INTRODUCTION
This Memorandum provides a summary of the duties and liabilities of the general partner (the "General Partner") of an Exempted Limited Partnership (referred to in this Memorandum as a "Partnership") registered under the laws of the Cayman Islands. It is not intended to be an exhaustive statement of the law in this area but merely to be of some guidance to persons who act as General Partner of a Partnership. Particular circumstances or transactions should be the subject of specific legal advice given on the relevant facts at the relevant time.
Exempted Limited Partnerships registered in the Cayman Islands and the duties and liabilities of the General Partner are governed by the Exempted Limited Partnership Law (2007 Revision) (the "ELP Law"), The Partnership Law (2002 Revision) and the common law so far as it has not been amended by statutory provision. The Cayman Islands' courts regard as highly persuasive the decisions of the English courts in relation to such matters.
DUTIES OF THE GENERAL PARTNER
Resident in Cayman Islands
At least one General Partner is required at all times to be either:
- an individual resident in the Cayman Islands;
- a company, incorporated in the Cayman Islands;
- a company registered in the Cayman Islands as a foreign
company pursuant to Part IX of the Companies Law (if
incorporated outside the Cayman Islands); or
- an Exempted Limited Partnership. (References in this
Memorandum to the General Partner shall where appropriate
include joint General Partners acting in accordance with the
terms of their partnership.)
[References in this Memorandum to the General Partner shall where appropriate include joint General Partners acting in accordance with the terms of their partnership].
Act in good faith
The General Partner has a duty to act at all times in good faith and in the best interests of the Partnership.
Carrying on the business of the Partnership
The General Partner has a duty to ensure that the Partnership does not undertake business in the Cayman Islands other than as far as may be necessary for the carrying on of the business of the Partnership exterior to the Cayman Islands.
File changes
Sections 9 and 10 of the ELP Law require the General Partner during the continuance of the Partnership to file any changes made in any of the matters listed below with the Registrar of Exempted Limited Partnerships (the "Registrar") within 60 days. A statement filed specifying the particulars of such changes, shall be open to public inspection. Changes relating to the following need to be filed:
- the name of the Partnership (which shall include the
words "Limited Partner" or "L.P.");
- the general nature of the business of the
Partnership;
- the address of the registered office in the Cayman
Islands; (note that section 6(4) of the ELP Law requires
every Partnership to have a registered office situated in the
Cayman Islands);
- the term, if any, for which the Partnership is entered
into (or, if for unlimited duration, a statement to that
effect) and the date of its commencement; and
- the name and address of each General Partner.
Annual certification that changes filed
On or before 31 January in every year a General Partner is required to file a return certifying that the Partnership has complied with the requirement to file any changes listed above and that there has been no breach of this obligation.
Register of Partnership interests
The General Partner is required to maintain a register of partnership interests at the registered office of the Partnership, setting forth the name, address, amount and date of the contribution of each partner, and the amount and date of any payment representing a return of any part of the contribution of any partner.
The Register is required to be updated within 21 business days of any change in the particulars therein and is open to public inspection during usual business hours. A General Partner who defaults in complying with the duty to update the Register, is guilty of an offence and liable on summary conviction to a fine of $25.00 for each day that such default continues, and shall indemnify any person who thereby suffers any loss.
Register of Mortgages and Charges
The General partner has a duty to maintain or cause to be maintained a Register of Mortgages and Charges of interests in the Partnership. This shall be maintained at the registered office, in writing on one or more sheets (whether bound or unbound) and shall record the identity of the mortgagor and mortgagee, the date of creation of the mortgage, the Partnership interest or part thereof subject to mortgage or charge and the date of receipt of notice of the mortgage or charge.
The Register of Mortgages and Charges shall be open to inspection by any person during all normal business hours. A failure to comply with this duty is an offence and each General Partner in default shall, upon summary conviction incur a penalty of $25.00 for each day that the default continues.
Conflicts of interests
The General Partner has a duty, subject to the terms of the Partnership Agreement, not to compete with the business of the Partnership.
Notice of dissolution
On dissolution of the Partnership a notice signed by a General Partner shall be filed with the Registrar.
LIABILITIES OF THE GENERAL PARTNER
Extent of liability
In the event that the assets of the Partnership are inadequate, the General Partner shall be liable for all of the debts and obligations of the Partnership.
Liability incurred by General Partner
Any debt or obligation incurred by a General Partner in the conduct of the business of the Partnership shall be a debt or obligation of the Partnership.
Partnership property
Any property of the Partnership which is conveyed to or vested in or held on behalf of any one or more of the General Partners or which is conveyed into or vested in the name of the Partnership shall be held or deemed to be held by the General Partner on trust, as an asset of the Partnership in accordance with the terms of the partnership agreement.
Account for profit
The General Partner shall be liable to account for any profit wrongly made in competition with the Partnership.
SPECIFIC TRANSACTIONS
Lending and borrowing
Subject to any express or implied terms of the Partnership Agreement to the contrary and to the duty imposed on the General Partner to act in good faith and in the best interests of the Partnership, a partner may lend money to, borrow from and transact other business with the Partnership with or without interest or security as the General Partner shall determine. The obligations of the Partnership to repay a debt to a General Partner shall, at all times, be subordinated to the claims of secured and unsecured creditors of the Partnership.
Contributions to limited partners
The General Partner shall not, on dissolution or otherwise, pay any limited partner a return of any part of his contribution to the Partnership out of the capital of the Partnership unless immediately following such payment, the Partnership is solvent. For a period of six months from the date of receipt by a limited partner of any such payment representing a return of contribution or part thereof in circumstances where the Partnership is not solvent, such payment shall, in the event of the insolvency of the Partnership within that six month period, be repayable by such limited partner with simple interest at the rate of 10 percent per annum to the extent that such contribution or part thereof is necessary to discharge a debt or obligation of the Partnership incurred during the period that the contribution represented an asset of the Partnership.
Full disclosure to limited partners
Subject to any express or implied term in the Partnership Agreement to the contrary, each limited partner may demand, and shall receive from the General Partner, full information regarding the state of the business and financial condition of the Partnership.
Filing notice of dissolution
A Partnership shall not be dissolved by an act of the partners until a notice of dissolution signed by the General Partner has been filed with the Registrar. In the event of a dissolution of a Partnership, its affairs shall be wound up by the General Partner unless the court otherwise orders.
Party to legal proceedings
Legal proceedings by or against a Partnership may be instituted by or against the General Partner only, and no limited partner shall be a party to or named in such proceedings.
Registering transactions that seek to discharge General Partner
Any arrangement or transaction consequent upon which any person will cease to be a General Partner in the Partnership must be filed with the Registrar within fifteen days of such agreement and until filed shall for the purposes of the law and the Partnership Agreement, be deemed to be of no effect. If default is made in compliance each General Partner in default shall incur a penalty of $25.00 for each day the default continues.
Save with the written consent of the person thereby affected, no arrangement or transaction shall take effect to the extent that it seeks to relieve or discharge a General Partner from his obligations with regard to any debt or obligation of the Partnership incurred before such arrangement or transaction takes effect.
If default is made in compliance with this requirement, each General Partner in default shall incur a penalty of $25.00 for each day that such default continues, which penalty shall be due to the Registrar and such General Partner shall indemnify any person who thereby suffers loss.
|
Cayman Islands London Jersey |
British Virgin Islands Hong Kong Dubai |
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.
