In the recent decision of Duet Real Estate Partners 1 LP the Grand Court wound up an exempted limited partnership (Fund) pursuant to section 92(c) of the Companies Law. This appears to be the first decision in the Cayman Islands which considers the application of section 92(c) (expiry of term) to exempted limited partnerships and which provides extensive jurisdictional guidance on section 92(c).
The Limited Partnership Agreement provided that the term of the Fund expired in March 2012, or no later than March 2014. Having been in discussions with those in charge of the Fund and the Duet Group for years, the Petitioner was advised that the investment was a total loss. Attempts to obtain documentation to explain how the investment had been dissipated proved unsuccessful.
In making the winding-up order, the Court provided guidance on section 92(c):
- If one seeks to wind-up an exempted limited partnership, the provisions of the Companies Law relating to the winding-up of companies apply, unless there are conflicting provisions in the Exempted Limited Partnerships Law (ELP Law). The most authoritative appellate statement on this is the dicta of Rix JA in Re Rhone Holdings LP.
- The tangible interest that a petitioning contributory must demonstrate is a question shaped by the specific winding-up ground relied upon (general support is found in Re Chesterfield).
- The issue of tangible interest is connected with the statutory purpose of section 92(c). The Petitioner must show that the Fund had a fixed duration which had expired, and that the Petitioner is a contributory with a crystallised contractual right to a voluntary winding up. An investor should not be locked into a company or fund for a longer period than that for which the shareholder signed up.
- Alternatively, the Court would have found that the Petitioner could rely on the exception to tangible interest (Re Commercial and Industrial Insulations), i.e. the Petitioner could not be required to establish the solvency of the Fund in circumstances where its management was depriving it of relevant information.
Pursuant to section 36(10) of the ELP Law the deemed commencement date of the winding-up was backdated to 30 March 2012. The Court inferred, based on evidence provided, that the term of the Fund had not been extended beyond March 2012.
Harneys acted for the successful petitioner.