Revised Exempted Limited Partnership Act

The revised law applicable to Exempted Limited Partnerships (“ELPs”), the Exempted Limited Partnership Act (2014 Revision) (the “Law”), is expected to come into force shortly. 

The purpose of the revised Law is principally to enhance Cayman’s partnership formation framework by providing much more contractual flexibility and to help align the drafting of a Cayman Islands partnership agreement with that of an onshore partnership in, for example, master/feeder structures.                                                                                                

Some of the key changes include:

• Duty of the general partner  - the general duty of the general partner to act in the interests of the ELP will be capable of being amended in the partnership agreement, provided that the general partner must at all times act in good faith.
• Limited liability of limited partners – the ‘safe harbours’ will be extended to clarify that a limited partner will not lose its limited liability solely as a result of serving as, or appointing, members of boards and committees (including advisory committees, which themselves are given statutory status under the revised Law) of the ELP. 
• Foreign limited partnerships – foreign limited partnerships registered in the Cayman Islands will now be able to act general partners of an ELP, whereas previously only foreign registered companies could so act.  This change provides greater flexibility in the structuring of the funds and may provide tax advantages to general partners based in certain jurisdictions.
• Re-domiciliation & termination – an ELP will have the ability to transfer out of the Cayman Islands by way of continuation to another jurisdiction, and the Law will introduce a short-form strike off mechanism for ELPs (in each case equivalent to the procedure which already exists for Cayman Islands companies).
• Advisory committees – it is clear that a member of any such committees will not owe fiduciary duties to the ELP or the partners

Once the law has come into force, we will be issuing a more detailed note of the changes.