The Cayman Islands Exempted Limited Partnership
is a business form that may be set up by two or more partners willing to carry out the same activities for the purpose of deriving profits. A key difference between this partnership and other business forms in the Cayman Islands is that has no separate legal entity from its founders. This is an important aspect that created unlimited liability for the partners, further discussed in this article.
The Exempted Partnership Law
is the one governing these types of business forms in the Islands. In addition to this, the Partnership Law is another legal resource on which investors can rely when dealing with specific matters. One of our Cayman Islands incorporation agents
can give you complete details on these laws as well as assist you in the creation of an exempted limited partnership.
What are the main characteristics of the exempted limited partnership?
The exempted limited partnership is a business form with no legal personality, unlike the Cayman Islands exempted company
. However, just like other business forms in the Islands, it is not subject to taxation. The partners in an exempted limited partnership can be individuals or other corporations.
This partnership is formed by a minimum of two partners: a general and a limited one. The general partner is the one with the entire management responsibilities while the limited partners are only engaged in management activities in some isolated cases. The general partner is also the one to bear unlimited liability in the event of the breakdown of the partnership and the one who will always need to act in good faith for the partnership.
When a limited partner takes up the role of managing the business for some time, he is then considered a general partner and, for the duration of his attributions as a manager, will lose his limited liability. Some of the activities a limited partner can engage in without losing their status include the following:
- advising or consulting with a general partner, as per the partnership agreement.
- attending or requesting partner’s meetings as well as approving or dismissing amendments to the partnership agreement.
- taking the needed steps or participating in the dissolution of the partnership.
- appointing or removing other general or limited partners as well as other persons who will be part of the board or committee.
- acting as a director of a corporate general partner.
The exempted limited partnership agreement
is the document that expressly states the attributions and duties of both the general partner and the limited one and it should be drawn up in such a manner as to ensure that there is no inadequate loss of limited liability for the partners that occupy this position. One of our Cayman Islands company formation agents
can help you during the draw up of the agreement.
How is the exempted limited partnership incorporated?
In order for a partnership of this kind to be fully functional and act legally, it must be registered immediately upon its formation. The application for registration is submitted to the Registrar, together with a statutory statement signed by the general partner. When this partner cannot be present to sign the statement in person, it can be signed by another party in his name.
The exempted limited partnership statement will include the name and the general description of the new business as well as the registered office address, which is mandatory and needs to be in the Cayman Islands. The particulars of the general partner are also clearly outlined as well as the terms under which the partners enter into the agreement (when applicable).
The name of the partnership must state the business form, meaning that L.P./LP or Limited Partnership will appear after the name.
An important advantage for this business form is that they can be incorporated easy and there are no regulatory approvals that need to be obtained by the founders. Once all of the documents are submitted with the Registrar, the certificate of registration is issued in approximately 3 to 5 working days. Partners also have the option for express incorporation and, according to the procedure, an express fee is payable.
What are the attributions of the partners?
When referring to the rights and obligations of the partners we generally talk about those that fall onto the general partner. As previously stated, the limited partner retains his limited liability as long as he does not engage in management activities. In general, this partner will have a passive role and will only provide the needed capital. The general partner, however, is required to engage in the proper conduct of the partnership’s business as well as exercise a high standard of care.
The exempted limited partnership is required to file an annual return with the Registrar and must pay the annual return fee. The general partner signs this return.
One of our Cayman Islands incorporation agents
can help investors open an exempted limited partnership of another business form of their choice. Contact us
for more information about investing in the Islands and the advantages for foreign investors.