ECM Straits: The Grand Court Of The Cayman Islands Confirms Its Power To Bring The Voluntary Winding Up Of Exempted Limited Partnerships Under The Supervision Of The Court

• Law Firm: Ogier
• Subject Matter: Corporate/Commercial Law, M&A/Private Equity, Corporate and Company Law
• Author: Mr Corey Byrne, Gemma Lardner and Christopher Levers
• Published date: 28 March 2023

In the recent decision of Re ECM Straits Fund I, LP,¹ the Grand Court of the Cayman Islands confirmed that there was power in the Exempted Limited Partnership Act to bring the voluntary liquidation of an exempted limited partnership under the Court's supervision by appointing official liquidators in place of a voluntary liquidator.

This decision has settled an area of long running uncertainty about the Court's powers, providing much needed clarification as to the jurisdiction of the Cayman Court over the winding up of exempted limited partnerships.

Winding up of exempted limited partnerships (ELPs)

The ELP is a fusion of Cayman statute, common law and equitable principles which is unique to the Cayman Islands. First introduced in 2014 by the Exempted Limited Partnership Act (ELP Act), ELPs have become a vehicle of choice for particular types of international business.² However, given their novelty and popularity, the Cayman Courts have increasingly been called on to clarify the meaning of certain provisions of the ELP Act,³ particularly those relating to the Court's jurisdiction to place those structures into liquidation.

Section 36(1) of the ELP Act provides that an ELP may be voluntarily wound up in accordance with the provisions of the applicable partnership agreement either at the time or upon the occurrence of any event specified in the agreement or, unless otherwise specified in the agreement, upon the passing of a resolution of all the general partners and a two-thirds majority of limited partners. In a voluntary liquidation, the affairs of an ELP are wound up by the general partner or other person appointed pursuant to the partnership agreement.⁴

Section 36(3) of the ELP Act provides that the provisions of Part V of the Companies Act and the Companies Winding Up Rules apply to the winding up of ELPs. While there are a number of authorities, albeit conflicting ones, concerning whether winding up proceedings ought to be presented against the general partner of the ELP⁵ or against the ELP itself,⁶ none of those authorities dealt with the process to be used where an ELP is already in voluntary liquidation.

The ordinary course for companies falling under the Companies Act is to apply for a supervision order which will replace the voluntary liquidators with official liquidators thereby placing the liquidation under the Court's supervision.⁷ However, the ELP Act itself carves a majority of the provisions relating to voluntary liquidation (including...