CIR 17 CIR 17 Winding Up of Domestic Funds
CIR 17 Guidance
Part 8 of the Law sets out all the provisions relating to transfer schemes and the winding up of
Funds. Article 61(c) enables the DFSAto prescribe additional circumstances to those contained in the Law in relation to when a Fundmay be wound up. This section contains such Rules.
CIR 17.1 CIR 17.1 Application
CIR 17.1.1 CIR 17.1.1
This Chapter applies to a
Fund Managerand, where appointed, the Trusteeof a Domestic Fundand, if the Fundis an Umbrella Fundusing the form of a Protected Cell Company, in respect of each cell as though each cell is a separate Fund.
CIR 17.1.1 Guidance
Additional requirements in the ICC Regulations apply to the winding up of a Fund that is an Incorporated Cell of an Incorporated Cell Company (ICC). In particular, the ICC Regulations provide that an ICC shall not be wound up until after all of its Incorporated Cells are either transferred or converted into another Company or wound up.
Pursuant to Article 61(c) of the Law, the
DFSAprescribes in this chapter the additional circumstances in which a Domestic Fundmay be wound up.
CIR 17.1.3 CIR 17.1.3(1) Upon the happening of any of the events specified in (2) and not otherwise, the
Fund Managerand, if appointed the Trusteemust cease to issue, sell, cancel or redeem Unitsin the Fundor to invest or borrow for the Fundand proceed to wind up the Fundin accordance with the Law and this section.(2) The events referred to in (1) are:(a) in response to a request made to the DFSAby the Trustee, Fund Manageror other member of its Governing Bodyfor the removal of a Fundfrom the list of registered Funds, the DFSAhas agreed, albeit subject to there being no material change in any relevant factor, that, on the conclusion of the winding up of the Fund, the DFSAwill accede to that request;(b) the expiration of any period specified in the Constitutionas the period at the end of which the Fundis to terminate; or(c) the effective date of a duly approved transfer scheme, which is to result in the Fundthat is subject to the transfer scheme being left with no property.
CIR 17.1.3 Guidance
The grounds for winding up of a
Domestic Fundunder this Ruleare in addition to the grounds specified in the Law. Under Article 64(1)(a) and (b) of the Law, a Fundwhich is no longer commercially viable or the purpose of which is either al accomplished or cannot be accomplished can be wound up. Similarly, under Article 34(3) of the Law, if a Domestic Fundwhich is an Exempt Fundor a Qualified Investor Fundcan no longer meet the relevant conditions to be classified as a Fundof that type, the Fund Managerof such a Fundmust either register it as a Public Fund(or alternatively reconstitute it as an Exempt Fundif it is a Qualified Investor Fund)or it must be wound up.
CIR 17.1.4(1) In a case falling within CIR Rule 17.1.3(2)(c), the
Fund Managerand if appointed the Trusteeof the Fundmust wind up the Fundin accordance with the approved transfer scheme.(2) In any other case falling within CIR Rule 17.1.4 or specified in Article 64(1) or Part 8 of the Law:(a) the Fundmanager or Trusteemust, as soon as practicable after the Fundfalls to be wound up, realise the Fund Property;(b) after paying therefrom or retaining adequate provision for all liabilities properly so payable and for the costs of the winding up, the Fund Managermust distribute the proceeds of that realisation to the Unitholders(upon production by them of such evidence as the Fund Managermay reasonably require as to their entitlement thereto) proportionately to their respective interests in the Fundas at the date of the relevant event referred to in CIR Rule 17.1.3; and(c) any unclaimed net proceeds or other cash (including unclaimed distribution payments) held by the Fund Manageror Trusteeafter the expiration of twelve months from the date on which they became payable must be paid by the Fund Manageror Trusteeinto court, subject to the Fund Manageror Trusteehaving a right to retain any expenses incurred by it relating to that payment.(3) Where the Fund Manageror Trusteeand one or more Unitholdersagree, the requirement of (2) to realise the Fund Propertydoes not apply to that part of the property proportionate to the entitlement of such Unitholders. The Fund Manageror Trusteemay distribute that part in the form of property, after making adjustments or retaining provisions as appear to the Fund Manageror Trusteeappropriate for ensuring that, that or those Unitholdersbear a proportional share of the liabilities and costs.(4) The Fund Manageror Trusteemust as soon as practical after the winding up or termination has commenced:(a) if the Unitholdershave not initiated the winding up under Article 63 of the Law, inform the Unitholders of the winding up or termination; and(b) publish a notice of the winding up or termination in one English and one Arabic language national newspaper and if the Fundhas a website, on the Fund'swebsite.(5) On completion of the winding up in respect of the events referred to in CIR Rule 17.1.3(2)(b) or (c) or Article 64(1) of the Law, the Fund Manageror Trusteemust notify the DFSAin writing of that fact and at the same time the Fund Manageror Trusteemust require the DFSAto revoke the relevant registration.
Accounting and Reports During Winding Up
CIR 17.1.5(1) Subject to any order of the court, and subject to (2) and (3), while a
Fundis being wound up, whether under CIR Rule 17.1.3 or otherwise:(a) the annual and half-yearly accounting periods continue to run;(b) the provisions concerning annual and interim allocation of income continue to apply; and(c) annual and half-yearly reports continue to be required.(2) Where for any annual or half-yearly accounting period the Fund Manager, after consulting the Auditorand the DFSA, has taken reasonable care to determine that timely production of an annual or half-yearly report is not required in the interests of the Unitholdersor the DFSA, the Fund Manageror Trusteemay direct that immediate production of the report by the Auditormay be dispensed with.(3) The period in question in (2) must be reported on together with the following period in the next report prepared for the purposes of (1) or (4).(4) At the conclusion of the winding up, the accounting period then running is regarded as the final annual accounting period.(5) Within two calendar months after the end of the final accounting period, the annual reports of the Fund Managermust be published and sent to each Personwho was a Unitholderimmediately before the end of the final accounting period.
Funds that are not Commercially Viable
CIR 17.1.6(1) If the
Fund Managerof a Fundbelieves on reasonable grounds that the Fundis not commercially viable or the purpose of the Fundcannot be accomplished, the Fund Managermust notify the DFSAand include the information specified in (2).(2) The information referred to in (1) is:(a) name of the Fund;(b) size and type of Fund;(c) number of Unitholders;(d) whether dealing in the Fund's Unitshas been suspended;(e) why the request is being made;(f) what consideration has been given to the Fundentering into a transfer scheme with another Fundand the reasons why a transfer scheme is not possible;(g)i) whether Unitholdershave been informed of the intention to seek winding up or revocation; and(ii) if not, when they will be informed;(h) details of any proposed preferential switching rights offered or to be offered to Unitholdersif it is an Umbrella Fund;(i) details of any proposed rebate of charges to be made to Unitholderswho recently purchased Units;(j) where the costs of winding-up will fall;(k) a statement obtained from the Trusteeor Eligible Custodianor other Personsproviding the oversight function if the Fundis a Public Fundor a statement from the Auditorif the Fundis an Exempt Fundor a Qualified Investor Fund:(i) that the Fund Manager, having taken reasonable care in considering the matter, is certain that a transfer scheme is not practical;(ii) an explanation of what steps have been considered that would result in the Fundnot needing to wind up;(iii) confirmation that the Fund Managerhas carried out its function and duties in accordance with the Law and Rules; and(iv) whether the Fund'sinvestment and borrowing powers have been exceeded;(l) the preferred date for the commencement of the winding up; and(m) any additional information considered relevant to the DFSA'sconsideration.(3) The DFSAmay request further information after receipt of the notification.