Cayman Islands - Comparison of Delaware and Cayman Exempted Limited Partnership

Cayman Islands Comparison of Delaware and Cayman Exempted Limited Partnership
This note provides a general comparison of Delaware and Cayman limited partnerships. It does not attempt to guide the reading to any one jurisdiction over
another, but instead highlights some of the features common to Cayman and Delaware limited partnerships, describes certain of the legal requirements in respect
of the limited partnership laws in each jurisdiction and examines some of the factors to consider when deciding which jurisdiction to use. Please note that Walkers
do not advise on Delaware law, the information on Delaware law in this Memo has been compiled in conjunction with US counsel and is not a substitute for specific
legal advice.
CAYMAN ISLANDS
DELAWARE
Legislation
The Exempted Limited Partnership Law, 2014 (the "ELP Law").
Delaware Revised Uniform Limited Partnership Act (the "Act").
Constitution
An exempted limited partnership ("ELP") requires at least one
limited partner ("LP") and at least one general partner
("GP"). At least one GP is required to be either an individual
resident in the Cayman Islands, a company incorporated or
registered as a foreign company in the Cayman Islands, be an
ELP itself or a foreign limited partnership registered in the
Cayman Islands under the ELP Law (sections 4(2) and (4)).
A limited partnership ("DELP") is defined as a partnership
formed by at least two persons under the laws of the State of
Delaware and having at least one general partner ("GP") and at
least one limited partner ("LP") (section 17-101(8)).
Legal form
An ELP as such is not an entity with separate legal personality,
and cannot own property in its own right; the general statutory
position is that the property of the ELP will be held on statutory
trusts by the GPs jointly under section 16(1) of the ELP Law.
A DELP formed under the Act shall be a separate legal entity,
the existence of which as a separate legal entity shall continue
until cancellation of the DELP's certificate of limited partnership
(section 17-201(b)).
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DELAWARE
Any rights or property of every description of the ELP, including
all choses in action and any right to make capital calls and
receive the proceeds thereof that is conveyed to or vested in or
held on behalf of a GP or conveyed into or vested in the name
of the ELP shall be held or deemed to be held by the GP, or if
more than one then by the GPs jointly, upon trust, as an asset
of the ELP in accordance with the terms of the partnership
agreement ("LPA"). Any debt or obligation incurred by a GP in
the conduct of the business of an ELP shall be a debt or
obligation of the ELP (sections 16(1) and 16(2)).
Nature of business
permitted
Registration requirements
Any lawful purpose or purposes to be carried out and
undertaken either in or from within the Cayman Islands or
elsewhere in accordance with the ELP Law provided that the
ELP shall not undertake business with the public in the Cayman
Islands other than so far as may be necessary for the carrying
on of the business of that ELP exterior to the Cayman Islands
(section 4(1)).
A DELP may carry on any lawful business, purpose or activity,
whether or not for profit, with the exception of the business of
granting policies of insurance, or assuming insurance risks, or
banking.
An ELP must be registered with the Registrar of Exempted
Limited Partnerships (the "Registrar") which is achieved by a
GP filing a statement pursuant to section 9 of the ELP Law
setting forth:
In order to form a DELP, at least one person (but not less than
all of the GPs) must execute a certificate of limited
partnership. The certificate of limited partnership shall be filed
in the Office of the Secretary of State setting forth:
1.
the name (or dual foreign name and translated name)
of the ELP (which must contain the words "Limited
Partnership" or the letters "L.P." or "LP");
1.
2.
the address of its registered office in the Cayman
A DELP shall possess and may exercise all the powers and
privileges granted by the Act or by any other law or by its
partnership agreement ("LPA"), together with any powers
incidental thereto, including such powers and privileges as are
necessary or convenient to the conduct, promotion or
attainment of the business, purpose or activities of the DELP
(section 17-106).
the name of the DELP (which, in accordance with
section 17-102 of the Act, must contain the words
"Limited Partnership" or abbreviation "L.P." or
designation "LP");
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CAYMAN ISLANDS
Islands;
3.
the general nature of the business of the ELP;
4.
the duration of the term of the ELP (may be
unlimited);
5.
the full name and address of each GP; and
6.
a declaration that the ELP will not undertake business
with the public of the Cayman Islands other than so
far as may be necessary for carrying on of the
business of that ELP exterior to the Cayman Islands
(sections 6(1) and 9(1)).
DELAWARE
2.
the name and the business, residence or mailing
address of each GP; and
3.
any other matters the partners determine to include
therein.
A DELP is formed at the time of the filing of the initial
certificate of limited partnership in the Office of the Secretary
of State or at any later due or time specified in the certificate of
limited partnership if, in either case, there has been substantial
compliance with the requirements of section 17-201 of the Act
(section 17-201).
Registered Office
An ELP shall have a registered office situated in the Cayman
Islands for the service of process and to which all notices and
communications may be addressed (section 6(2)).
Each DELP shall have and maintain in the State of Delaware a
registered office (which may but need not be a place of its
business in the State of Delaware) and shall have a registered
agent, whose business office is identical with the DELP's
registered office, for service of process on the DELP
(section 17-104).
Restrictions on number of
partners
Unlimited number of partners allowed as a matter of Cayman
Islands' law. [In effect, subject to the US Internal Revenue
Code and the US Investment Company Act of 1940.]
Unlimited number of partners allowed, subject to the US
Internal Revenue Code and the US Investment Company Act of
1940.
Changes to certificate of
limited
partnership/registration
statement
If any change is made or occurs in any matter specified in
paragraphs (a) to (e) of the ELP's Section 9 Registration
Statement (as set out under paragraphs (1) to (5) under
'Registration Requirements', above), a GP must within 60 days
of such change file with the Registrar a statement specifying
the nature of the change.
A certificate of limited partnership is amended by filing a
certificate of amendment thereto in the Office of the Secretary
of State. The certificate of amendment shall set forth:
1.
the name of the DELP; and
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CAYMAN ISLANDS
A statement signed in respect of any arrangement or
transaction consequent upon which any person will be
removed, replaced or admitted as a GP in any ELP, shall, within
fifteen days of such arrangement or transaction, be filed with
the Registrar and, until such statement is so filed, the
arrangement or transaction shall, for the purposes of the ELP
Law and the LPA, not be effective to remove, replace or admit
that person as a GP of the ELP and with respect to a
replacement or admitted GP, the documentation required by
the ELP Law shall be provided as the case may require.
Without the written consent of each person thereby affected,
no arrangement or transaction shall take effect to the extent
that it seeks to relieve or discharge a GP from the obligations
of a GP with regard to any debt or obligation of the ELP to a
person incurred before such arrangement or transaction takes
effect (section 10 (3)).
DELAWARE
2.
the amendment to the certificate.
A GP who becomes aware that any statement in a certificate of
limited partnership was false when made, or that any matter
described has changed making the certificates false in any
material respect, shall promptly amend the certificate.
Notwithstanding the requirements of the paragraph above, no
later than 90 days after the happening of any of the following
events an amendment to a certificate of limited partnership
reflecting the occurrence of the event or events shall be filed by
a GP:
1.
the admission of a new GP;
2.
a change in the name of the DELP, or except as
otherwise provided in sections 17-104(b) and (c) of
the Act, a change in the address of the registered
office or a change in the name or address of the
registered agent of the DELP.
A certificate of limited partnership may be amended at any
time for any other proper purpose the GPs may determine
(section 17-202).
Amendment to the LPA
Notwithstanding any term in the LPA to the contrary, any term
of the LPA may be amended orally by the partners.
However, usually, the LPA will set out the manner in which an
agreement may be amended and this is likely to be either by:
1.
the GP with LP consent acting by a specified majority;
2.
the GP only (generally only administrative matters);
An LPA may provide for the taking of an action, including the
amendment of the LPA, without the vote or approval of any LP
or class or group of LPs or any GP or class or group of GPs
(section 17-302(a)).
If an LPA provides for the manner in which it may be amended,
it may be amended in that manner or with the approval of all
the partners or as otherwise permitted by law (section
17-302(f)).
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CAYMAN ISLANDS
DELAWARE
and
3.
Powers and liabilities of GPs
the GP with the consent of affected partners
(economic rights and regulatory matters, eg ERISA
issues).
In the event that the assets of the ELP are inadequate, the GP
(or GPs jointly) shall be liable for all of the debts and
obligations of the ELP (section 4(2)).
Except as provided in the Act or in the LPA, a GP has the rights
and powers and is subject to the restrictions of a partner in a
partnership without LPs.
A GP shall act at all times in good faith and, subject to any
express provisions of the LPA to the contrary, in the interests of
the ELP (section 19(1)).
Except as provided in the Act, a GP has the liabilities of a
partner in a partnership without LPs to persons other than the
partnership and the other partners. Except as provided in the
Act or in the LPA, a GP has the liabilities of a partner in a
partnership without LPs to the partnership and to the other
partners.
Any debt or obligation incurred by a GP in the conduct of the
business of the ELP shall be a debt or obligation of the ELP
(section 16(2)).
Unless otherwise provided in the LPA, a GP has the power and
authority to delegate to one or more other persons the GP's
rights and powers to manage and control the business and
affairs of the DELP (section 17-403).
Registers
The GP shall maintain or cause to be maintained in the country
or territory that the GP may determine a register of limited
partners, setting forth the name and address of each LP, the
date on which a person became a LP and the date on which a
person ceased to be a LP (the "Register"). The Register is
required to be updated within 21 days of any change in the
particulars therein. The GP shall maintainor cause to be
maintained at the registered office of the ELP a record of the
address at which the register of limited partners is maintained,
which record shall be updated within twenty-one days of the
date of any change in the particulars therein.
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CAYMAN ISLANDS
The Register and the record of the address at which the
Register is maintained is open to inspection during usual
business hours in the place where the register is maintained by,
subject to any express or implied term of the LPA, all partners,
or by any other person with the consent of the GP. A GP who
defaults in complying with the duty to update the Register, is
guilty of an offence and liable on summary conviction to a fine
for each day that such default continues, and shall indemnify
any person who thereby suffers any loss (section 29).
Where the Register is kept at a place other than the registered
office of the ELP, the GP must make available at the registered
office, in electronic form or any other medium, the Register
upon service of an order or notice by the Tax Information
Authority (the "TIA") pursuant to the Tax Information Authority
Law (2013 Revision). A GP who defaults in complying with any
such order or notice without reasonable excuse, shall incur a
penalty of US$625 and a further penalty of US$125 forevery
day during which that non-compliance continues.
The GP must also maintain or cause to be maintained in any
country or territory a record of the amount and date of the
contribution or contributions of each LP of the ELP and the
amount and date of any payment representing a return of the
whole or any part of the contribution of any LP (the "Record"),
which Record shall be updated within twenty-one days of the
date of any change in the particulars therein. Such Record is
open to inspection during all usual business hours in the place
where the records are maintained by any person with the
consent of the GP. The default provisions relating to a GP's
failure to update the Register and provide the Register to the
TIA apply equally to the Record.
The GP has a duty to maintain or cause to be maintained at the
registered office a register of security interests in respect of
DELAWARE
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CAYMAN ISLANDS
DELAWARE
interests in the ELP (the "Register of Security Interests").
This shall record the identity of the grantor and grantee, the
partnership interest or part thereof subject to the security
interest and the date on which notice of the secutiry interest
was validly served on the ELP. Written notice of the grant of a
security interest over the whole or any part of a limited
partnership interest must be given by the grantor or the
grantee to the ELP at its registered office. Any security
interest over the whole or any part of a limited partnership
interest shall have priority according to the time that such
written notice is validly served at the registered office of the
ELP. The Register of Security Interests shall be open to
inspection by any person during all usual business hours. A
failure to comply with the duty to maintain the register is an
offence and each GP in default shall incur a penalty of US$31
for each day that the default continues (section 31).
Admission of limited
partners
Subject to the LPA, a person may become a partner of an ELP
either by executing and delivering the LPA orany supplement
thereto or counterpart thereof together withthe GP, by
acceding to the LPA in accordance with its terms or upon the
transfer of all or part of a partnership interest in accordance
with the ELP Law and in each case, without the consent of the
existing LPs (section 32(2)).
As provided in and upon compliance with the LPA
(section 17-301(a)).
Contributions
Contributions may be made in cash, property, services or other
assets which a partner contributes to the capital of an ELP in its
capacity as a partner (but shall not include any moneys lent by
a partner to an ELP) (section 2).
A person may be admitted to a DELP as an LP and may receive
a partnership interest in the DELP without making a
contribution or being obligated to make a contribution to the
DELP (section 17-301(d)).
The contribution of a partner may be in cash, property or
services rendered, or a promissory note or other obligation to
contribute cash or property or to perform services
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CAYMAN ISLANDS
DELAWARE
(section 17-501)).
Default
If the LPA provides that where a partner fails to perform any of
its other obligations under, or otherwise breaches the
provisions of, the LPA that partner may be subject to or suffer
remedies for, or consequences of, the failure or breach
specified in the LPA or otherwise applicable under any law and
those remedies or consequences shall not be unenforceable
solely on the basis that they are penal in nature.
Such remedies or consequences may include but are not
limited to any one or more of the following:
1.
reducing, eliminating or forfeiting the defaulting
partner's partnership interest in the ELP or any rights
of the defaulting partner underthe LPA;
2.
subordinating the defaulting partner's partnership
interest to the interests of non-defaulting partners;
3.
effecting a forced sale or forfeiture of the defaulting
partner's partnership interest;
4.
arranging for the lending by other partners or other
persons to the defaulting partner of the amount
necessary to meet the defaulting partner's
commitment;
5.
providing for the fixing of the value of the defaulting
partner's partnership interest by appraisal or by
formula and the redemption or sale of the defaulting
partner's partnership interest at that value; or
6.
exercising any other remedy or consequence specified
An LPA may provide that:
1.
an LP who fails to perform in accordance with, or to
comply with the terms and conditions of , the LPA
shall be subject to specified penalties and specified
consequences; and
2.
at the time or upon the happening of events specified
in the LPA, an LP shall be subject to specified penalties
or specified consequences (section 17-306).
An LPA may provide that the interest of any partner who fails to
make any contributions that he is obligated to make shall be
subject to specified penalties for, or specified consequences of,
such failure. Such penalty or consequence may take the form
of reducing or eliminating the defaulting partner's
proportionate interest in the DELP, subordinating his
partnership interest to that of non-defaulting partners, a forced
sale of his partnership interest, forfeiture of his partnership
interest, the lending by other partners of the amount necessary
to meet his commitment, a fixing of the value of his partnership
interest by appraisal or by formula and redemption or sale of
his partnership interest at such value, or other penalty or
consequence (section 17-502(c)).
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CAYMAN ISLANDS
DELAWARE
in the LPA or available under any applicable laws.
Liability of LPs to third
parties
An LP shall not take part in the conduct of the business of the
ELP in its capacity as a LP. All letters, contracts, deeds,
instruments or documents whatsoever shall be entered into by
or on behalf of the GP (or any agent or delegate of the GP) on
behalf of the ELP (sections 14(1) and (2)).
If an LP takes part in the conduct of the business of an ELP in
its dealings with persons who are not partners, that LP shall be
liable, in the event of the insolvency of the ELP, for all debts
and obligations of that ELP incurred during that period that he
participates in the conduct of the business as though he were,
for that period, a GP, but the LP shall be liable only to a person
who transacts business with the ELP during such period with
actual knowledge of such participation and who then
reasonably believed such LP to be a GP.
An LP is not liable for the obligations of a DELP unless he is also
a GP or, in addition to the exercise of his rights and powers as
an LP, he participates in the control of the business. However,
if the LP does participate in the control of the business, he is
liable only to persons who transact business with the DELP
reasonably believing, based upon the LP's conduct, that the LP
is a GP.
An LP does not participate in the control of the business within
the meaning of the Act by:
1.
being an independent contractor for, or an agent or
employee of, the DELP or a GP, or an officer, director
or stockholder of a corporate GP, or LP of a
partnership that is a GP of the DELP, or a trustee,
administrator, executor, custodian or other fiduciary or
beneficiary of an estate or trust which is a GP, or a
trustee, officer, advisor, stockholder or beneficiary of a
business trust which is a GP or member, manager,
agent or employee of a limited liability company
which is a GP;
2.
consulting with or advising a GP or any other person
with respect to any matter, including the business of
the DELP, or acting or causing a GP or any other
person to take or rerain from taking any action,
including by proposing, approving, consenting or
disapproving, by voting or otherwise, with respect to
any matter, including the business of the DELP;
3.
acting as surety, guarantor or endorser for the DELP or
a GP, guarantying or assuming one or more
An LP does not take part in the conduct of the business of an
ELP by:
1.
holding an office or interest in, or having a contractual
relationship with, a GP or being a contractor for or an
agent or employee of the ELP or of a GP or acting as a
director, officer or shareholder of a corporate GP;
2.
consulting with and advising a GP or consenting or
withholding consent to any action proposed, in the
manner contemplated by the LPA with respect to the
business of the ELP;
3.
investigating, reviewing, approving or being advised
as to the accounts or business affairs of the ELP or
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CAYMAN ISLANDS
DELAWARE
exercising any rights conferred by the ELP Law;
4.
acting as surety or guarantor for the ELP either
generally or in respect of specific obligations;
5.
approving or disapproving an amendment to the
partnership agreement
6.
calling, requesting, attending or participating in any
meeting of the partners;
7.
taking any action that results in the winding up or the
dissolution of the ELP;
8.
taking any action required or permitted by the LPA or
by law to bring, pursue, settle or terminate any action
or proceedings brought pursuant to section 33(2) of
the ELP Law;
9.
appointing a person to serve on any board or
committee of the ELP, a GP or an LP or removing a
person therefrom;
10.
serving on any board or committee of the ELP, a GP,
the LPs or the partners, or by appointing, electing or
otherwise participating in the choice of a
representative or any other person to serve on any
board or committee, or by acting as a member of any
board or committee either directly or by or through
any representative or other person, including giving
advice or consenting, or refusing to consent, to any
action proposed by the GP on behalf of the ELP and
exercising any powers or authorities or performing
any obligations as a member of that board or
obligations of the DELP or a GP, borrowing money
from the DELP or a GP, lending money to the DELP or
a GP, or providing collateral for the DELP or a GP;
4.
calling, requesting or attending or participating at a
meeting of the partners or the LPs;
5.
winding up a DELP pursuant to section 17-803 of the
Act;
6.
taking any action required or permitted by law to
bring, pursue or settle or otherwise terminate a
derivative action in the right of the DELP;
7.
serving on a committee of the DELP or the LP or
partners or appointing, electing or otherwise
participating in the choice of a representative or
another person to serve on any such committee, and
acting as a member of any such committee directly or
by or through any such representative or other
person;
8.
acting or causing the taking or refraining from the
taking of any action, including by proposing,
approving, consenting or disapproving, by voting or
otherwise, with respect to one or more of the
following matters:
(a)
the dissolution and winding up of the DELP
or an election to continue the DELP or an
election to continue the business of the
DELP;
(b)
the sale, exchange, lease, mortgage,
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CAYMAN ISLANDS
DELAWARE
committee in the manner contemplated by the LPA;
11.
12.
serving on the board of directors or a committee of,
consulting with or advising or being an officer,
director, shareholder, partner, member, manager,
trustee, agent or employee of, or by being a fiduciary
or contractor for, any person in which the ELP has an
interest or any person providing management,
consultation, custody or other services or other
products for, to or on behalf of, or otherwise having a
business or other relationship with, the ELP or a GP of
the ELP; or
assignment, pledge or other transfer of, or
granting of a security interest in, any asset or
assets of the DELP;
(c)
the incurrence, renewal, refinancing or
payment or other discharge of indebtedness
by the DELP;
(d)
a change in the nature of the business;
(e)
the admission, removal or retention of a GP;
(f)
the admission, removal or retention of a LP;
(g)
a transaction or other matter involving an
actual or potential conflict of interest;
voting as an LP on:
(a)
the winding up and dissolution of the ELP;
(b)
the purchase, sale, exchange, lease,
mortgage, pledge or other acquisition or
transfer of any asset or assets by or of the
ELP;
(h)
an amendment to the LPA or certificate of
limited partnership;
(i)
the merger or consolidation of a DELP;
(c)
the incurrence or renewal of indebtedness by
the ELP;
(j)
(d)
a change in the nature of the business of the
ELP;
(e)
the admission, removal or withdrawal of a GP
or LP and the continuation of business of the
ELP thereafter; or
(f)
transactions in which one or more of the GPs
have an actual or potential conflict of interest
in respect of a DELP which is registered as an
investment company under the Investment
Company Act of 1940, any matter required
by the Investment Company Act of 1940 to
be approved by the holders of beneficial
interests in an investment company,
including the electing of directors or trustees
of the investment company, the approving or
terminating of investment advisory or
underwriting contracts and the approving of
auditors;
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CAYMAN ISLANDS
DELAWARE
with one or more of the LPs (section 20(2)).
The above is a non-exhaustive list of matters which do not
amount to an LP taking part in the conduct of the business of
an ELP and shall not import any implication that the possession
or exercise of any other power by an LP will necessarily
constitute the taking part by such LP in the business of the ELP.
9.
Series of LPs, GPs or
partnership interests
Series partnerships are permissible under Cayman Islands' law
as a matter of contract but note that there is no scope for
statutory segregation as between the assets and/or liabilities of
different series of interests. An LPA providing for different
series of interests comprises solely a contractual arrangement
(k)
the indemnification of any partner or other
person;
(l)
the making of, or calling for, or the making of
other determinations in connection with
contributions;
(m)
the making of, or the making of other
determinations in connection with or
concerning, investments, including
investments in property whether real,
personal or mixed, either directly or
indirectly, by the DELP; or
(n)
such other matters as are stated in the LPA or
in any other agreement or in writing;
serving on the board of directors or a committee of,
consulting with or advising, being an officer, director,
stockholder, partner (other than a GP of a GP of the
DELP), member, manager, trustee, agent or employee
of, or to be a fiduciary or contractor for, any person in
which the DELP has an interest or any person
providing management, consulting, advisory, custody
or other services or products for, to or on behalf of, or
otherwise having a business or other relationship with,
the DELP or a GP of the DELP (section 17-303).
An LPA may establish or provide for the establishment of
designated series of LPs, GPs or partnership interests having
separate rights, powers or duties with respect to specified
property or obligations of the DELP, and, to the extent
provided in the LPA, any such series may have a separate
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CAYMAN ISLANDS
effective as between the partners and is not effective in relation
to third parties, such as creditors, in the absence of limited
recourse language limiting the recourse of such third parties to
the assets relevant to a particular series in the context of a
particular document.
DELAWARE
business purpose or investment objective (section 17-218(a)).
The GP should therefore manage cross-series liability by
incorporating limited recourse language, where possible, when
contracting with third parties.
Classes and voting
An LPA may provide for classes or groups of LPs or GPs having
such relative rights, powers and duties as the LPA may provide,
and may make provision for the future creation in any manner
provided in the LPA of additional classes or groups of LPs or
GPs having such relative rights, powers and duties as may from
time to time be established, including rights, powers and duties
senior to existing classes and groups of LPs or GPs.
The LPA may grant to all or certain identified LPs or a specified
class or group of LPs (subject to section 17-303 of the Act), or
to all or certain identified GPs or a specified group of GPs, the
right to vote separately or with all or any class or group of the
LPs or GPs, on any matter. Voting by LPs or GPs may be on a
per capita, number, financial interest, class, group or any other
basis.
Unless otherwise provided in an LPA, on any matter that is to
be voted on by GPs or LPs, the GPs or LPs may take such action
without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken,
shall be signed by the GPs or LPs having not less than the
minimum number of votes that would be necessary to
authorise or take such action at a meeting at which all GPs or
LPs entitled to vote thereon were present and voted. Unless
otherwise provided in an LPA, on any matter that is to be voted
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CAYMAN ISLANDS
DELAWARE
on by GPs or LPs, the GPs or LPs may vote in person or by
proxy.
An LP and any class or group of LPs have the right to vote only
on matters as specifically set forth in subchapter 3 of the Act,
on matters specifically provided by agreement, including an
LPA, and on any matter with respect to which a GP may
determine in its discretion to seek a vote of an LP or a class or
group of LP if a vote on such matter is not contrary to an LPA
or another agreement to which a GP or the DELP is a party. An
LP and any class or group of LPs have no other voting
rights. An LPA may provide that any LP or class or group of
LPs shall have no voting rights (sections 17-302 and 17-405).
Transfer of partnership
interest
A partnership interest is transferable in whole or in part in
accordance with the ELP Law and the provisions of the LPA
(section 32(1)).
Subject to the LPA, a person may become a partner of an ELP
either by executing and delivering together with the GP, by
acceding to the LPA in accordance with its terms or upon the
transfer of all or part of a partnership interest in accordance
with the ELP Law and in each case, without the consent of the
existing LPs (section 32(2)).
Where the requirements for or conditions to an admission of
an LP to the ELP contained in the LPA have been complied with
in accordance with their terms or, to the extent permitted by
the LPA, waived, any person, however admitted, shall without
the requirement for any further actions or formalities, be
deemed to have adhered to and agreed to be bound by the
terms and conditions of the LPA and shall have the rights and
be subject to the obligations contained in the LPA and the ELP
Law as if the person and all existing partners had together duly
A partnership interest is personal property. No partner has any
interest in specific property of the DELP (section 17-701).
Unless otherwise provided in the LPA:
1.
a partnership interest is assignable in whole or in part;
2.
an assignment of a partnership interest does not
dissolve a DELP or entitle the assignee to become or
to exercise any rights or powers of a partner;
3.
an assignment of a partnership interest entitles an
assignee to share in such profits and losses, to receive
such distribution or distributions, and to receive such
allocation of income, gain, loss, deduction, or credit or
similar item to which the assignor was entitled, to the
extent assigned; and
4.
a partner ceases to be partner and to have the power
to exercise any rights or powers of a partner upon
assignment of all of his partnership interest. Unless
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CAYMAN ISLANDS
DELAWARE
executed and delivered the LPA (section 32(3)).
otherwise provided in an LPA, the pledge of, or
granting of a security interest, lien or other
encumbrance in or against, any or all of the
partnership interest of a partner shall not cause the
partner to cease to be a partner or to have the power
to exercise any rights or powers of a partner
(section 17-702(a)).
Transfer of limited partnership interests
Subject to the LPA, no LP may transfer or grant any
securityinterest in the whole or any part of his limited
partnership interest except with the written consent of the GP
given priorto, or simultaneously with, the transfer or grant
(section 32(6)).
Subject to the LPA, the transferee of a limited partnership
interest or part thereof shall be admitted as a LP, wholly or
partly, as the case may be, in place of and to the exclusion of
the transferor in respect of the limited partnership interest or
part thereof transferred but, unless otherwise agreed in writing
by the transferor, the transferee and the general partner, the
transferee. shall not assume any liability of the transferor
arising from his taking part in the conduct of business of the
ELP, which is prohibited by the ELP Law, or for the return of
contributions to the assignor following an insolvency of the ELP
and provided further that, notwithstanding any term of the LPA
or any other agreement to the contrary, no such transfer shall
relieve the transferor of any liability arising pursuant thereto
(section 32(8)(b)).
Transfer of general partnership interests
Subject to the LPA and the ELP Law, a GP may transfer or grant
a security interest in the whole or any part of his general
partnership interest with the written consent of any other GP
given prior to, or simultaneously with, the transfer or grant
(section 32(7)).
Subject to the LPA, the transferee of a general partnership
interest or part thereof shall be admitted as a GP in place of
and (subject to the required filings having been made with the
Registrar) to the exclusion of, or in addition to, as the case may
Unless otherwise provided in an LPA and except to the extent
assumed by agreement, until an assignee of a partnership
interest becomes a partner, the assignee shall have no liability
as a partner solely as a result of the assignment
(section 17-702(c)).
Unless otherwise provided in the LPA, a DELP may acquire, by
purchase, redemption or otherwise, any partnership interest or
other interest of a partner in the DELP. Unless otherwise
provided in the LPA, any such interest so acquired by the DELP
shall be deemed cancelled (section 17-702(d)).
An assignee of a partnership interest, including any assignee of
a GP, may become an LP if and to the extent that:
1.
the LPA so provides; or
2.
all partners consent (section 17-704(a)).
An assignee who has become an LP has, to the extent assigned,
the rights and powers, and is subject to the restrictions and
liabilities, of an LP under the LPA and the Act
(section 17-704(b)).
Whether or not an assignee of a partnership interest becomes
an LP, the assignor is not released from his liability to the DELP
under subchapters 5 and 6 of the Act (section 17-704(c)).
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CAYMAN ISLANDS
be, the transferor in respect of the general partnership interest
or part thereof transferred but the transferee shall not be liable
for any obligation of the ELP incurred before he is so admitted
unless otherwise agreed in writing by the transferor and the
transferee and the transferor shall remain liable for any
obligation of the ELP incurred before the transferor ceased to
be a GP unless otherwise agreed in writing by the transferor,
the transferee and the person to whom the obligation is owed
(section 32(8)(a)).
Assignment or other disposition of interests
A partner may assign or otherwise dispose of, whether
absolutely or by way of security in any manner permitted by
law, any right, debt or other chose in action arising under the
LPA but no assignment or other disposition may, subject to the
LPA, be made without the consent of the GP or, in the case of
an assignment or disposition by a GP, the consent of any other
GP given prior to, or simultaneously with, the assignment or
disposition.
An LPA may provide that, as against any other partner, any
assignment or other disposition by a partner of any right, debt
or other chose in action arising under the LPA shall confer
economic rights only. "Economic rights" are: any rights to
make and enforce capital calls, to receive the proceeds thereof
and to enforce payment of, and receive any sums payable to
the partner including the rights on the winding up and
dissolution of the ELP; the right to receive a share of profits of
the ELP or a share of the property on its winding up and
dissolution; the right to an account for the purpose of
ascertaining the amount or share of any of the foregoing; and
any other rights that are expressly stated in the LPA to be
assignable.
DELAWARE
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DELAWARE
Allocations of profits and
losses
The profits and losses of an ELP shall be allocated among the
partners, and among classes or groups of partners, in the
manner provided in the LPA.
The profits and losses of a DELP shall be allocated among the
partners, and among classes or groups of partners, in the
manner provided in the LPA. If the LPA does not so provide,
profits and losses shall be allocated on the basis of the agreed
value (as stated in the records of the DELP) of the contributions
made by each partner to the extent they have been received by
the DELP and have not been returned (section 17-503).
Allocations of distributions
Distributions of cash or other assets of an ELP shall be allocated
among the partners, and among classes or groups of partners,
in the manner provided in the LPA.
Distributions of cash or other assets of a DELP shall be
allocated among the partners, and among classes or groups of
partners, in the manner provided in the LPA. If the LPA does
not so provide, distributions shall be made on the basis of the
agreed value (as stated in the records of the DELP) of the
contributions made by each partner to the extent they have
been received by the DELP and have not been returned
(section 17-504).
Limitations on distributions
An LP who receives a payment representing a return of any part
of his contribution to the ELP or is released from any
outstanding obligation in respect of his commitment and, at
the time that the payment was made or the release effected,
the ELP is insolvent including where the payment or release
causes the insolvency and the LP has actual knowledge of the
insolvency of the ELP, then for a period of six months
commencing on the date of that payment or release but not
thereafter, the LP shall be liable to the ELP for the amount of
the payment or the due performance of the released obligation
in respect of his commitment in each case to the extent that
the repayment or performance of the released obligation is
necessary to discharge a debt or obligation of the ELP incurred
during the period that the contribution or commitment
represented an asset of the ELP (section 34(1)).
A DELP shall not make a distribution to a partner to the extent
that at the time of the distribution, after giving effect to the
distribution, all liabilities of the DELP, other than liabilities to
partners on account of their partnership interests and liabilities
for which the recourse of creditors is limited to specified
property of the DELP, exceed the fair value of the assets of the
DELP, except that the fair value of property that is subject to a
liability for which the recourse of creditors is limited shall be
included in the assets of the DELP only to the extent that the
fair value of that property exceeds that liability.
An LP who receives a distribution in violation of section 17-607
of the Act and who knew at the time such section was being
violated shall be liable to the DELP for the amount of the
distribution. An LP who receives a distribution in violation of
this section but did not know the section was being violated,
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Any amount required to be repaid pursuant to the above
provision shall, unless the LPA specifies otherwise, bear simple
interest at the rate of 10% per annum (calculated on a daily
basis) (section 34(2)).
If an ELP is voluntarily wound up and dissolved, the period of
six months referred to above shall be calculated from the
earliest of: (a) the time of the passing of a resolution for
winding up; (b) the time or the occurrence of the event
specified in the LPA requiring that it be wound up and
dissolved; or (c) the insolvency of the ELP.
DELAWARE
shall not be liable for the amount of the distribution.
Unless otherwise agreed, an LP who receives a distribution
from a DELP shall have no liability under this section or other
applicable law for the amount of the distribution after the
expiration of three years from the date of the distribution
(section 17-607).
Interim distributions
There is nothing in the ELP Law that restricts the making of
interim distributions by an ELP; the LPA may provide for interim
distributions.
Except as provided in subchapter 6 of the Act, to the extent at
the times or upon the happening of the events specified in the
LPA, a partner is entitled to receive from a DELP distributions
before his withdrawal from the DELP and before the dissolution
and winding up thereof (section 17-601).
Distributions in kind
The LPA may provide for the making of distributions in kind by
the ELP.
Except as provided in the LPA, a partner, regardless of the
nature of such LP's contribution, has no right to demand and
receive any distribution in any form other than cash. Except as
provided in the LPA, a partner may not be compelled to accept
a distribution of any asset in kind from a DELP to the extent
that the percentage of the asset distributed to such LP exceeds
a percentage of that asset which is equal to the percentage in
which such LP shares in distributions from the DELP. Except as
provided in the LPA, a partner may be compelled to accept a
distribution of any asset in kind from a DELP to the extent that
the percentage of the asset distributed to such LP is equal to a
percentage of that asset which is equal to the percentage in
which he shares in distributions from the DELP (section 17-605).
GP withdrawal
There are no express provisions in the ELP Law pursuant to
which a GP automatically ceases to be a GP of an ELP, however,
A person ceases to be a GP of a DELP upon the happening of
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CAYMAN ISLANDS
section 36(7) of the ELP Law lists the following events as
"events of withdrawal" of the GP:
DELAWARE
any of the following events:
1.
the GP withdraws as provided in section 17-602 of the
Act;
the commencement of liquidation, bankruptcy or
dissolution proceedings of the GP; or
2.
the GP ceases to be a GP as provided in
section 17-702 of the Act;
the withdrawal, removal or making of a winding up or
dissolution order of the GP (section 36(7)).
3.
the GP is removed as a GP in accordance with the LPA;
4.
unless otherwise provided in the LPA, or with the
written consent of all partners, the GP:
1.
the death of the GP;
2.
3.
The terms of withdrawal of the GP are otherwise governed by
the LPA.
(a)
makes an assignment for the benefit of
creditors;
(b)
files a voluntary petition for bankruptcy;
(c)
is adjusted as bankrupt or insolvent, or has
entered against him an order for relief in any
bankruptcy or insolvency proceeding;
(d)
files a petition or answer seeking for himself
any reorganisation, arrangement,
composition, readjustment, liquidation,
dissolution or similar relief under any statute,
law or regulation;
(e)
files any answer or other pleading admitting
or failing to contest the material allegations
of a petition filed against him in any
proceeding of this nature; or
(f)
seeks, consents to or acquiesces in the
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CAYMAN ISLANDS
DELAWARE
appointment of a trustee, receiver or
liquidator of the GP or of all or any
substantial part of his properties;
5.
unless otherwise provided in the LPA, or with the
written consent of all partners, 120 days after the
commencement of any proceeding against the GP
seeking reorganisation, arrangement, composition,
readjustment, liquidation, dissolution or similar relief
under statute, law or regulation, the proceeding has
not been dismissed, or if within 90 days after the
appointment without his consent or acquiescence of a
trustee, receiver or liquidator of the GP or of all or any
substantial part of his properties, the appointment is
not vacated or stayed, or within 90 days after the
expiration of any such stay, the appointment is not
vacated;
6.
in the case of a GP who is a natural person:
(a)
his death; or
(b)
the entry by a Court of competent
jurisdiction adjudicating him incompetent to
manage his person or his property;
7.
in the case of a GP who is acting as GP by virtue of his
being a trustee of a trust, the termination of the trust
(but not merely the substitution of a new trustee);
8.
in the case of a GP that is a separate partnership, the
dissolution and commencement of winding up of the
separate partnership;
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CAYMAN ISLANDS
DELAWARE
9.
in the case of a GP that is a corporation, the filing of a
certificate of dissolution, or its equivalent, for the
corporation or the revocation of its charter and the
expiration of 90 days after the date of notice to the
corporation of revocation without restatement of its
charter;
10.
unless otherwise provided in the LPA, or with the
written consent of all partners, in the case of a GP that
is an estate, the distribution by the fiduciary of the
estate's entire interest in the DELP;
11.
in the case of a GP that is a limited liability company,
the dissolution and commencement of winding up of
the limited liability company; or
12.
in the case of a GP who is not an individual
partnership, limited liability company, corporation,
trust or estate, the termination of the GP
(section 17-402(a)).
A GP may withdraw from a DELP at the time or upon the
happening of events specified in the LPA and in accordance
with the LPA. Notwithstanding that an LPA provides that a GP
does not have the right to withdraw as a GP, a GP may
withdraw at any time by giving written notice to the other
partners. If the withdrawal of a GP violates an LPA, in addition
to any remedies otherwise available under applicable law, the
DELP may recover from the withdrawing GP damages for
breach of the LPA and offset the damages against the amount
otherwise distributable to the withdrawing
GP. Notwithstanding anything to the contrary set forth in the
Act, an LPA may provide that a GP may not assign a partnership
interest in a DELP prior to the dissolution and winding up of the
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CAYMAN ISLANDS
DELAWARE
DELP (section 17-602).
LP withdrawal
The LPA may provide for the circumstances and process for the
withdrawal of LPs.
Where an LPA permits the withdrawal of LPs at the option of
the LP, further consideration must be given as to whether the
ELP is required to be registered as a "mutual fund" under the
Mutual Funds Law (as amended).
An LP may withdraw from a DELP only at the time or upon the
happening of events specified in the LPA and in accordance
with the LPA. Notwithstanding anything to the contrary under
applicable law, unless an LPA provides otherwise, an LP may
not withdraw from a DELP prior to the dissolution and winding
up of the DELP. Notwithstanding anything to the contrary
under applicable law, an LPA may provide that a partnership
interest may not be assigned prior to the dissolution and
winding up of the DELP (section 17-603).
Distribution upon
withdrawal
The terms of distribution following a withdrawal will be as
provided under the LPA.
Except as provided by subchapter 6 of the Act, upon
withdrawal, any withdrawing partner is entitled to receive any
distribution to which such partner is entitled under an LPA and,
if not otherwise provided in an LPA, such partner is entitled to
receive within a reasonable time after withdrawal, the fair value
of such partner's partnership interest in the DELP as of the date
of withdrawal based upon such partner's right to share in
distributions from the DELP (section 17-604).
Certificate of
cancellation/dissolution
Dissolution
A certificate of limited partnership shall be cancelled upon the
dissolution and the completion of winding up of the DELP, or
as provided in section 17-104(d) or 17-1110 of the Act or upon
the filing of a certificate of merger or consolidation if the DELP
is not the surviving or resulting entity in a merger or
consolidation, or upon the filing of a certificate of transfer. A
certificate of cancellation shall be filed in the Office of the
Secretary of State to accomplish the cancellation of a certificate
of limited partnership and shall set forth:
Subject to the strike off procedure described below, an ELP
shall not be dissolved by an act of the partners or otherwise
until a notice of dissolution signed by a GP or liquidator has
been filed with the Registrar (section 36(2)).
An ELP shall be wound up at the time or upon the occurrence
of any event specified in the LPA and dissolved in accordance
with the terms of the LPA or, unless otherwise specified in the
LPA, by resolution of all the GPs and a two-thirds majority of
the LPs (section 36(1)).
Except to the extent that such provisions are not consistent
1.
the name of the DELP;
2.
the date of filing of its certificate of limited
Page 23
CAYMAN ISLANDS
with the ELP Law (and in the event of any inconsistencies the
ELP Law shall prevail) and subject to any express provisions of
the ELP Law to the contrary, the provisions of Part V of the
Companies Law and the Winding Up Rules 2008 shall apply to
the winding up and dissolution of an ELP (section 36(3)).
On application by a partner or a creditor, the Court may make
orders and give directions for the winding up and dissolution
of an ELP as may be just and equitable (section 36(3)(g)).
Notwithstanding that any order has been made pursuant to
section 36(3)(g) or that the winding up of an ELP has
commenced, a creditor who has security over the whole or part
of the assets of the ELP is entitled to enforce his security
without the leave of the Court and without reference to the GP
or any liquidator appointed to wind up the ELP (section 36(4)).
The GP or its legal representative shall promptly serve notice
on all LPs informing the LPs of any event of withdrawal (as
defined under 'Withdrawal of GP', above) in relation to the sole
or last remaining qualifying general partner. Unless the LPA
provides otherwise, if a new qualifying GP is not elected within
90 days after the service of notice of an event of withdrawal
(the "automatic winding up date") the ELP shall be wound up
in accordance with the LPA or the orders or directions the
Court may make or give in accordance with subsection 36(3)(g).
DELAWARE
partnership;
3.
the reason for filing the certificate of cancellation;
4.
the future effective date or time (which shall be a date
or time certain) of cancellation if it is not to be
effective upon the filing of the certificate; and
5.
any other information the person filing the certificate
of cancellation determines (section 17-203).
A DELP is dissolved and its affairs shall be wound up upon the
first to occur of the following:
1.
at the time specified in an LPA, but if no such time is
set forth in the LPA, then the DELP shall have a
perpetual existence;
2.
unless otherwise provided in an LPA, upon the
affirmative vote or written consent of:
If a majority of LPs specified in the LPA as being entitled to
vote to elect a new GP in accordance with the terms of the LPA
elects one or more new qualifying GPs by the automatic
winding up date, the ELP shall not be required to be wound up
and dissolved and the business of the ELP may be resumed and
continued as provided for in the LPA or any subsequent
agreement (sections 36(7) to (11)).
Subject to any express or implied term of the LPA to the
contrary, an ELP shall not be dissolved nor the LPA terminated
(a)
all GPs; and
(b)
the LPs or,
if there is more than one class or group of LPs, then
by each class or group of LPs, in either case, by LPs
who own more than two-thirds of the then current
percentage or other interest in the profits of the DELP
owned by all of the LPs or by the LPs in each class or
group, as appropriate;
3.
an event of withdrawal of a GP unless at the time
there is at least one other GP and the LPA permits the
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CAYMAN ISLANDS
DELAWARE
by:
1.
changes in, additions to or substitutions of any one or
more of the partners;
2.
the transfer of the whole or part of the partnership
interest of an LP;
3.
the death, bankruptcy, dissolution, removal,
withdrawal or winding up of an LP or a partner's
withdrawal or redemption of, or repurchase by the ELP
of, any partnership interest;
4.
the incapacity of an LP;
5.
any one or more of the LPs granting a mortgage,
charge or other form of security interest over the
whole or part of his partnership interest;
6.
7.
the sale, exchange, lease, mortgage, pledge or other
transfer of any of the assets of the ELP; or
business of the DELP to be carried on by the
remaining GP and that partner does so, but the DELP
is not dissolved and is not required to be wound up
by reason of any event of withdrawal if:
4.
(a)
within 90 days or such other period as is
provided for in an LPA after the withdrawal
the remaining partners agree to continue the
partnership in accordance with
section 17-801 of the Act; or
(b)
the business of the DELP is continued
pursuant to a right to continue stated in the
LPA and the appointment, effective as of the
date of withdrawal, of one or more additional
GPs if necessary or desired;
at the time there are no LPs; provided that the DELP is
not dissolved and is not required to be wound up if:
(a)
unless otherwise provided in an LPA, within
90 days or such other period as is provided
for in the LPA after the occurrence of the
event that caused the last remaining LP to
cease to be an LP, the personal
representative of the last remaining LP and
all of the GPs agree, in writing or by vote, to
continue the business of the DELP in
accordance with section 17-801 of the Act; or
(b)
an LP is admitted to the DELP in the manner
provided for in the LPA;
a de-registration of the ELP pursuant to sections 41 or
43 (section 35(a)).
Strike off
Where the Registrar has reasonable cause to believe that an
ELP is not carrying on business or is not in operation, the
Registrar may strike the ELP off the register and the ELP shall
thereupon be dissolved. The GP may request that the ELP be
struck off the register. Where an ELP is being wound up, and
the Registrar has reasonable cause to believe either that no
liquidator is acting, or that the affairs of the ELP are fully wound
up, the Registrar may strike the ELP off the register and the ELP
Page 25
CAYMAN ISLANDS
shall thereupon be dissolved without the need for a notice of
dissolution to be filed pursuant to section 36(2) (sections
37(1)-(3)).
A GP, LP or creditor who objects to an ELP being struck off the
register pursuant to the above, on the grounds that the ELP
was at the time it was struck off the register carrying on
business, in operation or otherwise, may make an application to
the Court for the name of the ELP to be restored to the register.
Such application must be made within two years of the date
upon which the name of the ELP was struck off the register; or
within a period that the Cabinet may by order allow but which
shall not exceed ten years of the date upon which the name of
the ELP was struck off the register (sections 37(5) and (6)).
The striking off the register of any ELP shall not affect the
liability, if any, of any GP or LP, and the liability shall continue
and may be enforced as if the ELP had at all times continued to
be in existence (section 37(11)).
DELAWARE
5.
upon the happening of events specified in an LPA; or
6.
entry of a decree of judicial dissolution under
section 17-802 of the Act (section 17-801).
On application by or for a partner the Court of Chancery may
decree dissolution of a DELP whenever it is not reasonably
practicable to carry on the business in conformity with the LPA
(section 17-802).
Unless otherwise provided in the LPA, the GPs who have not
wrongfully dissolved a DELP or, if none, the LPs or a person
approved by the LPs or, if there are more than one class or
group of LPs, then by each class or group of LPs, in either case,
by LPs who own more than 50 per cent of the then outstanding
current percentage or other interest in the profits of the DELP
owned by all of the LPs or by the LPs in each class or group, as
appropriate, may wind up the DELP's affairs; but the Court of
Chancery, upon cause shown, may wind up the DELP's affairs
upon application by any partner, his personal representative or
assignee, and in connection therewith, may appoint a
liquidating trustee. Upon dissolution of a DELP and until the
filing of a certificate of cancellation as provided in
section 17-203 of the Act, the persons winding up the DELP's
affairs may, in the name of, and for and on behalf of, the DELP
prosecute and defend suits, whether civil, criminal or
administrative, gradually settle and close the DELP's business,
dispose of and convey the DELP's property, discharge or make
reasonable provision for the DELP's liabilities, and distribute to
the partners any remaining assets of the DELP, all without
affecting the liability of LPs and without imposing the liability
of a GP on a liquidating trustee (section 17-803).
Upon the winding up of a DELP, the assets shall be distributed
Page 26
CAYMAN ISLANDS
DELAWARE
in accordance with section 17-804 of the Act.
Access to
information/confidentiality
Subject to any express or implied term of the LPA, each LP may
demand and shall receive from a GP true and full information
regarding the state of the business and financial condition of
the ELP (section 22).
Each LP has the right, subject to such reasonable standards
(including standards governing what information and
documents are to be furnished, at what time and location at
whose expense) as may be set forth in the LPA or otherwise
established by the GPs, to obtain from the GPs from time to
time upon reasonable demand for any purpose reasonably
related to the LP's interest as an LP:
1.
true and full information regarding that status of the
business and financial condition of the DELP;
2.
promptly after becoming available, a copy of the
DELP's federal, state and local income tax returns for
each year;
3.
a current list of the name and last known business,
residence or mailing address of each partner;
4.
a copy of any written LPA and certificate of limited
partnership and all amendments thereto, together
with executed copies of any written powers of
attorney pursuant to which the LPA and any certificate
and all amendments thereto have been executed;
5.
true and full information regarding the amount of
cash and a description and statement of the agreed
value of any other property or services contributed by
each partner and which each partner has agreed to
contribute in the future, and the date on which each
became a partner; and
6.
other information regarding the affairs of the DELP as
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CAYMAN ISLANDS
DELAWARE
is just and reasonable.
A GP shall have the right to keep confidential from LPs for such
period of time as the GP deems reasonable, any information
which the GP reasonably believes to be in the nature of trade
secrets or other information the disclosure of which the GP in
good faith believes is not in the best interest of the DELP or
could damage the DELP or its business or which the DELP is
required by law or by agreement with a third party to keep
confidential (section 17-305).
Books of Account
A GP shall keep or cause to be kept proper books of account
including, material underlying documentation including
contracts and invoices, with respect to:
4.
1.
all sums of money received and expended by the ELP;
2.
all sales and purchases of goods by the ELP; and
3.
the assets and liabilities of the ELP.
Books of account need to give a true and fair view of the
business and financial condition of the ELP and to explain its
transactions. Such books of account are required to be
retained for a minimum period of five years and any GP who
knowingly and wilfully contravenes the above mentioned
requirements shall be subject to a penalty. Where the GP
keeps the books of account at any place other than at the
registered office of the ELP or at any other place within the
Cayman Islands, the GP shall, upon service of an order or notice
by the TIA pursuant to the Tax Information Authority Law (2013
Revision), make available, in electronic form or any other
medium, at its registered office copies of its books of account,
or any part or parts thereof, as are specified in the order or
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CAYMAN ISLANDS
DELAWARE
Legal proceedings by or against an ELP may be instituted by or
against any one or more of the GPs only, and no LP shall be a
party to or named in such proceedings with the exception that
an LP may bring an action on behalf of the ELP if any one or
more of the GPs with authority to do so have, without cause,
refused to institute proceedings (section 33).
Service of legal process upon any DELP shall be made by
delivering a copy personally to any managing or general agent
or general partner of the DELP in the State of Delaware or the
registered agent of the DELP in the State of Delaware, or by
leaving it at the dwelling house or usual place of abode in the
State of Delaware of any such managing or general agent, GP
or registered agent (if the registered agent be an individual), or
at the registered office or other place of business of the DELP
in the State of Delaware (section 17-105).
notice (section 21).
Proceedings
Notwithstanding the above, it should be noted that if the
Cayman Islands' Court deems it just and equitable, any person
or a GP shall have the right to join in or otherwise institute
proceedings against any one or more LPs who may be liable in
respect of taking part in the conduct of the business of the ELP
under section 20(1) or to enforce any return of contribution
required by section 34(1) (section 33(2)).
A GP or a liquidating trustee of a DELP may be served with
process in the manner prescribed in section 17-109 of the Act
in all civil actions or proceedings brought in the State of
Delaware involving or relating to the business of the DELP or a
violation by the GP or the liquidating trustee of a duty to the
DELP, or the liquidating trustee is a GP or a liquidating trustee
at the time suit is commenced (section 17-109).
An LP or an assignee of partnership interest may bring an
action in the Court of Chancery in the right of a DELP to
recover a judgment in its favour if GPs with authority to do so
have refused to bring the action or if an effort to cause those
GPs to bring the action is not likely to succeed
(section 17-1101).
Business transactions of
partners
Subject to any express or implied terms of the LPA to the
contrary and to the duty imposed on the GP to act in good
faith and, subject to any express provisions of the LPA to the
contrary, in the interests of the ELP, a partner may lend money
to, borrow from and transact other business with the ELP so
that an asset, debt or obligation of the exempted limited
partnership shall thereby be created and with or without
Except as provided in the LPA, a partner may lend money to,
borrow money from, act as a surety, guarantor or assume one
or more specific obligations of, provide collateral for, and
transact other business with, the DELP and, subject to other
applicable law, has the same rights and obligations with respect
thereto as a person who is not a partner (section 17-107).
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CAYMAN ISLANDS
DELAWARE
interest or security as the GP shall determine. The obligations
of the ELP to repay a debt to a GP shall, at all times, be
subordinated to the claims of secured and unsecured creditors
of the ELP (section 18).
Indemnification
[As a matter of Cayman Islands' law, there is no doctrine of
third party beneficiary rights and therefore third parties named
in an ELP's LPA will not be able to enforce directly rights under
such LPA unless such third parties become a signatory to such
LPA or such rights are extended directly to such third parties
expressly in other contracts between such third party and the
ELP.]
Subject to such standards and restrictions, if any, as are set
forth in the LPA, a DELP may, and shall have the power to,
indemnify and hold harmless any partner or other person from
and against any and all claims and demands whatsoever
(section 17-108).
Tax status and annual
return/good standing
An ELP may apply for an undertaking from the Governor in
Cabinet that that any law which is enacted in the Cayman
Islands imposing any tax to be levied on profits or income or
gains or appreciations shall not apply to such ELP or to any
partner thereof in respect of the operations or assets of the ELP
or the partnership interest of a partner therein. The
Undertaking will be for a maximum of 50 years and may also
cover estate duty and/or inheritance tax (section 38).
Every DELP and every foreign limited partnership registered to
do business in the State of Delaware shall pay an annual tax, for
the use of the State of Delaware, in the amount of US$100.
An annual fee payable in January each year of approximately
US$2,439.02 is payable to the Registrar in respect of
unregulated ELPs. An annual return must also be filed in
January in every year, signed by or on behalf of a GP, certifying
that the ELP has during the prior calendar year, complied with
its obligations under Section 10(1) of the ELP Law (see
'Changes to Certificate of Limited Partnership/Registration
Statement' above) and that the ELP has not undertaken
business with the public in the Cayman Islands other than so
far as may be necessary for the carrying on of the business of
that ELP exterior to the Cayman Islands (section 39).
In the event of neglect, refusal or failure on the part of any
DELP or foreign limited partnership to pay the annual tax to be
paid on or before the 1st day of June in any year, such DELP or
foreign limited partnership shall pay the sum of US$100 to be
recovered by adding that amount to the annual tax, and such
additional sum shall become a part of the tax and shall be
collected in the same manner and subject to the same
penalties.
A DELP or foreign limited partnership that neglects, refuses or
fails to pay the annual tax when due shall cease to be in good
standing as a DELP or registered as a foreign limited
partnership in the State of Delaware.
A DELP that has ceased to be in good standing by reason of its
neglect, refusal or failure to pay an annual tax shall remain a
DELP formed under the Act. The Secretary of State shall not
accept for filing any certificate (except a certificate of
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CAYMAN ISLANDS
DELAWARE
resignation of a registered agent when a successor registered
agent is not being appointed) required or permitted by this
chapter to be filed in respect of any DELP or foreign limited
partnership which has neglected, refused or failed to pay an
annual tax, and shall not issue any certificate of good standing
with respect to such DELP or foreign limited partnership, unless
and until such DELP or foreign limited partnership shall have
been restored to and have the status of a DELP in good
standing or a foreign limited partnership duly registered in the
State of Delaware.
A DELP that has ceased to be in good standing or a foreign
limited partnership that has ceased to be registered in the State
of Delaware by reason of its neglect, refusal or failure to pay an
annual tax may not maintain any action, suit or proceeding in
any Court of the State of Delaware until such DELP or foreign
limited partnership has been restored to and has the status of a
DELP or foreign limited partnership in good standing or duly
registered in the State of Delaware. An action, suit or
proceeding may not be maintained in any Court of the State of
Delaware by any successor or assignee of such DELP or foreign
limited partnership on any right, claim or demand arising out of
the transaction of business by such DELP after it has ceased to
be in good standing or a foreign limited partnership that has
ceased to be registered in the State of Delaware until such
DELP or foreign limited partnership, or any person that has
acquired all or substantially all of its assets, has paid any annual
tax then due and payable, together with penalties and interest
thereon.
A LP of a DELP or foreign limited partnership is not liable as a
general partner of such DELP or foreign limited partnership
solely by reason of the neglect, refusal or failure of such DELP
or foreign limited partnership to pay an annual tax or by reason
of such DELP or foreign limited partnership ceasing to be in
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CAYMAN ISLANDS
DELAWARE
good standing or duly registered.
The certificate of limited partnership of a DELP shall be deemed
to be cancelled if the DELP shall fail to pay the annual tax due
under section 17-1109 of the Act for a period of three years
from the date it is due, such cancellation to be effective on the
third anniversary of such due date (sections 17-1109 and
17-1110).
Third party beneficiaries
[There is no doctrine of third-party beneficiary rights under
Cayman Islands law, therefore third parties named in an LPA
will not be able to enforce directly their rights unless they
become a signatory to the LPA (see 'Indemnification' above).]
Generally, a third party named in an LPA need not be a
signatory to the LPA in order to be able to enforce directly its
rights under the LPA.
Negligence standard
Cayman Islands law does not recognise the distinction between
gross negligence and negligence. It is common to include a
definition of gross negligence in the LPA which is frequently
defined as having the meaning ascribed to such term in a
jurisdiction where it is recognised (eg Delaware). An
alternative approach is to set out an explanation, by way of a
defined term, of what the parties to the LPA intend gross
negligence to mean. Where an onshore fund has been set up
in parallel with the offshore fund, it may appropriate to use the
same definition for gross negligence as has been used in the
onshore fund for consistency.
Delaware law recognises the distinction between gross
negligence and negligence.
Construction and
application of the act and
the LPA
Modification of duties
Delaware law gives maximum effect to the principles of
freedom of contract and to the enforceability of the LPA
(section 17-1101(c)).
The obligation of the GP to act at all times in good faith is an
inviolable provision of the ELP Law and cannot be reduced by
specific or implied terms of the LPA. However, the duty of the
GP to act in the interests of the ELP may be modified by the
To the extent that, at law or in equity, a partner or other person
has duties (including fiduciary duties) to a limited partnership
or to another partner or to an other person that is a party to or
is otherwise bound by the LPA, the partner's or other person's
Page 32
CAYMAN ISLANDS
terms of the LPA.
DELAWARE
duties may be expanded or restricted or eliminated by
provisions in the LPA; provided that the LPA may not eliminate
the implied contractual covenant of good faith and fair dealing
(section 17-1101(d)).
Updated: March 2014
For further information please refer to your usual contact or:
Cayman Islands - Rolf Lindsay, Partner | rolf.lindsay@walkersglobal.com | +345 914 6307
Dubai - Daniel Wood, Partner | daniel.wood@walkersglobal.com | +971 4 363 7912
Hong Kong - Arwel Lewis, Partner | arwel.lewis@walkersglobal.com | +852 2596 3319
London - Hughie Wong, Partner | hughie.wong@walkersglobal.com | +44 (0) 207 220 4982
Singapore - Tom Granger, Partner | thomas.granger@walkersglobal.com | +65 6603 1694
The information contained in this memorandum is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other
professional advice should be sought for any specific matter.