Kingate Global Fund Ltd v Knightsbridge (USD) Fund Limited

Alex Potts • Posted 22/12/2009 • Under Articles

A QUESTION OF TRUST: ARE SHARE SUBSCRIPTION MONIES HELD ON TRUST BY A MUTUAL FUND COMPANY IN THE EVENT THAT IT IS UNABLE TO ISSUE SHARES?

Bermuda's Court of Appeal recently considered whether share subscription monies are held on trust by a mutual fund company, in the event that the fund is unable to issue shares to the subscribing investor, whether as a result of a suspension of dealing or winding up. In Kingate Global Fund Ltd v Knightsbridge (USD) Fund Limited, the judge concluded that share subscription monies were held on trust for subscribing investors until shares have actually been issued. As a result, share subscription monies were not available for the fund's own use prior to the issue of the relevant shares, and they were not available for distribution to the fund's unsecured creditors, in the event of the fund's insolvency or liquidation.