A judgment handed down in September by the Royal Court of Guernsey cleared the Carlyle Group, Carlyle Investment Management, and TCGH, together with its seven executive and non-executive directors, of liability over the collapse of Carlyle Capital Corporation (CCC), a Guernsey investment fund that went into insolvency in the wake of the financial crash in 2008. Here, the international law firm of Ogier comments on the case.
The plaintiffs pleaded more than 187 claims against the defendants, including breaches of fiduciary duties and duties of skill and care. This article will look at how the judge dealt with the allegations relating to directors’ duties, record- keeping and board minutes.
The origins of Carlyle
CCC was an investment fund set up as a Guernsey company which went into insolvency in 2008, losing all of its $1 billion of capital. It invested mainly in residential mortgage-backed securities issued by US Government-sponsored entities known as Fannie Mae and Freddie Mac.
The residential mortgage-backed securi- ties purchased by CCC had express guarantees that principal and interest would be paid by the government agencies in the event of any default by the homeowners and also carried the implied guarantee of the US government itself. The residential mortgage-backed securities as- sets were purchased using one-month repurchase (repo) borrowing. The assets were subject to daily margin calls if prices changed and CCC’s investment guidelines stated that CCC should keep a 20% liquidity cushion in cash (or equivalent) to meet foreseeable margin calls should they occur...
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