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Courts to rule on future of CVC fund

Legal action by a former employee could lead to the winding up of the CVC Opportunity fund.

The CVC Opportunity fund is under threat of being disbanded following the UK Law Lords’ ruling that its general manager could be wound up if it didn’t offer a fair price for shares held by former CVC Opportunity Equity Partners employee Luis Demarco.

Demarco was dismissed by the firm in 1999 for alleged bad performance. Following his dismissal, Demarco attempted to sell his 1 per cent holding in the fund to the majority shareholders for fair value. The majority shareholder offered Demarco $1 for his stake, an offer which Demarco rejected.

Demarco subsequently petitioned the court of the Cayman Islands, where the CVC fund is incorporated, to wind up the general manager. The general manager then obtained a court injunction against the petition. Five UK Law Lords have now overturned that injunction, ruling that Demarco was only seeking to realise the valuation of his investment as a result of his exclusion from the fund’s management team.

The CVC Opportunity fund is managed by Brazilian financier Daniel Dantas. Citicorp Venture Capital, the VC unit of Citigroup is the largest backer of the fund, having invested $700m.