale of such assets on trust for the umbrella fund and shall keep those assets or proceeds separate and identifiable as such trust property.

(3) All sums recovered by an umbrella fund as a result of any such trust as is described in subsection (2)(c) shall be credited against any concurrent liability pursuant to the implied term set out in subsection (2)(b).

(4) Any asset or sum recovered by an umbrella fund pursuant to the implied term set out in subsection (2)(b) or (c) or by any other means whatsoever or wheresoever in the events referred to in those paragraphs shall, after the deduction or payment of any costs of recovery, be applied so as to compensate the sub-fund affected.

(5) In the event that assets attributable to a sub-fund to which section 256A applies are taken in execution of a liability not attributable to that sub-fund, and in so far as such assets or compensation in respect thereof cannot otherwise be restored to that sub-fund affected, the directors of the umbrella fund, with the consent of the custodian, shall certify or cause to be certified, the value of the assets lost to the sub-fund affected and transfer or pay from the assets of the sub-fund or sub-funds to which the liability was attributable, in priority to all other claims against such sub-fund or sub-funds, assets or sums sufficient to restore to the sub-fund affected, the value of the assets or sums lost to it.

(6) Without prejudice to the other provisions of sections 256A to 256D and this section, a sub-fund of an umbrella fund is not a legal person separate from that umbrella fund, but an umbrella fund may sue and be sued in respect of a particular sub-fund and may exercise the same rights of set-off, if any, as between its sub-funds as apply at law in respect of companies and the property of a sub-fund is subject to orders of the court as it would have been if the sub-fund were a separate legal person.

(7) Nothing in sections 256A to 256D and this section shall prevent the application of any enactment or rule of law which would require the application of the assets of any sub-fund in discharge of some or all of the liabilities of any other sub-fund on the grounds of fraud or misrepresentation and, in particular, by reason of the application of—

(a) section 286 of the Principal Act; and

(b) section 139 of this Act.

(8) A sub-fund may be wound up in accordance with the provisions of section 213(e) and section 251(1)(c) of the Principal Act as if the sub-fund were a separate company, provided always that the appointment of the liquidator or any provisional liquidator and the powers, rights, duties and responsibilities of the liquidator or any provisional liquidator shall be confined to the sub-fund or sub-funds which is or are being wound up.

(9) For the purposes of subsection (8), all references made in sections 213(e) and 251(1)(c) of the Principal Act and all relevant provisions of the Companies Acts relating to the winding up of a company pursuant to sections 213(e) and 251(1)(c) of the Principal Act to one of the following words shall be construed as follows—

(a) ‘company’ shall be read as referring to the sub-fund or sub-funds which is or are being wound up;

(b) a ‘member’ or ‘members’ shall be read as referring to the holders of the shares in that sub-fund or sub-funds; and

(c) ‘creditors’ shall be read as referring to the creditors of that sub-fund or sub-funds.”.