From Liquidation to Crown Custody: our process of tracing and transferring unclaimed funds

The decision to wind up the company was made by shareholders at an Extraordinary General Meeting (EGM) in 2020. Special resolutions passed at the EGM appointed two Partners, Neil Howlett and Chris van den Berg of PricewaterhouseCoopers CI LLP, as Joint Liquidators.

One of the significant challenges we faced during the liquidation was the client due diligence (CDD) verification of the investors. Given the number of investors involved, the age of the fund and the age profile of the investors a comprehensive remediation effort was necessary. Prior to the appointment of the Joint Liquidators, our regulatory consulting team conducted a pilot exercise to understand the data and regulatory uplift required. This provided the liquidation team with a springboard so that the remediation work could be completed efficiently and started in a timely fashion upon appointment of the Joint Liquidators.

To add some context and colour, in 2017 a large proportion of investors were aged over 65 and a significant number were over 80, meaning many investors had become unresponsive or had unfortunately passed away.

Following the AML remediation project and subsequent outreach letters sent to investors after the commencement of the liquidation, the liquidation team significantly reduced the number of unpaid investors with respective funds reducing from £180 million to £25 million by October 2024. This was achieved through outreach letters, our own internal tracing teams and external third-party tracing efforts, and meticulous management of the liquidation process, as detailed below.

Given the volume of investors, the sums owed, and the age profile of the investors, in 2022, following a competitive tender process, the Joint Liquidators engaged a PwC tracing team as well as third party external asset tracers to conduct a comprehensive, global tracing exercise across 28 countries. The tracing process involved several steps including: public source searches, physical tracing, international residency checks, manual tracing, mortality screening, international tracing, deceased tracing, and forensic tracing.

Of the remaining Transfer Investors, a significant portion were due less than the threshold set by the Joint Liquidators and were therefore not subjected to the tracing exercise to ensure that any associated tracing costs did not outweigh any return due to the investor. Instead, desktop procedures such as social media searches and local telephone book searches were employed. The tracing efforts by the tracing agents were instrumental in locating just over half of those investors owed larger sums; however, the high costs and challenges in verification reduced the overall success in disbursing funds to those traced investors. This case study exemplifies the complexities involved in the liquidation process and the importance of strategic planning and execution in achieving successful outcomes.

In parallel to the investor tracing exercises taking place, the Joint Liquidators engaged Robert Gardner, Heather Watters and Natasha Woodhouse, all of Bedell Cristin to act as their legal advisers for the duration of the liquidation.

With the support of Bedell Cristin, the Joint Liquidators requested the Court's approval for the substantial transfer of the remaining investor funds. This was because, despite extensive efforts by the Joint Liquidators, their team and the appointed tracing agents during the liquidation process, issues remained that prevented them from tracing and repaying all investors of the Fund. This thereby hindered the closure of the Fund and the subsequent dismissal of the Company.

Monies that are considered as bona vacantia (literally "ownerless goods") can be claimed by the Crown under the Royal Prerogative. Typically, HMRG will retain these assets for ten years before they are permanently claimed by the Crown. This aligns with the ten-year period during which a dissolved company can be reinstated to the register. In this situation, the funds belonging to investors that could not be traced despite significant efforts are deemed to be without an owner.

The Joint Liquidators therefore requested the Court to permit the transfer of the remaining funds and details of the remaining investors to HMRG in two tranches. Most investors were to be transferred to HMRG in the initial tranche. However, a smaller group of investors, who were either in contact with the Joint Liquidators and awaiting payment or had deceased with their next of kin and/or personal representatives undergoing probate, were given an additional six months to submit the required documentation for payment. If they failed to do so within this period, the Court ordered that these investors would also be transferred to HMRG.

On 17 October 2024, the Court authorised the transfer of almost £25 million to HMRG from the Joint Liquidators of the Company, as set out above.

Outlined below are the steps the Joint Liquidators and their team took which assisted them in receiving the desired outcome from the Court hearing:

• The Joint Liquidators kept the Jersey Financial Services Commission informed throughout the winding-up process, providing monthly management information on their progress;
• Balancing their responsibilities, as outlined above, the Joint Liquidators engaged specialist tracing agents to locate investors who had invested more than the threshold set by the Joint Liquidators, to maintain proportionality in the tracing efforts;
• The Joint Liquidators initiated early discussions with HMRG and continued this dialogue throughout the liquidation to ensure they were fully aware of the lengths taken to trace investors and was agreeable to accepting the money and holding it for the ten-year period;
• An Amicus Curiae was appointed to represent unpaid investors and to assure the Court that appropriate measures had been taken to find these investors.

The liquidation of this Company serves as a testament to our ability to manage complex financial processes effectively. By combining strategic planning, professional expertise, and meticulous execution, we successfully reduced the number of unpaid investors and ensured the appropriate transfer of residual funds to HMRG. This case study exemplifies how we can help clients navigate challenging financial situations, providing them with the support and solutions they need to achieve their goals.

If you are facing similar challenges or need expert guidance in managing the wind down of investment funds, please feel free to get in touch with Natalie Boes.

_{This publication has been prepared for general guidance on matters of interest only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers CI LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}