The Cayman Islands Court of Appeal has held that a liquidator cannot use his or her statutory power pursuant to Section 112(2) of the Companies Law (2013 Revision) to rectify the register of members where the effect would be to override investors' proprietary rights.


Both Primeo and Herald are Cayman Islands incorporated open-ended investment companies in liquidation. Almost all of their investments were with Bernard L Madoff Investment Securities LLC (BLMIS), but not all assets were lost and the liquidations were solvent. An additional liquidator was appointed to Herald who sought guidance from the court as to a list of contributories pursuant to Section 112(1) and to determine whether Herald's register of members should be restated pursuant to Section 112(2). This was in a context where shareholders who had redeemed before the discovery of the BLMIS fraud had benefited from a calculation of net asset value, based on fictitious profits.

At first instance, the Grand Court held that the additional liquidator had discretionary power to rectify the members' register pursuant to Section 112(2) in order "to do justice amongst those recorded as members as at the commencement of the liquidation shareholders".


On appeal, the court found that Section 112:

  • aims to give effect to a member's existing proprietary rights in accordance with the bargain struck when investing in the shares; and
  • contemplates rectification when that contract is not binding by reason of fraud or default.

It held that the section does not aim to provide for substitution of incorrect net asset value if, despite its incorrectness, it has been calculated in accordance with a member's contractual rights.


The court followed the Privy Council approach in Fairfield Sentry Ltd v Migani ((2014) UKPC) recognising the importance of certainty and finality in the determination of net asset value, which is a welcome guidance for investors and funds alike.

For further information on this topic please contact Vicky Lord or Marie Skelly at Harney Westwood & Riegels' Hong Kong office by telephone (+852 5806 7800) or email ( or Alternatively, contact Nick Hoffman at Harney Westwood & Riegels' Grand Cayman office by telephone (+1 345 949 8599) or email ( The Harneys website can be accessed at

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