Until recently, it seemed improbable that an institutional investor in a private equity fund (limited partner) would be unable to satisfy a capital commitment due to liquidity problems, or would be compelled to file for bankruptcy protection. Under current market conditions, however, the threat of a limited partner’s insolvency is no longer a remote possibility.
In a case under Chapter 15 of the U.S. Bankruptcy Code, filed in March 2009 in the U.S. Bankruptcy Court for the District of New Jersey, In re Grand Prix Associates Inc., 09-16545 (DHS), the limited partners of a number of private equity funds sought and received recognition of insolvency proceedings commenced in the British Virgin Islands.
