June 01 2009
The Exempted Limited Partnership Law (2007 Revision) has been amended by the Exempted Limited Partnership (Amendment) Law 2009. Many of the changes clarify the existing law and place greater reliance on the expressed provisions set forth in the partnership agreement. The amendments took effect on May 11 2009 and will be of interest to investors and managers of alternative investment funds alike. This article sets out many of the changes brought about by the 2009 law.
The register of partnership interests, which must be maintained at the registered office of an exempted limited partnership, may now be kept in electronic, rather than written, form. Such registrations are to remain open to inspection by all partners or by any other person with the consent of the general partner.
Clarification is now provided to limited partners by changes to Section 7(3) of the law, which sets out a non-exclusive list of the activities that limited partners may undertake without the risk of being deemed to be carrying on the business of an exempted limited partnership (ELP). These activities include:
The 2009 law also clarifies that no limited partner of an ELP which is itself the general partner of an ELP shall, by virtue of that fact alone, be deemed to be a general partner of such a partnership.
Section 7(7)(a) of the 2009 law has been amended to remove the requirement that the consent of the general partner must be obtained for assignments (absolute or by way of security) of a limited partnership interest. Accordingly, partners are now free to set out any transfer or charging restrictions expressly in the partnership agreement.
In relation to repayments of limited partner contributions, Section 14(1) of the 2007 law has been repealed and replaced by the 2009 law which now provides that a limited partner who receives a payment representing a return of any part of his or her contribution to the partnership within six months prior to an insolvency of an ELP shall be liable to repay such a payment with simple interest at the rate of 10% a year (calculated on a daily basis), or as may be specified in the partnership agreement, to the extent that such contribution or part thereof is necessary to discharge a debt or obligation of the ELP incurred during the period that the contribution represented an asset of the ELP.
Section 15 of the 2009 law concerning the dissolution of an ELP has been amended to clarify the procedure for winding-up and dissolution of an ELP. Previously, the court was empowered to make such orders and give such directions for the winding-up of an ELP's affairs as may be just and equitable. While this broad language had the advantage of allowing flexibility in the general approach to a winding-up, the absence of procedural rules created some uncertainty and inconsistency of treatment.
The amended Section 15 provides that, except to the extent that such provisions are not consistent with the ELP law, the provisions of Part V of the Companies Law dealing with liquidations and the Companies winding-up Rules 2008 shall be deemed to apply to the winding-up and dissolution of an ELP. This means that a solvent ELP may still be wound up in accordance with the terms of its partnership agreement, and only a few sections of the Companies Law (routine filings and procedures required to effect the winding-up) shall be deemed to apply to such a voluntary dissolution and winding-up.
The 2009 law gives greater guidance as to how the dissolution of an insolvent ELP can be commenced by limited partners or creditors, while the procedural rules for the winding-up of an insolvent ELP pursuant to a court order have also been clarified.
An amendment to Section 7(5) of the 2007 law also makes clear that even the nomination of any person as liquidator under the partnership agreement may be overridden by the court on the application of any partner or creditor.
Section 15(5) now clarifies the timing of an automatic dissolution of an ELP, stating that, subject to any express or implied term of the partnership agreement to the contrary, an ELP shall immediately be dissolved on an automatic dissolution date 90 days after the date of the service of a notice by the general partner (or its legal representative) on all the limited partners (or such other date or event as may be specified in the partnership agreement), informing them of any of the following events in relation to the sole or last remaining general partner:
Provided that a majority of the partners specified in the partnership agreement as being entitled to vote to elect a new general partner in accordance with the terms of the partnership agreement (or, if no such majority is specified in the partnership agreement, a simple majority of the partners) elects one or more new general partners before the automatic dissolution date, the business of the ELP may be resumed and continued as provided for in the partnership agreement or any subsequent agreement. This allows the limited partners greater flexibility to provide in the partnership agreement for the continued existence of the ELP should any of the above events occur.
The absolute prohibition on limited partners receiving a return of their capital contributions when an ELP is insolvent has been removed.
Section 26 provides that a general partner of an ELP may at any time de-register the partnership, if such de-registration is permitted under the terms of the partnership agreement, by filing a written notice of de-registration together with written confirmation that such action is authorized by the partnership agreement.
For further information on this topic please contact Stephen James or Simon Raftopoulos at Appleby by telephone (+1 345 949 4900) or by fax (+1 345 949 4901) or by email (firstname.lastname@example.org or email@example.com).
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