Bell Rock provides experienced and qualified independent directors to a range of crypto funds and blockchain investment funds. Our experience in fund governance for high quality hedge funds, venture capital and private equity over the years combined with a focus on industry developments in digital assets and blockchain technology provides fund managers with a unique and specialized fund governance service.
Our professionals work directly with fund managers and law firms from fund set up or where fund managers have decided to add independent directors to the board to bolster fund governance. Today, most investment funds will appoint at least one independent director to the board.
Recent court judgments and increased regulatory requirements have highlighted the important role placed on the duties and obligations of directors. Directors of funds are tasked with providing appropriate oversight of the activities of the investment manager and other service providers.
For Cayman funds, the Statement of Guidance on Corporate Governance provides minimum requirements expect of the directors of a fund. However, in reality the board of directors should have greater oversight than the minimum expectations. Most open-ended funds with monthly dealing will typically meet at least quarterly and have frequent dialogues on matters in the interim. Often the board is asked to approve various matters by way of resolution, in addition to periodic meetings.
What factors should Directors be looking at for Crypto Funds?
Investment Manager Integrity and Compliance. Is the fund manager authorized or regulated in any jurisdiction?
Investment Strategy, Complexity and Potential Strategy Drift
Risk Management Practice
Valuation Policy and Application
Quality of the Service Providers
Custody Solutions and Security Level
Data Security
Directors & Officers Liability Insurance
Legal Documentation and Investor Disclosures
AMLY/KYC Compliance/Risk Screening and On-Going Monitoring
Fund distribution / Selling Restrictions - dependent on countries of distribution
In the Cayman Islands (as well as other common law jurisdictions) the duties of a director fall into two broad groups:
the duties of loyalty, honesty and good faith (or "fiduciary" duties), and
the duties of care, skill and diligence.
These duties exist in law to protect shareholders from the risk of directors causing harm to the company or its assets. The risk arises because the internal rules of most companies vest the power to control and manage the company's property and affairs in the board of directors. Shareholders are vulnerable to harms such as:
fraud - directors taking assets, opportunities or information belonging to the company and using it for their own personal advantage, and
mismanagement - directors risking loss or devaluation of the company's assets through incompetence and poor decision making.
Directors owe duties of good faith and loyalty because they are in a "fiduciary relationship." Independent directors act as a "watchdog" for investors over the fund manager and other service providers to the fund. They act as agents for fund investors. They bring impartiality and experience to a fund's board and its oversight of the fund's affairs and activities.
For further information on Bell Rock's fund director services, please contact us: info@bellrockgroup.com
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