Axiom Legal Financing Fund stakeholders to oppose receivership application

Battle lines are being drawn up between the various stakeholders in the beleaguered Axiom Legal Financing Fund (the “Fund”).

Taylor Moor (“TM”), who acted as the main distributors of the Fund, are angry that the directors notified that shareholders that they would apply to the Cayman Grand Court for KPMG to be appointed as receivers of the Fund, without putting it to a shareholder vote.  Originally, this was one of the matters upon which the shareholders were expected to vote at the EGM earlier this month, but at short notice the resolution was withdrawn and the directors announced that they intended to go ahead with the receivership application unilaterally. TM intend to take legal action to oppose this move.

TM believe that the Fund should be put into liquidation rather than administration, with independent insolvency practitioners being appointed as liquidators. They believe that this would enable the liquidators to conduct a thorough investigation into the past affairs of the Fund and to take action against anyone who has been guilty of wrong-doing. The powers of Receivers are materially more limited in this regard. Furthermore, they are unhappy that the sole aim of a receivership is to ensure an orderly closure of the Fund – a decision which they believe is premature given that the investigation into the Fund’s loan portfolio is far from complete.

TM are also unhappy with the costs of investigating the situation to date ($1.3 million) and the lack of a complete and coherent report detailing the findings.

Whatever the merits of the case, this does seem to be a situation of poor stakeholder management by the Fund directors.  They must be aware of the sensitivities of the investors and need to be seen to take all steps that are necessary to investigate fully and take action if wrong-doing has occurred.  By proceeding with a receivership application in circumstances where they have not permitted the shareholders a vote on the issue, and in the knowledge that the main distributor of the Fund is clearly opposed, they are setting themselves on a difficult and antagonistic course.  Given the atmosphere of allegations and suspicion, it does appear unnecessarily inflammatory to proceed with an application that may limit a comprehensive investigation, without fully explaining the rationale for that to those who stand to lose their investment.

The Cayman Islands court is expected to hear the parties on 31^st January.