High Court finds transfer of assets to continuation fund to be void

The Commercial Court has given judgment in favour of a fund in claims against its former director, continuation vehicle, general partner (GP) and various related entities, declaring two transactions concerned with the transfer of the fund's assets to continuation vehicles void (under Lebanese law): Cedar Mundi (Holding) SAL v Bassel Attieh and others [2026] EWHC 1820 (Comm).

The judgment considers a GP-led continuation fund transaction, which is a transaction in which a fund manager sells a fund's assets into a new vehicle, typically to give existing investors an exit while allowing the manager to continue managing the assets. Although decided under Lebanese law, the judgment examines in detail the authorisation mechanics, valuation integrity and director conduct issues that arise when a GP-led continuation fund transaction goes wrong, and is required reading for those involved in structuring, executing or advising on continuation vehicle transactions. 

The case crystallises key commercial risks that may arise in GP-led secondary or continuation vehicle transactions, regardless of jurisdiction, such as: (i) whether board authorisation alone suffices, or whether shareholder (or limited partner) approval is separately required; (ii) undervalue risk where the fund’s GP or sponsor controls, or is closely affiliated with, both the selling fund (through a nominee director) and the continuation vehicle acting as buyer; (iii) the conflict that may arise where a director owes duties to the selling fund but has economic interests aligned with the buyer; and (iv) the circumstances in which a defective continuation transaction may be characterised as fraudulent, with the personal liability consequences that follow.

The principal takeaways for private capital clients are set out below:

• Where the sponsor or GP controls access to fund-level information about the nature, liquidity and convertibility of underlying assets, and is simultaneously aligned with the buyer, the pricing process may be compromised unless an independent valuation agent with access to that information and no economic interest in the outcome is engaged. 
• The fact pattern of the present case (namely a GP-led continuation vehicle transaction, executed without proper authority, at a significant undervalue, by a conflicted director) map onto equivalent English law causes of action. For example: breaches of directors’ duties under the Companies Act 2006 (duties to act within power, promote the success of a company, and avoid conflicts of interest), and equitable claims of dishonest assistance in breach of fiduciary duty and knowing receipt. 

We examine the key points of relevance for the private capital industry below. 

Background

Cedar Mundi (Holding) SAL (Cedar Mundi) was a Lebanese joint stock company operating as a venture capital fund. Its shareholder base was composed principally of 11 Lebanese banks and financial institutions that had invested pursuant to a Lebanese central bank circular (the C-331 Shareholders), a regulatory initiative designed to channel capital into the Lebanese technology and innovation sector, together with a minority interest held by Med Al Bahar International (MABIL), an entity associated with the Al Bahar Group, the sponsor. The Al Bahar Group was also the effective GP of the fund, with its nominee, Mr Bassel Attieh, serving as vice chairman and general manager of Cedar Mundi's board of directors.

Following the Lebanese financial crisis in late 2019, which severely restricted the availability of US dollars within the Lebanese banking system, Cedar Mundi began experiencing difficulties and Mr Attieh entered into two transactions on its behalf:

• In early 2020, Mr Attieh transferred the majority of Cedar Mundi's investment portfolio to IFA Capital Ltd (IFAC), a British Virgin Islands company within the Al Bahar Group, in exchange for an 84% shareholding in IFAC, documented in a Portfolio Preservation and Continuity Agreement (PPC Agreement) (2020 Transaction); and
• In June 2021, Mr Attieh signed a share purchase agreement (SPA) on Cedar Mundi's behalf, purporting to sell the overwhelming majority of Cedar Mundi's investment portfolio, including its IFAC shareholding, to Cedar II Fund LP (Cedar II), a Cayman Islands exempted partnership also within the Al Bahar Group, for US$27 million to be paid in so called “Lollars” (explained below) rather than freely convertible US dollars (the 2021 Transaction). 

In October 2023, Cedar II sought declarations that the SPA was valid and that it had acquired good title to the Cedar Mundi assets it purchased under it. Cedar Mundi responded with a counterclaim and brought separate proceedings against Mr Attieh, IFAC, MABIL, Cedar II and Mr Talal Al Bahar (a director of IFAC and MABIL and head of the Al Bahar Group) (together, the Defendants), seeking to have both transactions declared void and the investment portfolio returned. The proceedings were consolidated in October 2024, with Cedar Mundi as the claimant.

Decision

The High Court held that both the 2020 Transaction and 2021 Transaction were void. As the fund was incorporated in Lebanon, the validity of the transactions fell to be determined under Lebanese law, which the court treated as a question of fact determined by competing expert evidence in the usual way. Nonetheless, the underlying governance questions which arose are broadly analogous to those which arise under English law governed transactions. 

Compliance with procedural and governance steps, and valuation challenges

The Defendants accepted that the 2020 Transaction was never authorised. Mr Attieh entered into the PPC Agreement without board authority and without a general assembly resolution. 

The Defendants argued that the 2021 Transaction was authorised at a 13 April 2021 board meeting, where Mr Attieh was apparently given authority to execute the SPA. The court rejected that argument. On a proper construction of the 13 April 2021 board resolution, the board viewed ratification as conditional upon a subsequent general assembly vote, which never took place, and so Mr Attieh had executed the SPA without authority. In any event, the board’s purported authorisation was contrary to the Lebanese Commercial Code, and a nullity due to Mr Attieh voting at the meeting despite his position of conflict.

Notwithstanding the lack of general assembly ratification, the 2021 Transaction would still have been valid under Lebanese law if (i) it was entered into by Cedar II in “good faith”, and / or (ii) it was “beneficial” to Cedar Mundi. 

As to good faith, the court held that this exception was only available under Lebanese law to an unrelated entity. It found that the exception did not apply because Cedar II was not unrelated: it was closely affiliated with Mr Attieh (who was simultaneously Cedar Mundi's director and also the architect of the transaction on both sides).

In determining whether the 2021 Transaction was of benefit to Cedar Mundi, the court considered the true valuation of the assets sold and consideration paid under the SPA (US$27 million paid in “Lollars”). The valuation analysis turned heavily on the value to ascribe to "Lollars", which following the crisis of 2019, were effectively illiquid US dollar deposits held in Lebanese banks that could not be freely converted or remitted abroad, and traded at a significant discount to genuine US dollar equivalents. In short, the question for the court was whether US$27 million (to be paid in “Lollars”) was a fair price?

The court preferred the claimant's expert evidence on the appropriate multipliers, which revealed the true economic value of the consideration to be materially less than US$27 million and, when set against the court's assessment of the portfolio's true fresh-dollar value, confirmed the transaction was at a very significant undervalue.

Fraud risk

The court also found that the 2021 Transaction constituted fraud under Lebanese law, a free-standing basis for invalidity, in addition to the absence of general assembly ratification. The court was satisfied that Mr Attieh’s concealment of the 2020 Transaction amounted to fraud in the broad sense. The court found that the PPC Agreement was concealed from Cedar Mundi's board, shareholders (including the C-331 Shareholders), auditor, the Lebanese securities depository and the Lebanese central bank. Mr Attieh accepted in evidence that at the time of the 2020 Transaction, only he , Mr Najjar (a fellow Cedar Mundi director), and Mr Al Bahar, knew of its existence.

Breaches of duties

The court also found that Mr Attieh repeatedly breached duties of loyalty and good faith owed to Cedar Mundi under Lebanese law in connection with both the 2020 and 2021 Transactions. The key findings included:

• Conflict of interest. The court rejected Mr Attieh's case that he had acted in Cedar Mundi's interests throughout and found that the true purpose of the transactions was to protect and advance the Al Bahar group's interests, not those of Cedar Mundi. His participation in board-level decision-making in circumstances where he was conflicted, and his failure to disclose the nature and extent of that conflict, was itself a breach of his duties. 
• Personal benefit received from the counterparty. Mr Attieh received a substantial “bonus” from Mr Al Bahar following the transactions, which the court treated as evidence that Mr Attieh's loyalty lay with the Al Bahar group rather than with Cedar Mundi, and informed the court’s wider conclusion that Mr Attieh was not acting in Cedar Mundi's interests.

Having found that both the 2020 and 2021 Transactions were invalid, the court deferred its consideration of the available remedies to a subsequent consequentials hearing. The key issues to be addressed at that hearing are the declarations sought, whether to order the return of the investment portfolio to Cedar Mundi and the quantification of any damages (plus interest).