Directors of Cayman Islands hedge funds must conduct a fund's affairs in a transparent and honest manner, always disclosing to the Cayman Islands Monetary Authority's ("CIMA") any substantive issues which could materially affect the fund, in addition to any matter which could materially and adversely affect the financial soundness of the fund and any breach of law and regulation.

For example, CIMA would expect to be notified in the event the board of directors resolved to suspend NAV calculations and/or redemptions.

The fund may also be subject to filing and/or notification requirements in the Cayman Islands and other jurisdictions, depending on the resolutions of the board of directors vis-à- vis the continued operations of the fund.

Communication with investors is also key, particularly in a time of distress. Of course, depending on the facts, disclosure may be required as matter of law, rule or regulation, and/or in accordance with the terms of investment of the fund. However, if a fund does need to be restructured, it may be that the consent of all or some of the investors (e.g. two-thirds by NAV) is required to implement the proposed course of action. Accordingly, broader commercial considerations are also relevant to the timing, nature and extent of disclosure to investors. Similar considerations also apply as regards communications (if any) with creditors of the fund.

It is therefore imperative that the board of directors works closely with legal counsel to ensure that these important matters are navigated and addressed, and in a legally compliant and commercially sensitive manner.

There is no 'one size fits all' solution as to how boards of directors should regulate their business and conduct their meetings. However, directors must always pay regard to CIMA's Rule - Corporate Governance for Regulated Entities and Statement of Guidance - Corporate Governance for Mutual Funds and Private Funds and, of course, act at all times in accordance with their duties as directors, including fiduciary duties.

Ultimately, fund governance must be appropriate and suitable to enable effective oversight, direction and management of a fund, including oversight of risk. How these principles translate as a matter of practice will be a question for the board of directors, in consultation with the fund's professional advisors, including legal counsel, having regard to factors such as assets under management, number of investors, the complexity of the structure, the nature of the investment strategy and the nature of the operations.

It is imperative to establish best practices in a 'business as usual' environment, and for the board of directors to continue such practices (proactively adapted as necessary) during all phases of a fund's life, including in times of distress. There is no substitute for active engagement by the board of directors and CIMA has sought to make this clear.

Furthermore, it is important that the board of directors should not just be, but should be capable of being seen to be, discharging their duties as directors by accurately recording in minutes or written resolutions, among other things, the matters considered and decisions made, and the information requested from, and provided by, service providers and advisors.

In the event of any doubt, or if issues arise or the circumstances dictate, specific legal advice should be taken by the board of directors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.