Cayman Islands: Ongoing Obligations Of Exempted Limited Partnerships Registered As Mutual Funds

Ongoing partnership requirements

The Exempted Limited Partnership Law (2018 Revision) (the "ELP Law") imposes continuing obligations on all exempted limited partnerships, including those registered as mutual funds under Section 4(3) of the Mutual Funds Law (2015 Revision) (the "Mutual Funds Law"). The main relevant requirements of the ELP Law are summarised below.

Changes to registered details

An exempted limited partnership ("ELP") partnership is registered with the Registrar of Exempted Limited Partnerships (the "Registrar") by a general partner (a "GP") filing a statement pursuant to Section 9 of the ELP Law setting forth:

1. the name of the ELP;

2. the address of its registered office in the Cayman 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.

If any change is made or occurs in any matter specified in the ELP's Section 9 Statement, a GP must file with the Registrar a statement pursuant to Section 10 of the ELP Law (a "Section 10 Statement") specifying the nature of the change. The Section 10 Statement must ordinarily be filed within 60 days of such change.

A Section 10 Statement in respect of any arrangement or transaction consequent upon which any person will be removed, replaced or admitted as a GP, 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 exempted limited partnership agreement ("LPA"), not be effective to remove, replace or admit such person as a GP.

Amendment of constitution

The terms of an ELP are invariably set out in an LPA. Provisions governing the amendment of the LPA are invariably contained in the LPA itself. Notwithstanding any term in the LPA to the contrary, any term of the LPA may be amended by agreement between the partners. The LPA is not filed in any public registry and is not open to public inspection.

Annual return

An annual fee payable on or before 31 January is payable to the Registrar. An annual return must also be filed on or before 31 January in every year. Penalties will be levied for late payment.

Books and records

The GP is required to maintain two registers with details of the limited partners ("LPs"). The first register may be maintained in any country or territory as the GP may determine and must contain the name and address of each LP and the date of admission and withdrawal of each LP from the ELP (the "Register of LPs"). The Register of LPs shall be open to inspection during all usual business hours in the place where such register is maintained by (a) subject to any express or implied term of the LPA, all partners; and (b) any other person with GP consent. The GP must maintain a record of the address at which this register is held at the ELP's registered office.

The second register may also be maintained in any country or territory as the GP may determine and must record the amount and date of contributions of each LP and the amount and date of any payment representing a return of the whole or any part of the LP's contribution (the "Register of LP Contributions"). The Register of LP Contributions shall be open to inspection during all usual business hours in the place where it is maintained with the consent of the GP.

Both registers are required to be updated within 21 days of any change in the particulars therein. A GP who defaults in complying with the duty to maintain the Register of LPs or the record of the address at the ELP's registered office, 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.

The GP has a duty to maintain or cause to be maintained a Register of Security Interests in the Partnership. This shall be maintained at the registered office and shall record the agreement pursuant to which the security interest is granted including the date and the parties thereto, the identity of the grantor and grantee, the partnership interest or part thereof subject to the security interest and the date of receipt of notice of the security interest. A GP who defaults in complying with this duty shall be liable to pay a fine for each day the default continues. Any security interest of an LP's interest must comply with the LPA. The Register of Security Interests shall be open to inspection by any person during all usual business hours.

Subject to any express or implied term of the LPA to the contrary, 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.

A GP is required to keep proper books of account, including material underlying documentation (the "Books of Account") with respect to:

1. all sums of money received and expended by a partnership;

2. all sales and purchases of goods by the partnership; and

3. the assets and liabilities of the partnership.

The Books of Account must give a true and fair view of the business and financial condition of the ELP, explain its transactions and should be maintained for at least five years. Any GP who knowingly and wilfully fails to comply with these requirements shall be subject to a penalty.

Ongoing regulatory requirements

In addition to the ongoing partnership requirements, as detailed above, ELPs which are registered as mutual funds must also adhere to certain regulatory requirements pursuant to the Mutual Funds Law as summarised below.

Change to offering documents

If there is any change that materially affects any information in the offering document of a mutual fund, an amended offering document must be filed with CIMA. It is recommended that Cayman Islands legal counsel reviews these documents to ensure full compliance with the Mutual Funds Law.

CIMA charges a US$122 filing fee for each submission of an updated offering document and a US$366 filing fee for each revised MF filing. The revised documents must be filed within 21 days of the changes taking effect.

Change of registered office and/or service providers

The ELP must inform CIMA if it changes its registered office or any of its service providers. Where the company's auditor or administrator changes, a consent letter from any newly appointed auditor or administrator must be lodged with CIMA. In addition, details must be provided to CIMA of the reason for the change to the auditor.

Directors and board meetings

Having regard to the Statement of Guidance for Regulated Mutual Funds issued by CIMA (the "SOG"), the GP body should meet at least twice a year, in person or via telephone or video conference call. Where circumstances or size, nature or complexity of the ELP necessitates it, the GP body should meet more frequently so as to enable the GP to fulfil its oversight responsibilities effectively.

The GP is responsible to ensure that written records are kept of the GP's meetings. The SOG should be carefully considered by the GP.

Annual audit and report

The ELP must have its accounts audited annually by an auditor approved by CIMA and the GP may be fined US$24,390 if the ELP does not do so.

The ELP's auditors must file the audited annual report with CIMA, in electronic format, together with a Fund Annual Return ("FAR") and pay a filing fee of US$366. The annual report and FAR must be filed six months after the ELP's fiscal year end. However, an extension request may be submitted to CIMA for a fee of US$610. Failure to file the annual report and FAR on time may result in a US$24,390 fine.

Annual licence fee

The ELP must pay an annual licence fee to CIMA. The fee is US$4,268 for all stand-alone funds or feeder funds and US$3,049 for master funds.

This fee must be paid on or before 15 January of each year. Failure to pay on time may result in a penalty equal to one twelfth of the annual fee for each month or part of a month during which the annual fee and any additional penalty imposed remains unpaid.

Name change - CIMA requirements

In order for an ELP to change its name, CIMA requires the following:

1. the original mutual fund registration certificate of the ELP for cancellation (where this was issued in hard copy on registration);

2. a copy of the certificate of incorporation on change of name obtained from the Registrar; and

3. a US$610 application fee.

These requirements are in addition to the changes to registered details requirements as set out above.

Summary of ongoing filing and notice obligations

Event

Deadline

Filing of annual return with Registrar

31 January

Change to registered details

Within 60 days of the change or fifteen days of the change of GP

Update to register of LPs and register of LP contributions

Within 21 days of the change

Change to offering documents

Within 21 days of the GP becoming aware of the change

Filing of annual report to CIMA

Within six months of the end of the financial year

Annual licence fee payable to CIMA

15 January

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.

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