Governance of Cayman hedge funds in general, and the duties and qualifications of their directors in particular, have been hot topics in the industry for several years. See “Cayman Islands Government Introduces Bill That Would Require Registration and Licensing of Certain Hedge Fund Directors
,” Hedge Fund Law Report, Vol. 7, No. 12 (Mar. 28, 2014); and “Cayman Islands Monetary Authority Introduces Proposals to Apply Revised Governance Standards to CIMA-Regulated Hedge Funds and Require Registration and Licensing of Fund Directors
,” Hedge Fund Law Report, Vol. 6, No. 4 (Jan. 24, 2013). One important source of that concern arose out of the 2009 collapse of Weavering Capital
. In a landmark decision following that collapse, the Cayman Grand Court held the fund’s independent directors personally liable for the fund’s losses by reason of their “wilful neglect” of their duties. See “Cayman Grand Court Holds Independent Directors of Failed Hedge Fund Weavering Macro Fixed Income Fund Personally Liable for Losses Due to their Willful Failure to Supervise Fund Operations
,” Hedge Fund Law Report, Vol. 4, No. 31 (Sep. 8, 2011). The Cayman Court of Appeal has recently overturned that ruling on the ground that, although the directors had breached their duties to the fund, their conduct did not rise to the level of “wilful neglect or default.” This article summarizes the Court of Appeal’s analysis.