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Restructuring

Our Fund Liquidation Desk: Your team to

manage stakeholders’ interests

2 / 12 Restructuring | Our Fund Liquidation Desk: Your team to manage stakeholders’ interests

Our dedicated professional Liquidation Services Desk

conducts a large number of liquidations with different

levels of complexity each year. With proven expertise

in the field, we accompany stakeholders throughout

the liquidation process. They are provided with

appropriate and independent advice to help them

decide the proper course of action depending on their

needs and objectives. Moreover, we ensure that the

liquidation process is transparent to shareholders and

unitholders and is dealt with in accordance with all

legislative requirements.

Thanks to this support, fund promoters can

concentrate on launching new strategies and leave

the liquidation tasks to dedicated and independent

professionals.


Why liquidate funds?

The reasons to liquidate investment funds are manifold and can include:

During the liquidation period, it is beneficial for the fund’s directors to be released from their

ongoing duties and responsibilities. As from the date of the appointment, the independent

liquidator will take over all duties and responsibilities. The outgoing board of directors is formally

discharged at an extraordinary general meeting of shareholders, and the audited financial

statements as at the beginning of the liquidation are presented to the shareholders of the fund for

approval.


How we can help you? The successful delivery of a fund liquidation requires strong project management skills and a

clearly defined execution step plan. Appropriate planning ensures that the project’s steps,

responsibilities, key milestones and project status are clear.

Small or large, simple or complex, we have a proven track record in fund liquidations. Be it a

voluntary or judicial dissolution, we can step in and rapidly assess the situation of the portfolio

and optimize payouts.

Our knowledge of audit, tax, financial advisory and consulting means that we can mobilize a team

of highly experienced professionals to meet your needs.

We can deliver our services in three languages: English, German and French. We also provide

detailed itemized billing.


Your benefits The successful delivery of a fund liquidation requires strong project management skills and a

clearly defined execution step plan. Appropriate planning ensures that the project’s steps,

responsibilities, key milestones and project status are clear.

File tax

returns

and tax

reclaims

1

Benefit from a

dedicatedprofessional

liquidations desk

with full-time

specialists, led bytwo partners with

more than 40

years of combined

experience

2 Optimize

returns

ondivestedassets

5 Recover

debts 6 Manage

creditordemands

7 Conduct

account

and bookclosures 8

Control costs and free up management time

9 Accelerate the processthroughefficientorganisation 10

Manageongoinglitigation

3 Achieve

rapid

payouts

toinvestors

4 Manage and

divest illiquid

and complex

assets

responsibly

11


Typical steps in the

voluntary liquidation of an investment fund

1 Liquidation

planning and

opening of the

liquidation

• Prepare a liquidation step plan, including key milestones and an estimated

timeline for the closing of the liquidation

• Add ad hoc revisions to the liquidation step plan and communicate

effectively with stakeholders in case of unforeseen delays

• Prepare preliminary review of last audited financial statements and draft

management accounts to determine expected liquidation proceeds

• Liaise with international tax specialists to review and assess the tax situation of

the fund and the upcoming tax declarations to be prepared

• Review the contractual obligations of the fund and assess implications of

termination

• Prepare termination agreements

• Liaise with service providers (e.g., custodian banks, transfer agents,

accountants, tax experts, etc.) to discuss fee arrangements for the

liquidation period and to establish necessary liquidation provisions

• Advise on the liquidation opening date and assist with the preparation of board

minutes and convening notices for the first Extraordinary General Meeting

(EGM) of shareholders resolving to put the fund into liquidation

• Advise on the liquidation process (e.g., advance on liquidation boni in cash or in

kind)

• Clarify the situation of the fund in terms of distribution, listing on stock

exchanges and regular publication of net asset values

• Assist in the preparation of required notices of the liquidation in official European

Gazettes and newspapers (where applicable)

• Address the matters linked to the sale of the remaining portfolio investments

• Plan the mandatory audit of the opening as well as the closing liquidation

accounts

2 Administrative

control

• Perform an inventory of all assets and liabilities of the fund at the start of the

liquidation

• Prepare quarterly rolling cash flow models (optional)

• Prepare new authorized signatories list and notify banks and service providers

• Prepare or instruct the preparation of all outstanding tax returns (VAT,

subscription tax) and submit to the tax authorities

• Assess tax reclaim opportunities (e.g. the Aberdeen withholding tax ruling)

• Tax reporting in countries when required

• Prepare a schedule of all books and records to be archived and arrange for

adequate storage facilities


3 Realization

and transfer of

assets

• Investigate illiquid and toxic assets and claims to assess sales proceeds (e.g.,

researching publicly available information such as US bankruptcy court

proceedings to verify the existence of the asset/claim, obtain additional

documentation/information)

• Assess clawback claims related to financial fraud (e.g., Madoff, Petters,

Harbinger) and evaluate participation in class action suits

• Follow-up on outstanding creditor claims related to bankruptcies (e.g., MF Global,

Lehman etc.)

• Prepare detailed asset disposal/transfer step plans, including key milestones

and estimated timeline for closing the transaction

• Plan and execute asset realizations in the secondary market

• Evaluate and consult on the potential transfers of assets to shareholders and

unitholders through liquidation boni in kind

• Assess illiquid assets, including

- Hedge fund and private equity investments

- Clawback claims related to financial fraud

- Real estate, shipping and aviation finance loans

- Pledged assets with shareholder agreements limiting their disposal options

- Alternative asset classes like wine, antique furniture, fine art, classic and

luxury cars

- Intangible assets (e.g. patents)

- Precious metals and jewellery

- Collateralized debt obligations (CDOs) and credit default swaps (CDSs)

• Analyze potential asset impairments in collaboration with the Management

Company and the Investment Manager

• Prepare a sales pack for all portfolio investments (e.g., prospectus, latest audited

financial statements, reported net asset values (NAVs), communication with

the Investment Manager, etc.)

• Negotiate and review non-disclosure agreements (NDAs), sale and purchase

agreements (SPAs) and escrow agreements in collaboration with legal counsel

• Organize a transparent and competitive bidding process with potential

investors to optimize liquidation proceeds while limiting the liquidation period

to the extent possible

• Review of the global tax position of the fund to align tax accruals to expected tax

liabilities

4 Payment of

creditor

claims and

interim

liquidation

boni

• Review creditor claims

• Provide administrative support, preparation and approval of payment instructions

• Advise on interim liquidation boni to shareholders (e.g., in cash or in kind)

• Obtain confirmation from underlying investment managers (e.g. hedge

funds) that securities/claims are transferable

• Assist with the interim liquidation boni allocation


5 Reporting to

shareholders

and regulatory

authorities

• Review periodic liquidation NAVs prior to communication to the shareholders

• Report to the shareholders on a yearly basis in accordance with art. 150

of the Luxembourg Commercial Law

• Inform shareholders of significant events on an ad hoc basis

• Report quarterly to the Commission de Surveillance du Secteur Financier

(CSSF) on the evolution and status of the liquidation (e.g., statutory reporting

to other regulators where applicable)

• Arrange for the preparation of corporate and VAT tax returns

6 Finalization

and closure of

the liquidation

• Prepare and issue confirmation requests to service providers to ensure that all

invoices have been received before the closure of the liquidation

• Deregistration from VAT and FATCA/CRS reporting (if applicable)

• Prepare the final liquidator’s report to shareholders under Lux GAAP

• Issue final liquidator’s report under other financial reporting regimes such

as IFRS (optional)

• Prepare the EGM that votes of the closure of the liquidation

• Pay final liquidation boni to shareholders.

• Close the bank account(s) of the fund and close the shareholders’ register

• Arrange for books and records of the fund to be archived in accordance

with legal requirements

• De-register the fund, strike-off from the Luxembourg Trade Register, and file

required documents with the CSSF

• Deposit liquidation proceeds that could not be distributed to the persons

entitled to at the closure of the liquidation with the Caisse de Consignations


Our case studies

Portfolio transfer through

subscription in kind We were appointed liquidator to the voluntary

liquidation of a flagship hedge fund with an

investment portfolio of €420 million (mainly

hedge funds and several British Virgin Islands

wholly-owned subsidiaries) by a renowned asset

manager in the United Kingdom. The

shareholders had resolved to transfer the

investment portfolio into a new umbrella

structure through a subscription in kind in

exchange for shares in the new structure. We

distributed the shares in the new structure

through a payment in kind (PIK) to the

shareholders of the liquidating fund. In a single

day, we completed the whole portfolio transfer,

issuance of shares in the new investment

structure, and the subsequent distribution of

the shares to the shareholders of the liquidating

fund through a PIK. Daily liquidation NAVs per

share were published throughout the liquidation

period.

Liquidation of a multi-jurisdiction

investment structure

We were appointed liquidator to the voluntary

liquidation of an investment structure with a

wholly-owned Mauritian subsidiary by an asset

manager in the United States. We liaised with

the board of directors of the Mauritian

subsidiary about the conversion of participating

redeemable preference shares into founders’

shares to simplify the shareholder structure and

minimize the administrative burden for the

payment of dividends and liquidation boni. We

also investigated the potential recoverability of

withholding tax leveraged on dividends and

interest received from a Taiwanese investment

on the basis of a recent double tax treaty.

Liquidation of an investment fund

with illiquid assets

We liquidated a multi-compartment investment

structure (Part II SICAV) with three sub-funds

and a large portfolio of illiquid hedge fund

investments. The divestment of the most illiquid

securities was undertaken via a secondary

market sale. A sales pack for each portfolio

security was prepared to optimize sales

proceeds and to limit the time to the closing of

the transaction. Secondary market bidders were

required to provide bids on a line by line basis

as well as on a portfolio basis.


Liquidation of a fund of funds

We were appointed liquidator to the voluntary liquidation of a fund of funds with an NAV of €630

million at the beginning of the liquidation. The shareholders had resolved that in liquidation we would

continue hedging the various share classes and portfolio during the liquidation period. As many assets

were illiquid, we entered into four different sales of sub-portfolios during the liquidation period. The

liquidation process lasted about four years, but ultimately, investors received between 91 percent and

100 percent of the NAV at the beginning of the liquidation.

Liquidation and PIK to shareholders

We liquidated a specialized investment fund (SIF) with a €92.5 million securities portfolio of illiquid

hedge funds, private equity investments (with uncalled capital commitments) and holdbacks.

We distributed approximately 67 percent of the investment portfolio through payment in cash and

in kind as a first advance on liquidation boni to the shareholders. We distributed a further 30 percent

of the portfolio securities through a second payment in kind including private equity investments with

open capital commitments and currency hedging contracts. The two advances of liquidation boni were

completed within a four month period.

Other special situations we have been dealing with

• Settling a Madoff-related clawback claim

• Filing the Aberdeen withholding tax reclaims with foreign tax authorities

• Asset tracing and recovery procedures

Contact Forensic & Restructuring

Michael JJ Martin Partner

+352 451 452 [email protected]

Eric Collard Partner


Dr. Sebastian Bos Senior Manager


Olivier Peter Senior Manager


560, rue de Neudorf L-2220 LuxembourgGrand Duchy of LuxembourgTel: +352 451 451

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