Connaught clarifies Series 3 investor situation

Connaught clarifies Series 3 investor situation


The Chairman of Connaught Administration Services Ltd has responded to comments made after UK Acorn Finance, specialist partners of the Connaught Income Fund Series 3, was issued with a notice of default.

As reported in B&C last week, the agricultural finance lender denied claims that it had been issued with a notice of default by Connaught Asset Management (CAM) in which CAM state Acorn failed to pay an outstanding management fee issued by Connaught’s Administrators.

At the time, Acorn’s Chairman Peter Sobey told B&C that: “It is not correct to say that Connaught Asset Management (CAM) served a notice of default on UK Acorn Finance Ltd.”

Since then, however, Mike Davies, Chairman of Connaught Administration Services (CAS), has contacted B&C to clarify the current state of affairs between the Income Fund Series 3 and its specialist partners.

Regarding the legitimacy of the notice of default issued to Acorn, Mike said: “We are prepared to assume that Acorn did not intend to mislead in stating that the Notice of Default was issued as a result of the non-payment of a management fee, i.e. giving the impression, intended or not, that it was the non-payment of a fee to the Operator, Administrator or Asset Manager of the Fund, rather than the investors’ interest distribution that had led the General Partner to issue the Notice (it is worth noting that the General Partner does not, in any event, receive a ‘management’ fee).

“The Management Fee is a defined term within the Services Agreement under which the relationship between the Fund and Acorn operates and by far the largest proportion of the Management Fee is the distribution payment to Investors; in other words, the non-payment of the ‘management fee’ leading to the issuing of the default notice includes the non-payment of the interest distribution to investors.

He then added: “For the sake of accuracy, the payment of the Management Fee is a legal obligation under the Service Agreement placed on the General Partner of the Fund’s Limited Partnership. Primagtius Administration Services Ltd, which has been the individual administrator of Income Fund Series 3 since it was launched, has no role in the Notice process and the General Partner had no choice, under the Service Agreement obligations, but to issue the Notice.”

Mike then detailed the process behind the administrator’s decision. He said: “CAM’s administrators have advised the general partner (CAS), who in turn informed the Operator (Dunadd), that Acorn made a detailed offer to the administrator, which included a proposal to meet the outstanding amounts to investors.

“The proposal required a form of acceptance by a given time and date and, for a number of reasons - involving commercial confidentiality for both the Fund and Acorn - the Administrator did not respond to or accept Acorn’s proposal. 

He added: “In fact, the Administrator and their lawyers have now reviewed the Limited Partnership Agreement that sets out the governance structure for the Fund and have decided that this issue of default is solely a matter for the Operator and, in particular, the General Partner and, therefore, at present the Administrator agree with the issuing of the notice of default to Acorn.”

Mike also discussed the suggestion that a number of investors had been in touch with Acorn to ask that their money be returned independently of Connaught.

He said: “The CAM administrator has no role at present in the recovery process for Income Fund Series 3 and any recovery process (which will not necessarily exclude Acorn) is the responsibility of the General Partner and the Operator and, to that end, it has the same objectives as those espoused by Acorn and we must point out that such objectives are not exclusive to Acorn.”

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