Last week the Cayman Islands legislature approved a major overhaul to the jurisdiction’s “Exempted Limited Partnership Law” or ELP.
As pfm reported previously, the ELP law was written in 1991 largely based off Delaware's limited partnership law so that US managers could use an offshore vehicle that was familiar and consistent with their onshore funds. In many respects the reforms realign the ELP law with Delaware's partnership law which have drifted apart over the years.
The chief update was to ensure investors serving on limited partnership advisory boards or committees do not have fiduciary duties to other LPs, unless expressly stated in the limited partnership agreement.
In recent years it had become increasingly common for LPs to serve on, or appoint representatives to, advisory boards with approval or veto rights for specific types of transaction and to resolve conflicts of interest at the GP’s request. This increased involvement in the internal management of the fund raised concerns that LPs or their appointees could have fiduciary duties or even that they could be characterized as general partners in certain circumstances, according to a client alert from offshore law firm Carey Olsen.
The new law also provides for the registration of foreign limited partnerships in Cayman to act as GPs of Cayman exempted limited partnerships.
During the debate of the amendments in the Legislative Assembly, Minister of Financial Services Wayne Panton reportedly said the changes to the law were driven by demands from private equity funds as the most frequent users of ELPs.