The Cayman Islands Exempted Limited Partnership Law, 2014, has now come into force following its gazettal on Wednesday, 2 July 2014, and should be beneficial to Cayman funds, according to Solomon Harris.
The new law is the result of years of consultation with the financial services industry and is designed to make the Exempted Limited Partnership (ELP) investment vehicle more flexible, easier to establish and to run.
The law brings Cayman Islands ELP law in line with changes the Cayman Islands Government made to the Companies Law in 2013 and addresses some practical issues which had become apparent with the old law (for example, there are now simple statutory procedures for existing funds to be re-domiciled to the Cayman Islands).
The changes, Solomon Harris said in a note, should help Cayman ELPs dovetail better with Delaware fund structures, and particularly benefit those managers and investors who use Cayman vehicles in parallel fund structures with Delaware investment vehicles.
Other changes give partners greater control over their commercial arrangements, including more flexibility on how they structure their partnership (for example a non-Cayman Islands partnership can now be a general partner).
“It extends the type of entity which can be a general partner (GP), allows a GP to limit its fiduciary duties to an extent, and assists a GP to enforce agreed remedies against a defaulting LP. In addition, there are now statutory mechanisms by which a foreign partnership can relocate to Cayman,” Harris said.
It will also benefit investors, Harris said. “The principal benefits for investors are that the Law helps clarify the duties owed by LPs to the ELP and to one another, even where they sit on advisory boards or committees of the ELP. The law makes it easier for LPs to understand what actions might compromise their limited liability status and allows for them to be awarded costs if they need to bring an action on behalf of the ELP against a third party.”
Exempted Limited Partnership Law, Cayman, Solomon Harris