Cayman Islands: Exempted Limited Partnerships

Last Updated: 10 June 2016
Article by Rolf Lindsay, Daniel Wood, Arwel Lewis, Hughie Wong and Thomas Granger


An exempted limited partnership (an "ELP") is the most commonly used Cayman Islands partnership for international transactions. This memorandum describes certain features of an ELP. It is intended to be a summary only, and is not exhaustive. It is not a substitute for detailed legal advice, which can be obtained from your usual Walkers contact.


The principal legislation governing an ELP is the Exempted Limited Partnership Law, 2014 of the Cayman Islands (the "ELP Law").


Under Cayman Islands law, for an ELP to exist there must be a business carried on by two or more persons in common with a view to profit. An ELP is subject to certain further requirements in addition to these pre-requisites of partnership.

At its inception, an ELP requires at least one general partner (a "GP") which satisfies one of the criteria listed in 'Residency requirements' below and at least one limited partner (an "LP").

The terms of an ELP are invariably set out in an exempted limited partnership agreement (the "LPA"). In addition there are certain registration requirements which must be met (see Registration requirements below).

Legal form

An ELP is not an entity with separate legal personality, and cannot own property in its own right. The general statutory position is that the property of the ELP will be held on statutory trusts by the GP or GPs jointly under section 16(1) of the ELP Law:

"Any rights or property of every description of the exempted limited partnership, (including all choses in action and any right to make capital calls and receive the proceeds thereof), that is conveyed to or vested in or held on behalf of any one or more of the general partners or which is conveyed into or vested in the name of the exempted limited partnership shall be held or deemed to be held by the general partner, and if more than one then by the general partners jointly, upon trust as an asset of the exempted limited partnership in accordance with the terms of the partnership agreement."

Any debt or obligation incurred by a GP in the conduct of the business of an ELP shall be a debt or obligation of the ELP.

All letters, contracts, deeds, instruments or documents must be entered into by the GP on behalf of the ELP.

Nature of business permitted

An ELP may be formed for any lawful purpose or purposes to be carried out and undertaken either in or from within the Cayman Islands or elsewhere in accordance with the ELP Law, provided that the ELP shall not undertake business with the public in the Cayman Islands other than so far as may be necessary for the carrying on of the business of that ELP exterior to the Cayman Islands.

Certain activities are regulated in the Cayman Islands and an ELP may be required to obtain a licence or to register with the Cayman Islands Monetary Authority if it wishes to carry on such activities. These include banking business, trust business, company management, insurance business, mutual fund administration, business of a mutual fund and securities investment business.

Registration requirements

An ELP is originally formed by one or more GPs and one or more LPs entering into the LPA. To bring the partnership within the ambit of the ELP Law (and therefore to confer limited liability status on the LPs etc), a partnership must then be registered with the Registrar of Exempted Limited Partnerships (the "Registrar") which is achieved by a GP filing a statement pursuant to section 9 of the ELP Law setting forth:

  1. the name of the ELP;
  2. the address of its registered office in the Cayman Islands;
  3. the general nature of the business of the ELP;
  4. the duration of the term of the ELP (may be unlimited);
  5. the full name and address of each GP; and
  6. a declaration that the ELP will not undertake business with the public of the Cayman Islands other than so far as may be necessary for carrying on of the business of that ELP exterior to the Cayman Islands.

The Registrar is required to issue a Certificate of Registration as soon as the registration of the Section 9 Statement and certain ancillary documents has been effected. The Certificate of Registration will generally be issued within five working days, or within two working days upon payment of an express government fee.


The name of the ELP must contain the words 'Limited Partnership', or the letters 'L.P.' or 'LP'. The ELP may have a dual foreign name, being a name in any language not utilising the Roman alphabet, ie using letters, characters, script, accents and other diacritical marks.

Registered office

An ELP must have a registered office situated in the Cayman Islands for the service of process and to which all notices and communications may be addressed.

Restrictions on number of partners

An ELP must at all times have a minimum of one GP which satisfies one of the criteria listed in 'Residency requirements' below, and one LP. Unless provided for in the LPA, there is no maximum number of LPs or GPs.

Residency requirements

There are no residency or qualification requirements for GPs or LPs except that at least one GP is required to be either an individual resident in the Cayman Islands, a company or limited liability company incorporated in the Cayman Islands, a company registered as a foreign company in the Cayman Islands, a foreign limited partnership registered under the ELP law, or be an ELP itself.

An ELP is not required to hold partner meetings in the Cayman Islands or anywhere else unless so required by the LPA.

Changes to registered details

If any change is made or occurs in any matter specified in the ELP's Section 9 Statement (see above), a GP must file with the Registrar a statement pursuant to section 10 of the ELP Law (a "Section 10 Statement") specifying the nature of the change. The Section 10 Statement must ordinarily be filed within 60 days of such change.

A Section 10 Statement in respect of any arrangement or transaction consequent upon which any person will be removed, replaced or admitted as a GP, shall, within fifteen days of such arrangement or transaction, be filed with the Registrar and, until such statement is so filed, the arrangement or transaction shall, for the purposes of the ELP Law and the LPA, not be effective to remove, replace or admit such person as a GP.

Amendment of constitution

Provisions governing the amendment of the LPA are invariably contained in the LPA itself. Notwithstanding any term in the LPA to the contrary, any term of the LPA may be amended by agreement between the partners.

Powers and liabilities of GPs

All letters, contracts, deeds, instruments or documents whatsoever shall be entered into by the GP (or any agent or delegate of the GP) on behalf of the ELP. An LP who takes part in the conduct of the business may lose its limited liability status, as described below in the section headed 'Liability of LPs'.

In the event that the assets of the ELP are inadequate, the GP(s) shall be liable for all of the debts and obligations of the ELP.

A GP has a statutory duty to act at all times in good faith and, subject to any express provisions of the LPA to the contrary, in the interests of the ELP.

Any debt or obligation incurred by a GP in the conduct of the business of the ELP shall be a debt or obligation of the ELP.

Books and records

The GP is required to maintain two registers with details of the LPs. The first register may be maintained in any country or territory as the GP may determine and must contain the name and address of each LP and the date of admission and withdrawal of each LP from the ELP (the "Register of LPs"). The Register of LPs shall be open to inspection during all usual business hours in the place where such register is maintained by (i) subject to any express or implied term of the LPA, all partners and (ii) any other person with GP consent. The GP must maintain a record of the address at which this register is held at the ELP's registered office.

The second register may also be maintained in any country or territory as the GP may determine and must record the amount and date of contributions of each LP and the amount and date of any payment representing a return of the whole or any part of the LP's contribution (the "Register of LP Contributions"). The Register of LP Contributions shall be open to inspection during all usual business hours in the place where it is maintained with the consent of the GP.

Both registers are required to be updated within 21 days of any change in the particulars therein. A GP who defaults in complying with the duty to maintain the Register of LPs or the record of the address at the ELP's registered office, is guilty of an offence and liable on summary conviction to a fine for each day that such default continues, and shall indemnify any person who thereby suffers any loss.

The GP has a duty to maintain or cause to be maintained a Register of Security Interests in the Partnership. This shall be maintained at the registered office and shall record the agreement pursuant to which the security interest is granted including the date and the parties thereto, the identity of the grantor and grantee, the partnership interest or part thereof subject to the security interest and the date of receipt of notice of the security interest. A GP who defaults in complying with this duty shall be liable to pay a fine for each day the default continues.

Any security interest of an LP's interest must comply with the LPA.

The Register of Security Interests shall be open to inspection by any person during all usual business hours.

Subject to any express or implied term of the LPA to the contrary, each LP may demand and shall receive from a GP true and full information regarding the state of the business and financial condition of the ELP.

A GP is required to keep proper books of account, including material underlying documentation (the "Books of Account") with respect to:

  1. all sums of money received and expended by a partnership;
  2. all sales and purchases of goods by the partnership; and
  3. the assets and liabilities of the partnership.

The Books of Account must give a true and fair view of the business and financial condition of the ELP, explain its transactions and should be maintained for at least five years.

Any GP who knowingly and wilfully fails to comply with these requirements shall be subject to a penalty.

The LPA is not filed in any public registry and is not open to public inspection.

Liability of LPs

An LP shall not take part in the conduct of the business of the ELP. If the LP takes part in the conduct of the business of an ELP in its dealings with persons who are not partners, that LP shall be liable, in the event of the insolvency of the ELP, for all debts and obligations of that ELP incurred during that period in which he conducted himself as a GP provided always that the LP shall be liable only to a person who transacts business with the ELP during such period with actual knowledge of such participation and who then reasonably believed such LP to be a GP.

The ELP Law specifically provides that an LP does not take part in the conduct of the business of an ELP by:

  1. holding an office or interest in, or having a contractual relationship with, a GP or being a contractor for or an agent or employee of the ELP or of a GP or acting as a director, officer or shareholder of a corporate GP;
  2. consulting with and advising a GP or consenting or withholding consent to any action proposed, in the manner contemplated by the LPA with respect to the business of the ELP;
  3. investigating, reviewing, approving or being advised as to the accounts or business affairs of the ELP or exercising any right conferred by the ELP Law;
  4. acting as surety or guarantor for the ELP either generally or in respect of specific obligations;
  5. approving or disapproving an amendment to the LPA;
  6. calling, requesting, attending or participating in any meeting of the partners;
  7. taking any action that results in the winding up or the dissolution of the ELP;
  8. taking any action required or permitted by the LPA or by law to bring, pursue, settle or terminate any action or proceedings brought pursuant to section 13(2);
  9. appointing a person to serve on any board or committee of the ELP, a GP or an LP or removing a person therefrom;
  10. serving on any board or committee of the ELP, a GP, the LP or partners or by appointing, electing or otherwise participating in the choice of a representative or any other person to serve on any such board or committee, or by acting as a member of any such board or committee either directly or by through any such representative or other person including giving advice consenting (or refusing to consent) to any action proposed by the GP on behalf of the ELP and exercising any powers or authorities or performing any obligations as a member of such board or committee in the manner contemplated by the LPA;
  11. serving on the board of directors or a committee of, consulting with or advising or being an officer, director, shareholder, partner, member, manager, trustee, agent or employee of, or by being a fiduciary or contractor for, any person in which the ELP has an interest or any person providing management, consulting, custody or other services or other products for, to or on behalf of, or otherwise having a business or other relationship with, the ELP or a general partner of the ELP;
  12. voting as an LP on:

    1. the winding up and dissolution of the ELP;
    2. the purchase, sale, exchange, lease, mortgage, pledge or other acquisition or transfer of any asset or assets by or of the ELP;
    3. the incurrence or renewal of indebtedness by the ELP;
    4. a change in the nature of the business of the ELP;
    5. the admission, removal or withdrawal of a GP or LP and the continuation of business of the ELP thereafter; or
    6. transactions in which one or more of the GPs have an actual or potential conflict of interest with one or more of the LPs.

The ELP Law also specifies that the possession of powers not included on this list does not imply that an LP is necessarily taking part in the business of the ELP. The ELP Law further provides that subject to the express provisions of the LPA, any person appointed to serve on any board or committee, such as the advisory committee of the ELP, will owe no fiduciary duties to the ELP or any partner and will be able to enforce the indemnification provisions afforded to such member in the LPA, even where the member is not itself a party to the LPA.

Transfer of interests

Subject to the ELP Law and the provisions of the LPA, a partnership interest is assignable in whole or in part.

Subject to the terms of the LPA, an LP may assign either absolutely or by way of mortgage the whole or any part of his partnership interest. An assignee shall, to the extent of such assignment, become an LP with the rights and subject to the obligations of the assignor (and, subject as set forth below, wholly or partly in place of and to the exclusion of the assignor as the case may be) in accordance with the LPA and the ELP Law in respect of the partnership interest or part thereof assigned. No such assignee shall assume any liability of the assignor for him taking part in the conduct of business of the ELP or for the return of contributions to the assignor following an insolvency of the ELP, and notwithstanding any term of the LPA or any other agreement to the contrary, no such assignment shall relieve the assignor of any liability arising pursuant thereto.

Distributions to LPs

The GP shall not, on winding up or otherwise, pay any LP a return of any part of its contribution to the ELP out of the capital of the ELP unless immediately following such payment, the ELP is solvent. An LP who receives a payment representing a return of any part of its contribution to the ELP or is released from any outstanding obligations in respect of its commitment when the ELP is insolvent and such LP has actual knowledge of the insolvency shall be liable to return the amount of such payment or the due performance of that released obligation within six months from the date the payment was made to the LP, to the extent such amount is required to discharge a debt or obligation of the ELP. Any amount required to be repaid shall bear simple interest at the rate of ten percent per annum (calculated daily) or otherwise as may be specified in the LPA.

Defaulting LPs

The ELP Law provides that where an LPA includes certain remedies for the breach or default by a partner of its obligations under the LPA, such remedies will not be unenforceable solely on the basis that they may be penal in nature. The ELP law sets out a non-exhaustive list of such possible remedies or consequences of default. A GP shall not be liable for its decision to impose or not impose any such remedies or consequences upon any partner, or for its decision not to do so, subject always to the GP's duty to act at all times in good faith, and subject to any provisions to the contrary in the LPA, the interests of the ELP.


The ELP Law states that an ELP shall be wound up in accordance with the provisions of the LPA at the time or upon the occurrence of any event specified in the LPA or, unless otherwise specified in the LPA, on the passing of a resolution of all GPs and a two-thirds majority of LPs. The GP must make a number of filings within 28 days of the commencement of the winding up of the ELP.

Subject to the ability of the Registrar to strike an ELP from the register under the ELP Law, an ELP shall not be dissolved by an act of the partners or otherwise until a notice of dissolution signed by a GP or liquidator has been filed with the Registrar on completion of the winding up of the ELP.

Unless the LPA provides otherwise, if a new qualifying GP is not elected within 90 days after the notification by the GP or its representative to the LPs of the death, commencement of liquidation or bankruptcy proceedings, withdrawal, removal or making of a winding up or dissolution order of the sole or last GP (the "automatic wind up date"), the ELP shall be wound up in accordance with the LPA or such orders as the court may decree pursuant to the above. Notwithstanding the foregoing, if within 90 days of the date of such notice, a majority of LPs (or such other threshold set out in the LPA) elect one or more new GPs, the ELP shall not be required to be wound up and dissolved and the business of the ELP may be resumed and continued as provided for in the LPA or any subsequent agreement.

The ELP Law allows the registrar to strike an ELP from the Register if it has reasonable cause to believe that an ELP is not carrying on business or is not in operation, whereupon the ELP shall be dissolved. A GP may apply to have an ELP struck from the register upon payment of the prescribed fee. Notice of any strike off will be published in the Cayman Islands Gazette and any GP, LP or creditor of an ELP so struck off may apply to the Court to have the ELP restored to the register. The striking off the register of an ELP shall not affect the liability, if any, of any GP or LP which shall continue and be enforced as if the ELP had not been dissolved.

Transfer by way of Continuation

An ELP may apply to be deregistered in the Cayman Islands in order to transfer by way of continuation into another jurisdiction. Certain requirements must be met for the Registrar to permit the deregistration which include solvency declarations made by the GP, a statement of assets and liabilities of the ELP, evidence that notice has been given to secured creditors of the ELP of the transfer and evidence that the transfer is permitted by the foreign jurisdiction and the LPA.

Tax status and annual return

An ELP may apply for an undertaking from the Governor that no law enacted in Cayman imposing any tax to be levied on profits or income or gains or appreciations shall apply to the ELP or to any partner in respect of the ELP. The undertaking will be for a maximum of 50 years and will also cover estate duty or inheritance tax.

An annual fee payable on or before 31 January of approximately US$2,439.02 is payable to the Registrar for an unregulated ELP. An annual return must also be filed on or before 31 January in every year. Penalties will be levied for late payment.

For an ELP that is not regulated or licensed under any other law, no financial statements need to be filed with any Cayman Islands governmental agency, and no annual audit is required.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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