Jul 2020
Introduction
In the recent judgment of In the Matter of Gulf Investment Corporation et al v. The Port Fund LP et al (“Gulf Investment”)1 and the earlier judgment of Dorsey Ventures Limited v. XIO GP Limited (“Dorsey Ventures”)2, the Cayman Islands Grand Court has provided some welcome clarification regarding the extent of a limited partner’s statutory right to information in an exempted limited partnership.
Limited Partners’ Statutory Right to Information
An exempted limited partnership is a popular offshore investment vehicle used in the Cayman Islands. It consists of a general partner and one or more limited partners. A limited partner does not take part in the conduct of the business of the partnership3; rather it is the general partner that enters into all communication, contracts, deeds and instruments on behalf of the limited partnership4. The structure operates so that the general partner carries out the obligations and duties necessary for the business of the partnership on behalf of all limited partners. Notwithstanding this arrangement, a limited partner (as a partner in a business that is managed on its behalf) is prescribed a statutory right to receive information from a general partner regarding the state of the business to include the financial condition of the partnership.
Section 22 of the Exempted Limited Partnership Law (2018 Revision) (the “ELPL”) provides that
“Subject to any express or implied term of the partnership agreement each limited partner may demand and shall receive from a general partner true and full information regarding the state of the business and financial condition of the exempted limited partnership.”
As set out in section 22 of the ELPL, a limited partner’s right to information is subject to the express or implied terms of the partnership agreement. Therefore the statutory right to information may be restricted by the terms of the fund documents. The Cayman Court has helpfully sought to clarify the statutory obligation under section 22 and has provided some comfort to limited partners on their overriding general rights to information.
1 FSD 235 of 2019 and FSD 13 of 2020, unreported 16 June 2020
2 FSD 38 of 2018, unreported 22 October 2018
3 Section 4(1) ELPL
4 Section 14(2) ELPL