Winding Up A Cayman ELP – Post Judgment Admission Of Evidence And Costs

A recent decision of the Grand Court of the Cayman Islands1 considered the principles upon which a Cayman Islands exempted limited partnership ("ELP") may be wound up by the Court under its 'just and equitable' jurisdiction2, the Court's power under section 95(3) of the Companies Law to grant alternative remedies when hearing a winding up petition and to admit evidence after the release of a judgment but before the order is sealed.

The Background

Cybernaut Growth Fund, L.P. (the "Partnership") was an ELP invested in various operating companies in the People's Republic of China. Five of the six limited partners, together holding just under 50% of the limited partnership interests (the "Petitioners") presented a winding up petition against the Partnership pursuant to section 15(4) of the Exempted Limited Partnership Law (2012 Revision) (the "Law"), based on a justifiable loss of trust and confidence in the general partner's management of the Partnership. The general partner (the "GP") had become dysfunctional due to, amongst other reasons, a dispute between its principals involving allegations of misconduct and the GP's failure to provide audited financial statements and other financial reports as required by the limited partnership agreement (the "LPA") and the Law.

Although it was common ground between parties that the Partnership should be brought to an end, the petition was opposed by the GP and the other limited partner, which held just over 50% of the limited partnership interests ("Oriental") (together, the "Respondents"). The Respondents argued that the Partnership should be wound up in accordance with the voluntary liquidation provisions in the LPA and that the GP should act as voluntary liquidator.

Winding Up on Just and Equitable Grounds

It was not disputed that the Partnership could be wound up if there had been a justifiable loss of trust and confidence in the GP's management of the Partnership. The onus was on the Petitioners to establish the managerial misconduct by the GP alleged in the petition, such that the intervention of the Court was warranted. The Court found that, based on the evidence, the Petitioners were justified in bringing the petition. The Court placed particular reliance upon the GP's failure to provide proper financial transparency and the breakdown in the relationship between the principals of the GP.

The Respondents argued that, despite the Court's finding that there had been a justifiable loss of trust...