58

Legal Focus

SEPTEMBER 2014

The Exempted Limited Partnership Law, 2014

Jonathan Law, of Counsel at Campbells law firm, gives LM readers insight into the

Exempted Limited Partnership bill, 2014. The key changes introduced by the new law: The ELPL recognises developments in commercial practice, clarifies certain matters in order to ensure consistency of advice and allows for greater contractual flexibility to accommodate developing trends in the formation, regulation and operation of Cayman Islands exempted limited partnerships. Broadly welcomed by the legal profession in Cayman, the new ELPL also clarifies certain technical matters in order to ensure consistency of advice across the profession. Key changes: The ability of exempted limited partnerships to create floating charges over the assets of the partnership is now expressly permitted; the formalities associated with the admission and transfer of partnership interests are simplified; the time period that applies to ‘statutory clawbacks’ in the event of the insolvency of an exempted limited partnership are clarified; the limited liability ‘safe harbour’ for limited partners is expanded; the partnership agreement may now be directly enforced by the members of advisory boards; details of contributions may now be kept in a separate register which may only be inspected with the consent of the general partner; a foreign limited partnership can now be registered in the Cayman Islands in order that it may act as the general partner of a Cayman Islands exempted limited

partnership; and there is now a specific process for a Cayman Islands exempted limited partnership to transfer to another jurisdiction by way of continuation

The trends in the formation, regulation and operation of private funds: The theme of regulation remains transparency and oversight. The Cayman Directors Registration and Licensing Law, albeit not applicable to limited partnership structures, is another example of the continued demand for increased information about and regulation of the key service providers to offshore private funds. The advantage of utilising the Cayman model continues to be ‘speed to market’ and with the additional flexibility introduced by the ELPL amendments, the model now seems to enjoy an additional competitive advantage over some of the other offshore jurisdictions. Operationally, the costs of meeting increased due diligence, the breadth of indemnification provisions, staffing of advisory boards and solidifying key investor relationships are on the minds of many.

What parties that work with Cayman Islands exempted limited partnerships should now do?

The latest revisions to the ELPL will mean that all advisors to private fund sponsors

and other service providers who are utlilising the limited partnership structure will be revisiting not just certain

key terms of limited partnership agreements but also certain parts of closing opinions and side letter templates. For those working with lenders and for those seeking increased leverage, the creditor friendly changes may encourage wider discussion as to the levels of required borrowing and the perception of risk. LM

Contact: Campbells

Floor 4, Willow House, Cricket Square PO Box 884, George Town, Grand Cayman KY1-1103, Cayman Islands

Website: www.campbells.com.ky Tel: +1 345 949 2648

Jonathan Law Of Counsel

Email: jlaw@campbells.com.ky Tel: +1 345 949 2648