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Cayman Islands Exempted Limited Partnerships
Cayman Islands’ user-friendly and practical exempted limited partnership (“LP”) regime has established the Cayman Islands as one of the world’s most successful jurisdictions for establishing limited partnership structures. These are typically used for the establishment of private equity funds, investment holding structures and tax efficient structures for corporate groups.
The combination of a tax neutral environment, a favourable fundraising and regulatory regime, practical laws and sophisticated service providers have led to Cayman's popularity as a choice of domicile for LP structures.
LPs are established and registered pursuant to The Exempted Limited Partnership Law, 2014 of the Cayman Islands (the “ELP Law”). Some key features of LPs and the ELP Law are set out below.
Feature | Details |
Structure | 1. Not a separate legal person; assets held on trust by general partner (“GP”) for benefit of LP 2. At least one GP with unlimited liability in the event of the insolvency of the LP 3. Limited partners afforded limited liability and may not take part in the conduct of the business of the LP |
Formation and registration | 1. Formation typically evidenced by limited partnership agreement (“LPA”) between GP and Limited partner 2. GP registers the LP pursuant to the ELP Law by filing certain particulars with the Registrar by means of a “Section 9 Statement” (any changes to such particulars are notified by means of a Section 10 Statement) |
Name and Registered Office | 1. Name of LP must include the words “Limited Partnership” or “L.P.” or “LP” 2. LP must maintain a registered office in the Cayman Islands |
Rights, Duties and Obligations of Partners | 1. GP must act at all times in good faith and, subject to the LPA, in the interests of the LP 2. Limited partners, acting in that capacity, owe no fiduciary duty to the LP or any partner 3. Any debt or obligation incurred by the GP in the conduct of the business of an LP is a debt or obligation of the LP |
Safe Harbour Provisions | 1. Limited partners liable for debts and obligations of LP if take part in conduct of business of LP with third parties who reasonably believe such Limited Partner is acting as GP 2. ELP Law contains certain “safe harbour” provisions which are deemed not to constitute “taking part in the conduct of the business” of the LP including: ü holding an office in or having a contractual relationship with the GP ü acting on boards or committees of the LP ü approving amendments to the LPA ü consulting or advising a GP with respect to the business of the LP ü voting as a Limited partner on matters under the LPA |
Register of Limited Partners and ELP records | 1. GP must maintain: ü a register of limited partners setting out the names and addresses of all Limited partners ü a record of amounts and dates of contributions and returns of capital by/to LPs ü a register of security interests granted over partnership interests |
Tax Undertaking | 1. GP may obtain an undertaking from the Cabinet that no taxes will be applied in the Cayman Islands on the profits, income or gains of the ELP for a period of 50 years from the date of such undertaking |
Admission and Transfers | 1. Limited partners admitted to the partnership in accordance with the LPA 2. Transfers of Limited partners interests require GP consent |
GP withdrawal | 1. The death, insolvency or withdrawal of the GP shall be notified to Limited partners 2. LP wound up in accordance with the LPA if no sucessor GP is appointed within 90 days of such notice |
Dissolution | 1. An LP is wound up and dissolved in accordance with the LPA or upon the passing of a resolution of the GP and two-thirds of the Limited partners |
Return of Contributions | 1. If LP receives a distribution at a time when the LP is insolvent (and the LP has knowledge of this), then for 6 months from the date of distribution, the LP is liable for the amount of such distribution |
For further information on LPs and the matters referred to above, please contact your us.
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