🛡️Bankruptcy Remote Structure

More detail on the bankruptcy remote structure behind OpenTrade products.

Summary

Currently, all loans made via the OpenTrade Treasury Management & Yield Product are made to a single Borrower, OpenTrade SPC, a segregated portfolio company registered in the Cayman Islands.

OpenTrade SPC has been designed to be "bankruptcy remote" meaning its assets would not form part of the bankruptcy estate of any other entity involved in supporting the OpenTrade Platform.

This is to ensure that loan collateral is protected and, in an extreme case, can be recovered by Lenders as secured creditors of the Borrower in a default event.

What is a Segregated Portfolio Company (SPC)?

The segregated portfolio company (SPC) is a type of exempted company in the Cayman Islands established under the Companies Act.

An SPC is single legal entity that can create Segregated Portfolios ("SP") such that the assets and liabilities of each Portfolio are legally separate from the assets and liabilities of any other Portfolio and from the SPC's general assets and liabilities. This is known as the segregation principle.

The central tenets of the segregation principle, as prescribed by the Companies Act, are these:

As regards each Portfolio's assets:

  • those assets are only available and may only be used to meet liabilities to the creditors and shareholders of the SPC who are, respectively, creditors in respect of that Portfolio and are entitled to recourse to those assets for that purpose; and

  • those assets are not available and may not be used to meet liabilities to creditors of the SPC who are not creditors in respect of that Portfolio

As regards each Portfolio's liabilities (being liabilities in respect of or attributable to that Portfolio):

  • each such liability extends only to, and the person in respect of that liability is entitled to have recourse only to:

    • firstly, that Portfolio's assets; and

    • secondly, unless the SPC's articles specifically prohibit, the SPC's general assets to the extent that Portfolio's assets are insufficient to meet the liability (and to extent that the SPC's general assets exceed any minimum capital amount lawfully required by a regulatory body in the Cayman Islands).

  • each such liability does not extend to, and the person in respect of that liability is not entitled to have recourse to, any other Portfolio's assets.

The segregated-portfolio concept also exists in various other jurisdictions (such as Delaware, Bermuda, British Virgin Islands, Guernsey and Jersey) and has become increasingly well understood and recognised. In May 2012, the Cayman Islands Court of Appeal, in ABC Company (SPC) v J & Co. Ltd (this was the first Cayman case to consider the SPC provisions), acknowledged the separateness of segregated portfolios while emphasising that the SPC’s status as a single legal entity.

OpenTrade SPC, Treasury Management Segregated Portfolio 1

OpenTrade SPC holds segregated accounts for each portfolio and each product so that the assets and liabilities of each segregated portfolio are ring fenced from the assets and liabilities of its other segregated portfolios, and the Cayman SPC overall is ring fenced from the assets and liabilities of other entities involved in the OpenTrade ecosystem.

The segregated portfolio of OpenTrade SPC which collateral for loans made via the Treasury Management & Yield Product is OpenTrade SPC, Treasury Management Segregated Portfolio 1. The assets in this segregated portfolio are only available to and may only be used to meet liabilities to Lenders who have made loans via the Treasury Management & Yield Product.

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