The Petitioning investors were owed redemption proceeds by the Company. Rather than paying in cash, the Company sought to satisfy the redemption requests in specie by issuing promissory notes. The Company’s offering memorandum stated that shares could be redeemed in kind, and provided that the value of the assets paid out were to be determined by the board of directors in consultation with the Company’s investment manager, in the board’s sole discretion.
The investors were not satisfied with the promissory notes and applied to have the Company wound up on the basis that the Company could not pay its debts. Alternatively, the application claimed that the Company should be wound up on the just and equitable ground, the Company having lost its substratum.
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In the Matter of the Companies Law (2011) Revision and In the Matter of FIA Leveraged Fund (The Company”) Cause No. FSD 0013 of 2012, per Smellie CJ (18 April 2012)