A Cayman partnership that is registered under the Exempted Limited Partnership Act (ELP Act) is known as an Exempted Limited Partnership (ELP). The ELP Act expressly protects pertinent elements of the Partnership Act and stipulates that ELPs must follow the same common law and equity rules that apply to partnerships.
Key features of an exempted limited partnership
An ELP has the following key features:
- It has no separate legal personality
- Neither the ELP nor the partners are taxed in the Cayman Islands
- At least one general and one limited partner must be present
- All management responsibility is held by the general partner(s)
- Limited liability for the limited partners, except in specific circumstances
- Unlimited liability for the general partner if the assets are insufficient
- An unbreakable duty of the general partner to act in good faith
Registration and formation
In the Cayman Islands, the formation and registration of an ELP entail the following steps:
Name
The words “Limited Partnership” or the initials “L.P.” or “LP” must be included in the proposed name. The terms “bank,” “insurance,” “trust,” and “royal” are examples of prohibited words that may not be included in the name of the ELP at all. In other circumstances, those words need the previous authorization of the Registrar of Exempted Limited Partnerships (Registrar) before they can be used.
Qualifying general partner
A qualifying general partner must be present in at least one general partnership. This can be a Cayman-exempted company; a non-Cayman company (or LLC) registered in Cayman as a foreign company or a non-Cayman limited partnership registered as a foreign limited partnership.
Licensed office
A service provider authorized by the Cayman Islands Monetary Authority (CIMA) for this purpose must provide the ELP with a registered office.
Quantity of partners
Partners must always consist of at least two distinct individuals or entities, including a minimum of one general partner and a minimum of one limited partner. A partner must be a “qualified general partner” as defined by the Act for an ELP to be constituted. A short-form limited partnership agreement (LPA) must be signed by all partners. They are is responsible for providing the Registrar with information about the ELP and paying the registration cost. The certificate of registration is provided in about five working days after the ELP registration paperwork is submitted. The certificate of Registration may be obtained within one business day after payment of an express registration fee. This stage must be completed before submitting the registration forms.
Cayman Islands’ tax policy
In the Cayman Islands, neither an ELP nor any partners are liable for any kind of direct taxes. An ELP can get an undertaking from the Cayman Islands government that no law imposing a tax on earnings, income, gains, or appreciations will apply to it. In addition, any partner regarding the operations, assets, or interest of a partner for not more than 50 years from the date of the undertaking.
Partnership records
The LPA often lays up guidelines for the upkeep of accounting documents of the payments made by partners, the division of earnings among the partners, and the authority of the limited partners to review such records. The act states that a limited partner may request and receive from the general partner honest and complete information about the status of the business and financial situation of the ELP if there is no provision to the contrary in the LPA.
Termination of an ELP
An ELP may be liquidated after termination or it may request to be stricken off. Any ELP that has attracted investors or has been regularly traded will normally be liquidated formally. The winding up and subsequent dissolution are the two different phases of liquidation.
Justifications for dissolution
An ELP may be dissolved under the following conditions:
- At the time of, or upon the occurrence of, any event specified in the LPA
- By resolution of all the general partners and a majority of the partners (unless otherwise provided for in the LPA)
- Automatically, following the liquidation or withdrawal of the last qualifying general partner; or
- By court order
Strike off
The general partner may request that the registrar strike out the name of an ELP and dissolve it if it is not operating or doing business.
Transfer by way of continuation
An ELP may apply to deregister and transfer by way of continuation to another country as a partnership, body corporate, or any other kind of entity as defined by the laws of that jurisdiction.
