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The below presentation is meant for general understanding only and does not represent legal or professional advice. Please contact John Tan (john.tan@lu.ey.com) or Christophe Vandendorpe (christophe.vandendorpe@lu.ey.com) to discuss your specific needs.
For a regulated investment fund, the nominated liquidator must be approved by the regulator (e.g. the CSSF). In order to assume an appointment, the nominated liquidator must provide guarantees of good repute and professional skill (see article 145(1) of the Law of 17 December 2010 relating to undertakings for collective investment, as amended) (UCI Law) and the appointment is not a matter to be taken lightly as it carries certain responsibilities and duties to stakeholders and that of the fund itself (see article 143 (8) of the UCI Law, as amended). Ramifications from the conduct of the liquidators may arise as legal actions can be brought against them for up to a maximum of five years from the publication of the liquidation´s closure (see article 143 (10) of the UCI Law, as amended). The conclusion is that acting as liquidator is not a simple matter to be taken lightly, even in the context of a solvent voluntary liquidation.
EY Luxembourg has extensive experience dealing with the liquidation of various regulated investment funds, and obtaining approval from CSSF to act as liquidator. EY Luxembourg has a dedicated restructuring and liquidation team to ensure that the liquidation of the fund is handled efficiently by an independent third party and in compliance with applicable law.
Assuming there are minimal liquid assets and distributions to be made, we would say approximately six to nine months from commencement of liquidation to dissolution. During this period, the liquidator oversees the finalisation of the opening liquidation accounts (i.e. covering the financial period up to the date of commencement of liquidation), realise any residual assets and make interim distributions to shareholders and draft the liquidators´ final report to shareholders. The accounts contained in the liquidator´s final report itself will be audited by a statutory auditor (Réviseur d´ Enterprises Agréé) who is appointed during the liquidation period. The timeline for completion may be extended if there are further extraordinary matters arising to be dealt with by the liquidators and is usually subjected to regulatory approval.
The pari-passu principle applies, which means that all shareholders in the same class are to receive equal distributions in proportion to their shareholdings in the fund, calculated based on the audited NAV as at the date of commencement of liquidation. Once the fund commences liquidation, all redemptions and subscription requests should no longer be processed.
Our fees are based on time costs incurred, and therefore the liquidation costs will depend on the complexity of matters to be dealt with by the liquidator. Assuming however that there are minimal assets of a liquid nature and minimal distributions to be made, and there are no extraordinary issues arising in the liquidation, the cost of a liquidator is usually less than for a full time employee for an engagement lasting approximately six months. The benefit of an experienced liquidator resides essentially in his know-how to deal efficiently with matters that are usually not in the ordinary course of business for most professionals. In addition, EY Luxembourg can draw upon a vast internal network of experts, enabling to handle efficiently matters that require specific expertise. The combination of experienced fund liquidation professionals and the internal expert network, enables an efficient and timely liquidation process, which ordinary is challenging for non-initiated professionals without such network, which may be at the detriment of investor interests. Appointing an external experienced liquidator also enables your own professionals to focus on their core business and free up valuable management time.
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