The Cayman Islands Grand Court has clarified that it has no jurisdiction to wind up an exempted limited partnership upon a petition presented by a creditor. Instead, the appropriate route for an aggrieved creditor is to commence proceedings against the general partner of the exempted limited partnership. The decision also helpfully clarifies that the Companies Act does not apply generally to winding up an exempted limited partnership.
Background
In the recent decision of Re Padma Fund LP, a creditor sought to wind-up the Padma Fund L.P.1 (the Partnership) on the basis that the Partnership was unable to pay its debt in respect of a costs award arising out of foreign arbitration proceedings. The application was brought pursuant to section 92(d) of the Companies Act (2021 Revision) (the Companies Act) by virtue of section 3 of the Exempted Limited Partnership Act (the ELP ACT).
The main argument advanced on the defence of the General Partner of the Partnership (the GP) was that the application was procedurally defective, and the Court had no jurisdiction to make the orders sought because section 91 of the Companies Act does not apply to exempted limited partnerships. The GP contended that the correct course of action, where adequate grounds exist, is for a creditor to commence proceedings against the general partner.
It was not disputed that the Court's jurisdiction under section 91 of the Companies Act and section 36 of the ELP Act is a matter of statutory interpretation2.
The law
Unlike a company, an exempted limited partnership does not have separate legal personality and cannot own property in its own right. The general partner plays a key and controlling roll in an exempted limited partnership – the general partner, inter alia, has the authority to enter into agreements and contracts on behalf of the exempted limited partnership and is liable for all of its debts and obligations.
An exempted limited partnership may be wound up and dissolved –
- voluntarily under section 36(1) of the ELP Act in accordance with the partnership agreement or upon the passing of a resolution of all the general partners and two-thirds majority of a limited partners (unless otherwise specified in the partnership agreement); or
- by an order of the court on the application of a limited partner of the partnership pursuant to section 35 of the Partnership Act (2013 Revision) by virtue of section 3 of the ELP Act.
Section 92(d) of the Companies Act provides that “A company may be wound up by the court if the company is unable to pay its debts”.
Section 91(d)(iii) of the Companies Act states: “The Court has jurisdiction to make winding up orders in respect of – a foreign company which – is the general partner of a limited partnership…”.
Analysis
Having considered the relevant sections of the Companies Act, the ELP Act and the Partnership Act, the learned Judge determined that the Court's jurisdiction to make a winding up order under section 91 of the Companies Act does not extend to an exempted limited partnership. Section 91(d)(iii) of the Companies Act gives the Court jurisdiction to wind up the general partner of an exempted limited partnership but no such jurisdiction is contained in section 91 to wind up an exempted limited partnership.
Further, the ELP Act does not give a freestanding right for a creditor to present a winding‐up petition against an exempted limited partnership3. The ELP Act is clear that Part V of the Companies Act only applies to an exempted limited partnership where the provisions are not inconsistent with the ELP Act. Therefore, a creditor's petition against an exempted limited partnership is inconsistent with, and contrary to, section 33(1) of the ELP Act which provides that proceedings against an exempted limited partnership may be commenced against the general partner only.
The Court also accepted the Partnership's contention that the legislature could not have intended to narrow the scope of the Court's jurisdiction to wind up an ELP on the application of a limited partner of an ELP by relying on the just and equitable grounds provisions in the Companies Act since a broader remedy exists in the Partnership Act. The Court's jurisdiction to wind up an ELP on the just and equitable basis on the application of a limited partner arises by virtue of s.3 of the ELP Act and s.35 of the Partnership Act only, which is broader than s.92 of the Companies Act.
The Court's decision
It was held that there is no provision in the ELP Act or the Partnership Act providing for proceedings to be commenced against an exempted limited partnership in the name of the exempted limited partnership. The ELP Act expressly states that legal proceedings against an exempted limited partnership may be instituted against a general partner only. Therefore, the Court had no jurisdiction to make the winding-up order sought.
Footnotes
1 (Unreported, 8 October 2021) (FSD 201 of 2021 (RPJ)).
2 The principles of which were summarised by the Privy Council in Shanda Games Ltd v Maso Capital [2020] UKPC 2.
3 XIO Diamond supra at § 26.
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