Grand Court Confirms Lack Of Jurisdiction To Wind Up An Exempted Limited Partnership Based On A Creditor's Petition

• Published date: 29 October 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Arbitration & Dispute Resolution
• Law Firm: Baker & Partners
• Author: Mr Adam Crane and Nicosia Lawson

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...