Case Details
- Citation: [2025] SGHC 174
- Court: High Court of the Republic of Singapore
- Date: 2025-08-29
- Judges: Kristy Tan J
- Plaintiff/Applicant: Zhong Shan Strategic Fund (ZSSF)
- Defendant/Respondent: RG Strategy Fund VCC
- Legal Areas: Insolvency Law — Winding up
- Statutes Referenced: First Schedule of the Variable Capital Companies Act, First Schedule to the VCC Act, Securities and Futures Act, Securities and Futures Act 2001, Under the Variable Capital Companies Act 2018, Variable Capital Companies Act, Variable Capital Companies Act, Variable Capital Companies Act 2018
- Cases Cited: [2025] SGHC 163, [2025] SGHC 174
- Judgment Length: 68 pages, 18,507 words
Summary
This case concerns an application by Zhong Shan Strategic Fund (ZSSF) to wind up RG Asset-Backed Investment Fund I (ABIFI), a sub-fund of the defendant VCC, RG Strategy Fund VCC. ZSSF, a shareholder in ABIFI, sought to wind up the sub-fund on the grounds that it was unable to pay its debts and that it was just and equitable to do so. The High Court of Singapore dismissed ZSSF's application, finding that ZSSF did not have standing as a creditor, contingent creditor, or contributory to bring the winding up petition, and that ZSSF had not established the statutory grounds for winding up the sub-fund.
What Were the Facts of This Case?
RG Strategy Fund VCC (the "Fund") was incorporated in 2021 as an umbrella VCC under the Variable Capital Companies Act 2018. ABIFI was formed and registered as a sub-fund of the Fund in July 2021. The shareholders in ABIFI are ZSSF, which holds 53.6% of the shares, Ms. Lisa Leung, who holds 37.99% of the shares, and Ms. Ivy Connie Sun, who holds 8.41% of the shares.
ZSSF, a regulated mutual fund from the Cayman Islands, made two cash subscriptions totaling HK$209 million (approximately US$26.6 million) for Class C Participating Shares in ABIFI in January and May 2023. ZSSF agreed to be bound by the terms of the Fund's Constitution and Offering Documents, which set out the rights and procedures for redeeming the participating shares.
The Constitution and Offering Documents provide that the participating shares are redeemable at the option of the shareholders, with the redemption price calculated based on the net asset value per share. The directors also have the discretion to suspend the determination of net asset value and the redemption of shares in certain circumstances.
What Were the Key Legal Issues?
The key legal issues in this case were:
- Whether ZSSF had standing to bring the winding up application against ABIFI, as a creditor, contingent creditor, or contributory.
- Whether ZSSF had established the statutory ground of insolvency for winding up the sub-fund.
- Whether ZSSF had established the just and equitable ground for winding up the sub-fund.
- Whether the court should exercise its discretion not to make a winding up order even if the statutory grounds were established.
How Did the Court Analyse the Issues?
On the issue of ZSSF's standing, the court examined whether ZSSF qualified as a creditor, contingent creditor, or contributory of ABIFI. The court found that ZSSF did not have standing as a creditor, as its redemption requests had not been refused but were merely suspended by the directors in accordance with the Constitution and Offering Documents. The court also held that ZSSF did not have standing as a contingent creditor, as its potential future claim for redemption proceeds was not a "debt or liability" under the VCC Act. Finally, the court determined that ZSSF did not have standing as a contributory, as the VCC Act does not confer such standing on shareholders of a sub-fund.
On the issue of insolvency, the court held that ZSSF had not established that ABIFI was unable to pay its debts. The court found that the mere suspension of redemption requests did not amount to an inability to pay debts, as the Constitution and Offering Documents expressly permitted the directors to suspend redemptions.
Regarding the just and equitable ground, the court examined ZSSF's arguments that ABIFI had lost its substratum and that ZSSF was "locked in" as a shareholder. The court rejected these arguments, finding that the Constitution and Offering Documents contemplated the possibility of suspending redemptions and did not support a conclusion that the sub-fund had lost its substratum or that ZSSF was unfairly prejudiced.
Finally, the court considered whether it should exercise its discretion not to make a winding up order even if the statutory grounds were established. The court concluded that, given its findings on the other issues, it was not necessary to address this discretionary question.
What Was the Outcome?
The High Court dismissed ZSSF's application to wind up ABIFI. The court found that ZSSF did not have standing to bring the winding up petition and that ZSSF had not established the statutory grounds for winding up the sub-fund. Accordingly, the court declined to make a winding up order against ABIFI.
Why Does This Case Matter?
This case is significant as it is the first published decision in Singapore addressing the winding up of a sub-fund under the Variable Capital Companies Act 2018. The judgment provides important guidance on the standing requirements and grounds for winding up a sub-fund, which will be relevant for investors, fund managers, and insolvency practitioners dealing with VCCs.
The court's analysis of the redemption rights and the directors' powers to suspend redemptions under the VCC's constitutional documents is particularly noteworthy. The judgment underscores that the VCC framework allows for a degree of flexibility and discretion in managing redemptions, which may limit the circumstances in which a shareholder can successfully petition to wind up a sub-fund.
More broadly, this case contributes to the developing jurisprudence on the VCC regime in Singapore and the interplay between the rights of shareholders and the powers of the directors in the context of investment fund structures. As the use of VCCs continues to grow, this judgment will serve as an important precedent for courts addressing similar issues in the future.
Legislation Referenced
- First Schedule of the Variable Capital Companies Act
- First Schedule to the VCC Act
- Securities and Futures Act
- Securities and Futures Act 2001
- Variable Capital Companies Act
- Variable Capital Companies Act 2018
Cases Cited
Source Documents
This article analyses [2025] SGHC 174 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.