Cayman Islands Comparison of Delaware and Cayman Exempted Limited Partnership This note provides a general comparison of Delaware and Cayman limited partnerships. It does not attempt to guide the reading to any one jurisdiction over another, but instead highlights some of the features common to Cayman and Delaware limited partnerships, describes certain of the legal requirements in respect of the limited partnership laws in each jurisdiction and examines some of the factors to consider when deciding which jurisdiction to use. Please note that Walkers do not advise on Delaware law, the information on Delaware law in this Memo has been compiled in conjunction with US counsel and is not a substitute for specific legal advice. CAYMAN ISLANDS DELAWARE Legislation The Exempted Limited Partnership Law, 2014 (the "ELP Law"). Delaware Revised Uniform Limited Partnership Act (the "Act"). Constitution An exempted limited partnership ("ELP") requires at least one limited partner ("LP") and at least one general partner ("GP"). At least one GP is required to be either an individual resident in the Cayman Islands, a company incorporated or registered as a foreign company in the Cayman Islands, be an ELP itself or a foreign limited partnership registered in the Cayman Islands under the ELP Law (sections 4(2) and (4)). A limited partnership ("DELP") is defined as a partnership formed by at least two persons under the laws of the State of Delaware and having at least one general partner ("GP") and at least one limited partner ("LP") (section 17-101(8)). Legal form An ELP as such 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 GPs jointly under section 16(1) of the ELP Law. A DELP formed under the Act shall be a separate legal entity, the existence of which as a separate legal entity shall continue until cancellation of the DELP's certificate of limited partnership (section 17-201(b)). Page 2 CAYMAN ISLANDS DELAWARE Any rights or property of every description of the ELP, 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 a GP or conveyed into or vested in the name of the ELP shall be held or deemed to be held by the GP, or if more than one then by the GPs jointly, upon trust, as an asset of the ELP in accordance with the terms of the partnership agreement ("LPA"). 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 (sections 16(1) and 16(2)). Nature of business permitted Registration requirements 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 (section 4(1)). A DELP may carry on any lawful business, purpose or activity, whether or not for profit, with the exception of the business of granting policies of insurance, or assuming insurance risks, or banking. An ELP must 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: In order to form a DELP, at least one person (but not less than all of the GPs) must execute a certificate of limited partnership. The certificate of limited partnership shall be filed in the Office of the Secretary of State setting forth: 1. the name (or dual foreign name and translated name) of the ELP (which must contain the words "Limited Partnership" or the letters "L.P." or "LP"); 1. 2. the address of its registered office in the Cayman A DELP shall possess and may exercise all the powers and privileges granted by the Act or by any other law or by its partnership agreement ("LPA"), together with any powers incidental thereto, including such powers and privileges as are necessary or convenient to the conduct, promotion or attainment of the business, purpose or activities of the DELP (section 17-106). the name of the DELP (which, in accordance with section 17-102 of the Act, must contain the words "Limited Partnership" or abbreviation "L.P." or designation "LP"); Page 3 CAYMAN ISLANDS 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 (sections 6(1) and 9(1)). DELAWARE 2. the name and the business, residence or mailing address of each GP; and 3. any other matters the partners determine to include therein. A DELP is formed at the time of the filing of the initial certificate of limited partnership in the Office of the Secretary of State or at any later due or time specified in the certificate of limited partnership if, in either case, there has been substantial compliance with the requirements of section 17-201 of the Act (section 17-201). Registered Office An ELP shall have a registered office situated in the Cayman Islands for the service of process and to which all notices and communications may be addressed (section 6(2)). Each DELP shall have and maintain in the State of Delaware a registered office (which may but need not be a place of its business in the State of Delaware) and shall have a registered agent, whose business office is identical with the DELP's registered office, for service of process on the DELP (section 17-104). Restrictions on number of partners Unlimited number of partners allowed as a matter of Cayman Islands' law. [In effect, subject to the US Internal Revenue Code and the US Investment Company Act of 1940.] Unlimited number of partners allowed, subject to the US Internal Revenue Code and the US Investment Company Act of 1940. Changes to certificate of limited partnership/registration statement If any change is made or occurs in any matter specified in paragraphs (a) to (e) of the ELP's Section 9 Registration Statement (as set out under paragraphs (1) to (5) under 'Registration Requirements', above), a GP must within 60 days of such change file with the Registrar a statement specifying the nature of the change. A certificate of limited partnership is amended by filing a certificate of amendment thereto in the Office of the Secretary of State. The certificate of amendment shall set forth: 1. the name of the DELP; and Page 4 CAYMAN ISLANDS A statement signed in respect of any arrangement or transaction consequent upon which any person will be removed, replaced or admitted as a GP in any ELP, 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 that person as a GP of the ELP and with respect to a replacement or admitted GP, the documentation required by the ELP Law shall be provided as the case may require. Without the written consent of each person thereby affected, no arrangement or transaction shall take effect to the extent that it seeks to relieve or discharge a GP from the obligations of a GP with regard to any debt or obligation of the ELP to a person incurred before such arrangement or transaction takes effect (section 10 (3)). DELAWARE 2. the amendment to the certificate. A GP who becomes aware that any statement in a certificate of limited partnership was false when made, or that any matter described has changed making the certificates false in any material respect, shall promptly amend the certificate. Notwithstanding the requirements of the paragraph above, no later than 90 days after the happening of any of the following events an amendment to a certificate of limited partnership reflecting the occurrence of the event or events shall be filed by a GP: 1. the admission of a new GP; 2. a change in the name of the DELP, or except as otherwise provided in sections 17-104(b) and (c) of the Act, a change in the address of the registered office or a change in the name or address of the registered agent of the DELP. A certificate of limited partnership may be amended at any time for any other proper purpose the GPs may determine (section 17-202). Amendment to the LPA Notwithstanding any term in the LPA to the contrary, any term of the LPA may be amended orally by the partners. However, usually, the LPA will set out the manner in which an agreement may be amended and this is likely to be either by: 1. the GP with LP consent acting by a specified majority; 2. the GP only (generally only administrative matters); An LPA may provide for the taking of an action, including the amendment of the LPA, without the vote or approval of any LP or class or group of LPs or any GP or class or group of GPs (section 17-302(a)). If an LPA provides for the manner in which it may be amended, it may be amended in that manner or with the approval of all the partners or as otherwise permitted by law (section 17-302(f)). Page 5 CAYMAN ISLANDS DELAWARE and 3. Powers and liabilities of GPs the GP with the consent of affected partners (economic rights and regulatory matters, eg ERISA issues). In the event that the assets of the ELP are inadequate, the GP (or GPs jointly) shall be liable for all of the debts and obligations of the ELP (section 4(2)). Except as provided in the Act or in the LPA, a GP has the rights and powers and is subject to the restrictions of a partner in a partnership without LPs. A GP shall 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 (section 19(1)). Except as provided in the Act, a GP has the liabilities of a partner in a partnership without LPs to persons other than the partnership and the other partners. Except as provided in the Act or in the LPA, a GP has the liabilities of a partner in a partnership without LPs to the partnership and to the other partners. 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 (section 16(2)). Unless otherwise provided in the LPA, a GP has the power and authority to delegate to one or more other persons the GP's rights and powers to manage and control the business and affairs of the DELP (section 17-403). Registers The GP shall maintain or cause to be maintained in the country or territory that the GP may determine a register of limited partners, setting forth the name and address of each LP, the date on which a person became a LP and the date on which a person ceased to be a LP (the "Register"). The Register is required to be updated within 21 days of any change in the particulars therein. The GP shall maintainor cause to be maintained at the registered office of the ELP a record of the address at which the register of limited partners is maintained, which record shall be updated within twenty-one days of the date of any change in the particulars therein. Page 6 CAYMAN ISLANDS The Register and the record of the address at which the Register is maintained is open to inspection during usual business hours in the place where the register is maintained by, subject to any express or implied term of the LPA, all partners, or by any other person with the consent of the GP. A GP who defaults in complying with the duty to update the Register, 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 (section 29). Where the Register is kept at a place other than the registered office of the ELP, the GP must make available at the registered office, in electronic form or any other medium, the Register upon service of an order or notice by the Tax Information Authority (the "TIA") pursuant to the Tax Information Authority Law (2013 Revision). A GP who defaults in complying with any such order or notice without reasonable excuse, shall incur a penalty of US$625 and a further penalty of US$125 forevery day during which that non-compliance continues. The GP must also maintain or cause to be maintained in any country or territory a record of the amount and date of the contribution or contributions of each LP of the ELP and the amount and date of any payment representing a return of the whole or any part of the contribution of any LP (the "Record"), which Record shall be updated within twenty-one days of the date of any change in the particulars therein. Such Record is open to inspection during all usual business hours in the place where the records are maintained by any person with the consent of the GP. The default provisions relating to a GP's failure to update the Register and provide the Register to the TIA apply equally to the Record. The GP has a duty to maintain or cause to be maintained at the registered office a register of security interests in respect of DELAWARE Page 7 CAYMAN ISLANDS DELAWARE interests in the ELP (the "Register of Security Interests"). This shall record the identity of the grantor and grantee, the partnership interest or part thereof subject to the security interest and the date on which notice of the secutiry interest was validly served on the ELP. Written notice of the grant of a security interest over the whole or any part of a limited partnership interest must be given by the grantor or the grantee to the ELP at its registered office. Any security interest over the whole or any part of a limited partnership interest shall have priority according to the time that such written notice is validly served at the registered office of the ELP. The Register of Security Interests shall be open to inspection by any person during all usual business hours. A failure to comply with the duty to maintain the register is an offence and each GP in default shall incur a penalty of US$31 for each day that the default continues (section 31). Admission of limited partners Subject to the LPA, a person may become a partner of an ELP either by executing and delivering the LPA orany supplement thereto or counterpart thereof together withthe GP, by acceding to the LPA in accordance with its terms or upon the transfer of all or part of a partnership interest in accordance with the ELP Law and in each case, without the consent of the existing LPs (section 32(2)). As provided in and upon compliance with the LPA (section 17-301(a)). Contributions Contributions may be made in cash, property, services or other assets which a partner contributes to the capital of an ELP in its capacity as a partner (but shall not include any moneys lent by a partner to an ELP) (section 2). A person may be admitted to a DELP as an LP and may receive a partnership interest in the DELP without making a contribution or being obligated to make a contribution to the DELP (section 17-301(d)). The contribution of a partner may be in cash, property or services rendered, or a promissory note or other obligation to contribute cash or property or to perform services Page 8 CAYMAN ISLANDS DELAWARE (section 17-501)). Default If the LPA provides that where a partner fails to perform any of its other obligations under, or otherwise breaches the provisions of, the LPA that partner may be subject to or suffer remedies for, or consequences of, the failure or breach specified in the LPA or otherwise applicable under any law and those remedies or consequences shall not be unenforceable solely on the basis that they are penal in nature. Such remedies or consequences may include but are not limited to any one or more of the following: 1. reducing, eliminating or forfeiting the defaulting partner's partnership interest in the ELP or any rights of the defaulting partner underthe LPA; 2. subordinating the defaulting partner's partnership interest to the interests of non-defaulting partners; 3. effecting a forced sale or forfeiture of the defaulting partner's partnership interest; 4. arranging for the lending by other partners or other persons to the defaulting partner of the amount necessary to meet the defaulting partner's commitment; 5. providing for the fixing of the value of the defaulting partner's partnership interest by appraisal or by formula and the redemption or sale of the defaulting partner's partnership interest at that value; or 6. exercising any other remedy or consequence specified An LPA may provide that: 1. an LP who fails to perform in accordance with, or to comply with the terms and conditions of , the LPA shall be subject to specified penalties and specified consequences; and 2. at the time or upon the happening of events specified in the LPA, an LP shall be subject to specified penalties or specified consequences (section 17-306). An LPA may provide that the interest of any partner who fails to make any contributions that he is obligated to make shall be subject to specified penalties for, or specified consequences of, such failure. Such penalty or consequence may take the form of reducing or eliminating the defaulting partner's proportionate interest in the DELP, subordinating his partnership interest to that of non-defaulting partners, a forced sale of his partnership interest, forfeiture of his partnership interest, the lending by other partners of the amount necessary to meet his commitment, a fixing of the value of his partnership interest by appraisal or by formula and redemption or sale of his partnership interest at such value, or other penalty or consequence (section 17-502(c)). Page 9 CAYMAN ISLANDS DELAWARE in the LPA or available under any applicable laws. Liability of LPs to third parties An LP shall not take part in the conduct of the business of the ELP in its capacity as a LP. All letters, contracts, deeds, instruments or documents whatsoever shall be entered into by or on behalf of the GP (or any agent or delegate of the GP) on behalf of the ELP (sections 14(1) and (2)). If an 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 that he participates in the conduct of the business as though he were, for that period, a GP, but 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. An LP is not liable for the obligations of a DELP unless he is also a GP or, in addition to the exercise of his rights and powers as an LP, he participates in the control of the business. However, if the LP does participate in the control of the business, he is liable only to persons who transact business with the DELP reasonably believing, based upon the LP's conduct, that the LP is a GP. An LP does not participate in the control of the business within the meaning of the Act by: 1. being an independent contractor for, or an agent or employee of, the DELP or a GP, or an officer, director or stockholder of a corporate GP, or LP of a partnership that is a GP of the DELP, or a trustee, administrator, executor, custodian or other fiduciary or beneficiary of an estate or trust which is a GP, or a trustee, officer, advisor, stockholder or beneficiary of a business trust which is a GP or member, manager, agent or employee of a limited liability company which is a GP; 2. consulting with or advising a GP or any other person with respect to any matter, including the business of the DELP, or acting or causing a GP or any other person to take or rerain from taking any action, including by proposing, approving, consenting or disapproving, by voting or otherwise, with respect to any matter, including the business of the DELP; 3. acting as surety, guarantor or endorser for the DELP or a GP, guarantying or assuming one or more 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 Page 10 CAYMAN ISLANDS DELAWARE exercising any rights 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 partnership agreement 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 33(2) of the ELP Law; 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 LPs or the partners, or by appointing, electing or otherwise participating in the choice of a representative or any other person to serve on any board or committee, or by acting as a member of any board or committee either directly or by or through any representative or other person, including giving advice or 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 that board or obligations of the DELP or a GP, borrowing money from the DELP or a GP, lending money to the DELP or a GP, or providing collateral for the DELP or a GP; 4. calling, requesting or attending or participating at a meeting of the partners or the LPs; 5. winding up a DELP pursuant to section 17-803 of the Act; 6. taking any action required or permitted by law to bring, pursue or settle or otherwise terminate a derivative action in the right of the DELP; 7. serving on a committee of the DELP or the LP or partners or appointing, electing or otherwise participating in the choice of a representative or another person to serve on any such committee, and acting as a member of any such committee directly or by or through any such representative or other person; 8. acting or causing the taking or refraining from the taking of any action, including by proposing, approving, consenting or disapproving, by voting or otherwise, with respect to one or more of the following matters: (a) the dissolution and winding up of the DELP or an election to continue the DELP or an election to continue the business of the DELP; (b) the sale, exchange, lease, mortgage, Page 11 CAYMAN ISLANDS DELAWARE committee in the manner contemplated by the LPA; 11. 12. 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, consultation, 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 GP of the ELP; or assignment, pledge or other transfer of, or granting of a security interest in, any asset or assets of the DELP; (c) the incurrence, renewal, refinancing or payment or other discharge of indebtedness by the DELP; (d) a change in the nature of the business; (e) the admission, removal or retention of a GP; (f) the admission, removal or retention of a LP; (g) a transaction or other matter involving an actual or potential conflict of interest; voting as an LP on: (a) the winding up and dissolution of the ELP; (b) the purchase, sale, exchange, lease, mortgage, pledge or other acquisition or transfer of any asset or assets by or of the ELP; (h) an amendment to the LPA or certificate of limited partnership; (i) the merger or consolidation of a DELP; (c) the incurrence or renewal of indebtedness by the ELP; (j) (d) a change in the nature of the business of the ELP; (e) the admission, removal or withdrawal of a GP or LP and the continuation of business of the ELP thereafter; or (f) transactions in which one or more of the GPs have an actual or potential conflict of interest in respect of a DELP which is registered as an investment company under the Investment Company Act of 1940, any matter required by the Investment Company Act of 1940 to be approved by the holders of beneficial interests in an investment company, including the electing of directors or trustees of the investment company, the approving or terminating of investment advisory or underwriting contracts and the approving of auditors; Page 12 CAYMAN ISLANDS DELAWARE with one or more of the LPs (section 20(2)). The above is a non-exhaustive list of matters which do not amount to an LP taking part in the conduct of the business of an ELP and shall not import any implication that the possession or exercise of any other power by an LP will necessarily constitute the taking part by such LP in the business of the ELP. 9. Series of LPs, GPs or partnership interests Series partnerships are permissible under Cayman Islands' law as a matter of contract but note that there is no scope for statutory segregation as between the assets and/or liabilities of different series of interests. An LPA providing for different series of interests comprises solely a contractual arrangement (k) the indemnification of any partner or other person; (l) the making of, or calling for, or the making of other determinations in connection with contributions; (m) the making of, or the making of other determinations in connection with or concerning, investments, including investments in property whether real, personal or mixed, either directly or indirectly, by the DELP; or (n) such other matters as are stated in the LPA or in any other agreement or in writing; serving on the board of directors or a committee of, consulting with or advising, being an officer, director, stockholder, partner (other than a GP of a GP of the DELP), member, manager, trustee, agent or employee of, or to be a fiduciary or contractor for, any person in which the DELP has an interest or any person providing management, consulting, advisory, custody or other services or products for, to or on behalf of, or otherwise having a business or other relationship with, the DELP or a GP of the DELP (section 17-303). An LPA may establish or provide for the establishment of designated series of LPs, GPs or partnership interests having separate rights, powers or duties with respect to specified property or obligations of the DELP, and, to the extent provided in the LPA, any such series may have a separate Page 13 CAYMAN ISLANDS effective as between the partners and is not effective in relation to third parties, such as creditors, in the absence of limited recourse language limiting the recourse of such third parties to the assets relevant to a particular series in the context of a particular document. DELAWARE business purpose or investment objective (section 17-218(a)). The GP should therefore manage cross-series liability by incorporating limited recourse language, where possible, when contracting with third parties. Classes and voting An LPA may provide for classes or groups of LPs or GPs having such relative rights, powers and duties as the LPA may provide, and may make provision for the future creation in any manner provided in the LPA of additional classes or groups of LPs or GPs having such relative rights, powers and duties as may from time to time be established, including rights, powers and duties senior to existing classes and groups of LPs or GPs. The LPA may grant to all or certain identified LPs or a specified class or group of LPs (subject to section 17-303 of the Act), or to all or certain identified GPs or a specified group of GPs, the right to vote separately or with all or any class or group of the LPs or GPs, on any matter. Voting by LPs or GPs may be on a per capita, number, financial interest, class, group or any other basis. Unless otherwise provided in an LPA, on any matter that is to be voted on by GPs or LPs, the GPs or LPs may take such action without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the GPs or LPs having not less than the minimum number of votes that would be necessary to authorise or take such action at a meeting at which all GPs or LPs entitled to vote thereon were present and voted. Unless otherwise provided in an LPA, on any matter that is to be voted Page 14 CAYMAN ISLANDS DELAWARE on by GPs or LPs, the GPs or LPs may vote in person or by proxy. An LP and any class or group of LPs have the right to vote only on matters as specifically set forth in subchapter 3 of the Act, on matters specifically provided by agreement, including an LPA, and on any matter with respect to which a GP may determine in its discretion to seek a vote of an LP or a class or group of LP if a vote on such matter is not contrary to an LPA or another agreement to which a GP or the DELP is a party. An LP and any class or group of LPs have no other voting rights. An LPA may provide that any LP or class or group of LPs shall have no voting rights (sections 17-302 and 17-405). Transfer of partnership interest A partnership interest is transferable in whole or in part in accordance with the ELP Law and the provisions of the LPA (section 32(1)). Subject to the LPA, a person may become a partner of an ELP either by executing and delivering together with the GP, by acceding to the LPA in accordance with its terms or upon the transfer of all or part of a partnership interest in accordance with the ELP Law and in each case, without the consent of the existing LPs (section 32(2)). Where the requirements for or conditions to an admission of an LP to the ELP contained in the LPA have been complied with in accordance with their terms or, to the extent permitted by the LPA, waived, any person, however admitted, shall without the requirement for any further actions or formalities, be deemed to have adhered to and agreed to be bound by the terms and conditions of the LPA and shall have the rights and be subject to the obligations contained in the LPA and the ELP Law as if the person and all existing partners had together duly A partnership interest is personal property. No partner has any interest in specific property of the DELP (section 17-701). Unless otherwise provided in the LPA: 1. a partnership interest is assignable in whole or in part; 2. an assignment of a partnership interest does not dissolve a DELP or entitle the assignee to become or to exercise any rights or powers of a partner; 3. an assignment of a partnership interest entitles an assignee to share in such profits and losses, to receive such distribution or distributions, and to receive such allocation of income, gain, loss, deduction, or credit or similar item to which the assignor was entitled, to the extent assigned; and 4. a partner ceases to be partner and to have the power to exercise any rights or powers of a partner upon assignment of all of his partnership interest. Unless Page 15 CAYMAN ISLANDS DELAWARE executed and delivered the LPA (section 32(3)). otherwise provided in an LPA, the pledge of, or granting of a security interest, lien or other encumbrance in or against, any or all of the partnership interest of a partner shall not cause the partner to cease to be a partner or to have the power to exercise any rights or powers of a partner (section 17-702(a)). Transfer of limited partnership interests Subject to the LPA, no LP may transfer or grant any securityinterest in the whole or any part of his limited partnership interest except with the written consent of the GP given priorto, or simultaneously with, the transfer or grant (section 32(6)). Subject to the LPA, the transferee of a limited partnership interest or part thereof shall be admitted as a LP, wholly or partly, as the case may be, in place of and to the exclusion of the transferor in respect of the limited partnership interest or part thereof transferred but, unless otherwise agreed in writing by the transferor, the transferee and the general partner, the transferee. shall not assume any liability of the transferor arising from his taking part in the conduct of business of the ELP, which is prohibited by the ELP Law, or for the return of contributions to the assignor following an insolvency of the ELP and provided further that, notwithstanding any term of the LPA or any other agreement to the contrary, no such transfer shall relieve the transferor of any liability arising pursuant thereto (section 32(8)(b)). Transfer of general partnership interests Subject to the LPA and the ELP Law, a GP may transfer or grant a security interest in the whole or any part of his general partnership interest with the written consent of any other GP given prior to, or simultaneously with, the transfer or grant (section 32(7)). Subject to the LPA, the transferee of a general partnership interest or part thereof shall be admitted as a GP in place of and (subject to the required filings having been made with the Registrar) to the exclusion of, or in addition to, as the case may Unless otherwise provided in an LPA and except to the extent assumed by agreement, until an assignee of a partnership interest becomes a partner, the assignee shall have no liability as a partner solely as a result of the assignment (section 17-702(c)). Unless otherwise provided in the LPA, a DELP may acquire, by purchase, redemption or otherwise, any partnership interest or other interest of a partner in the DELP. Unless otherwise provided in the LPA, any such interest so acquired by the DELP shall be deemed cancelled (section 17-702(d)). An assignee of a partnership interest, including any assignee of a GP, may become an LP if and to the extent that: 1. the LPA so provides; or 2. all partners consent (section 17-704(a)). An assignee who has become an LP has, to the extent assigned, the rights and powers, and is subject to the restrictions and liabilities, of an LP under the LPA and the Act (section 17-704(b)). Whether or not an assignee of a partnership interest becomes an LP, the assignor is not released from his liability to the DELP under subchapters 5 and 6 of the Act (section 17-704(c)). Page 16 CAYMAN ISLANDS be, the transferor in respect of the general partnership interest or part thereof transferred but the transferee shall not be liable for any obligation of the ELP incurred before he is so admitted unless otherwise agreed in writing by the transferor and the transferee and the transferor shall remain liable for any obligation of the ELP incurred before the transferor ceased to be a GP unless otherwise agreed in writing by the transferor, the transferee and the person to whom the obligation is owed (section 32(8)(a)). Assignment or other disposition of interests A partner may assign or otherwise dispose of, whether absolutely or by way of security in any manner permitted by law, any right, debt or other chose in action arising under the LPA but no assignment or other disposition may, subject to the LPA, be made without the consent of the GP or, in the case of an assignment or disposition by a GP, the consent of any other GP given prior to, or simultaneously with, the assignment or disposition. An LPA may provide that, as against any other partner, any assignment or other disposition by a partner of any right, debt or other chose in action arising under the LPA shall confer economic rights only. "Economic rights" are: any rights to make and enforce capital calls, to receive the proceeds thereof and to enforce payment of, and receive any sums payable to the partner including the rights on the winding up and dissolution of the ELP; the right to receive a share of profits of the ELP or a share of the property on its winding up and dissolution; the right to an account for the purpose of ascertaining the amount or share of any of the foregoing; and any other rights that are expressly stated in the LPA to be assignable. DELAWARE Page 17 CAYMAN ISLANDS DELAWARE Allocations of profits and losses The profits and losses of an ELP shall be allocated among the partners, and among classes or groups of partners, in the manner provided in the LPA. The profits and losses of a DELP shall be allocated among the partners, and among classes or groups of partners, in the manner provided in the LPA. If the LPA does not so provide, profits and losses shall be allocated on the basis of the agreed value (as stated in the records of the DELP) of the contributions made by each partner to the extent they have been received by the DELP and have not been returned (section 17-503). Allocations of distributions Distributions of cash or other assets of an ELP shall be allocated among the partners, and among classes or groups of partners, in the manner provided in the LPA. Distributions of cash or other assets of a DELP shall be allocated among the partners, and among classes or groups of partners, in the manner provided in the LPA. If the LPA does not so provide, distributions shall be made on the basis of the agreed value (as stated in the records of the DELP) of the contributions made by each partner to the extent they have been received by the DELP and have not been returned (section 17-504). Limitations on distributions An LP who receives a payment representing a return of any part of his contribution to the ELP or is released from any outstanding obligation in respect of his commitment and, at the time that the payment was made or the release effected, the ELP is insolvent including where the payment or release causes the insolvency and the LP has actual knowledge of the insolvency of the ELP, then for a period of six months commencing on the date of that payment or release but not thereafter, the LP shall be liable to the ELP for the amount of the payment or the due performance of the released obligation in respect of his commitment in each case to the extent that the repayment or performance of the released obligation is necessary to discharge a debt or obligation of the ELP incurred during the period that the contribution or commitment represented an asset of the ELP (section 34(1)). A DELP shall not make a distribution to a partner to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the DELP, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specified property of the DELP, exceed the fair value of the assets of the DELP, except that the fair value of property that is subject to a liability for which the recourse of creditors is limited shall be included in the assets of the DELP only to the extent that the fair value of that property exceeds that liability. An LP who receives a distribution in violation of section 17-607 of the Act and who knew at the time such section was being violated shall be liable to the DELP for the amount of the distribution. An LP who receives a distribution in violation of this section but did not know the section was being violated, Page 18 CAYMAN ISLANDS Any amount required to be repaid pursuant to the above provision shall, unless the LPA specifies otherwise, bear simple interest at the rate of 10% per annum (calculated on a daily basis) (section 34(2)). If an ELP is voluntarily wound up and dissolved, the period of six months referred to above shall be calculated from the earliest of: (a) the time of the passing of a resolution for winding up; (b) the time or the occurrence of the event specified in the LPA requiring that it be wound up and dissolved; or (c) the insolvency of the ELP. DELAWARE shall not be liable for the amount of the distribution. Unless otherwise agreed, an LP who receives a distribution from a DELP shall have no liability under this section or other applicable law for the amount of the distribution after the expiration of three years from the date of the distribution (section 17-607). Interim distributions There is nothing in the ELP Law that restricts the making of interim distributions by an ELP; the LPA may provide for interim distributions. Except as provided in subchapter 6 of the Act, to the extent at the times or upon the happening of the events specified in the LPA, a partner is entitled to receive from a DELP distributions before his withdrawal from the DELP and before the dissolution and winding up thereof (section 17-601). Distributions in kind The LPA may provide for the making of distributions in kind by the ELP. Except as provided in the LPA, a partner, regardless of the nature of such LP's contribution, has no right to demand and receive any distribution in any form other than cash. Except as provided in the LPA, a partner may not be compelled to accept a distribution of any asset in kind from a DELP to the extent that the percentage of the asset distributed to such LP exceeds a percentage of that asset which is equal to the percentage in which such LP shares in distributions from the DELP. Except as provided in the LPA, a partner may be compelled to accept a distribution of any asset in kind from a DELP to the extent that the percentage of the asset distributed to such LP is equal to a percentage of that asset which is equal to the percentage in which he shares in distributions from the DELP (section 17-605). GP withdrawal There are no express provisions in the ELP Law pursuant to which a GP automatically ceases to be a GP of an ELP, however, A person ceases to be a GP of a DELP upon the happening of Page 19 CAYMAN ISLANDS section 36(7) of the ELP Law lists the following events as "events of withdrawal" of the GP: DELAWARE any of the following events: 1. the GP withdraws as provided in section 17-602 of the Act; the commencement of liquidation, bankruptcy or dissolution proceedings of the GP; or 2. the GP ceases to be a GP as provided in section 17-702 of the Act; the withdrawal, removal or making of a winding up or dissolution order of the GP (section 36(7)). 3. the GP is removed as a GP in accordance with the LPA; 4. unless otherwise provided in the LPA, or with the written consent of all partners, the GP: 1. the death of the GP; 2. 3. The terms of withdrawal of the GP are otherwise governed by the LPA. (a) makes an assignment for the benefit of creditors; (b) files a voluntary petition for bankruptcy; (c) is adjusted as bankrupt or insolvent, or has entered against him an order for relief in any bankruptcy or insolvency proceeding; (d) files a petition or answer seeking for himself any reorganisation, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation; (e) files any answer or other pleading admitting or failing to contest the material allegations of a petition filed against him in any proceeding of this nature; or (f) seeks, consents to or acquiesces in the Page 20 CAYMAN ISLANDS DELAWARE appointment of a trustee, receiver or liquidator of the GP or of all or any substantial part of his properties; 5. unless otherwise provided in the LPA, or with the written consent of all partners, 120 days after the commencement of any proceeding against the GP seeking reorganisation, arrangement, composition, readjustment, liquidation, dissolution or similar relief under statute, law or regulation, the proceeding has not been dismissed, or if within 90 days after the appointment without his consent or acquiescence of a trustee, receiver or liquidator of the GP or of all or any substantial part of his properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated; 6. in the case of a GP who is a natural person: (a) his death; or (b) the entry by a Court of competent jurisdiction adjudicating him incompetent to manage his person or his property; 7. in the case of a GP who is acting as GP by virtue of his being a trustee of a trust, the termination of the trust (but not merely the substitution of a new trustee); 8. in the case of a GP that is a separate partnership, the dissolution and commencement of winding up of the separate partnership; Page 21 CAYMAN ISLANDS DELAWARE 9. in the case of a GP that is a corporation, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter and the expiration of 90 days after the date of notice to the corporation of revocation without restatement of its charter; 10. unless otherwise provided in the LPA, or with the written consent of all partners, in the case of a GP that is an estate, the distribution by the fiduciary of the estate's entire interest in the DELP; 11. in the case of a GP that is a limited liability company, the dissolution and commencement of winding up of the limited liability company; or 12. in the case of a GP who is not an individual partnership, limited liability company, corporation, trust or estate, the termination of the GP (section 17-402(a)). A GP may withdraw from a DELP at the time or upon the happening of events specified in the LPA and in accordance with the LPA. Notwithstanding that an LPA provides that a GP does not have the right to withdraw as a GP, a GP may withdraw at any time by giving written notice to the other partners. If the withdrawal of a GP violates an LPA, in addition to any remedies otherwise available under applicable law, the DELP may recover from the withdrawing GP damages for breach of the LPA and offset the damages against the amount otherwise distributable to the withdrawing GP. Notwithstanding anything to the contrary set forth in the Act, an LPA may provide that a GP may not assign a partnership interest in a DELP prior to the dissolution and winding up of the Page 22 CAYMAN ISLANDS DELAWARE DELP (section 17-602). LP withdrawal The LPA may provide for the circumstances and process for the withdrawal of LPs. Where an LPA permits the withdrawal of LPs at the option of the LP, further consideration must be given as to whether the ELP is required to be registered as a "mutual fund" under the Mutual Funds Law (as amended). An LP may withdraw from a DELP only at the time or upon the happening of events specified in the LPA and in accordance with the LPA. Notwithstanding anything to the contrary under applicable law, unless an LPA provides otherwise, an LP may not withdraw from a DELP prior to the dissolution and winding up of the DELP. Notwithstanding anything to the contrary under applicable law, an LPA may provide that a partnership interest may not be assigned prior to the dissolution and winding up of the DELP (section 17-603). Distribution upon withdrawal The terms of distribution following a withdrawal will be as provided under the LPA. Except as provided by subchapter 6 of the Act, upon withdrawal, any withdrawing partner is entitled to receive any distribution to which such partner is entitled under an LPA and, if not otherwise provided in an LPA, such partner is entitled to receive within a reasonable time after withdrawal, the fair value of such partner's partnership interest in the DELP as of the date of withdrawal based upon such partner's right to share in distributions from the DELP (section 17-604). Certificate of cancellation/dissolution Dissolution A certificate of limited partnership shall be cancelled upon the dissolution and the completion of winding up of the DELP, or as provided in section 17-104(d) or 17-1110 of the Act or upon the filing of a certificate of merger or consolidation if the DELP is not the surviving or resulting entity in a merger or consolidation, or upon the filing of a certificate of transfer. A certificate of cancellation shall be filed in the Office of the Secretary of State to accomplish the cancellation of a certificate of limited partnership and shall set forth: Subject to the strike off procedure described below, 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 (section 36(2)). An ELP shall be wound up at the time or upon the occurrence of any event specified in the LPA and dissolved in accordance with the terms of the LPA or, unless otherwise specified in the LPA, by resolution of all the GPs and a two-thirds majority of the LPs (section 36(1)). Except to the extent that such provisions are not consistent 1. the name of the DELP; 2. the date of filing of its certificate of limited Page 23 CAYMAN ISLANDS with the ELP Law (and in the event of any inconsistencies the ELP Law shall prevail) and subject to any express provisions of the ELP Law to the contrary, the provisions of Part V of the Companies Law and the Winding Up Rules 2008 shall apply to the winding up and dissolution of an ELP (section 36(3)). On application by a partner or a creditor, the Court may make orders and give directions for the winding up and dissolution of an ELP as may be just and equitable (section 36(3)(g)). Notwithstanding that any order has been made pursuant to section 36(3)(g) or that the winding up of an ELP has commenced, a creditor who has security over the whole or part of the assets of the ELP is entitled to enforce his security without the leave of the Court and without reference to the GP or any liquidator appointed to wind up the ELP (section 36(4)). The GP or its legal representative shall promptly serve notice on all LPs informing the LPs of any event of withdrawal (as defined under 'Withdrawal of GP', above) in relation to the sole or last remaining qualifying general partner. Unless the LPA provides otherwise, if a new qualifying GP is not elected within 90 days after the service of notice of an event of withdrawal (the "automatic winding up date") the ELP shall be wound up in accordance with the LPA or the orders or directions the Court may make or give in accordance with subsection 36(3)(g). DELAWARE partnership; 3. the reason for filing the certificate of cancellation; 4. the future effective date or time (which shall be a date or time certain) of cancellation if it is not to be effective upon the filing of the certificate; and 5. any other information the person filing the certificate of cancellation determines (section 17-203). A DELP is dissolved and its affairs shall be wound up upon the first to occur of the following: 1. at the time specified in an LPA, but if no such time is set forth in the LPA, then the DELP shall have a perpetual existence; 2. unless otherwise provided in an LPA, upon the affirmative vote or written consent of: If a majority of LPs specified in the LPA as being entitled to vote to elect a new GP in accordance with the terms of the LPA elects one or more new qualifying GPs by the automatic winding up date, 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 (sections 36(7) to (11)). Subject to any express or implied term of the LPA to the contrary, an ELP shall not be dissolved nor the LPA terminated (a) all GPs; and (b) the LPs or, if there is more than one class or group of LPs, then by each class or group of LPs, in either case, by LPs who own more than two-thirds of the then current percentage or other interest in the profits of the DELP owned by all of the LPs or by the LPs in each class or group, as appropriate; 3. an event of withdrawal of a GP unless at the time there is at least one other GP and the LPA permits the Page 24 CAYMAN ISLANDS DELAWARE by: 1. changes in, additions to or substitutions of any one or more of the partners; 2. the transfer of the whole or part of the partnership interest of an LP; 3. the death, bankruptcy, dissolution, removal, withdrawal or winding up of an LP or a partner's withdrawal or redemption of, or repurchase by the ELP of, any partnership interest; 4. the incapacity of an LP; 5. any one or more of the LPs granting a mortgage, charge or other form of security interest over the whole or part of his partnership interest; 6. 7. the sale, exchange, lease, mortgage, pledge or other transfer of any of the assets of the ELP; or business of the DELP to be carried on by the remaining GP and that partner does so, but the DELP is not dissolved and is not required to be wound up by reason of any event of withdrawal if: 4. (a) within 90 days or such other period as is provided for in an LPA after the withdrawal the remaining partners agree to continue the partnership in accordance with section 17-801 of the Act; or (b) the business of the DELP is continued pursuant to a right to continue stated in the LPA and the appointment, effective as of the date of withdrawal, of one or more additional GPs if necessary or desired; at the time there are no LPs; provided that the DELP is not dissolved and is not required to be wound up if: (a) unless otherwise provided in an LPA, within 90 days or such other period as is provided for in the LPA after the occurrence of the event that caused the last remaining LP to cease to be an LP, the personal representative of the last remaining LP and all of the GPs agree, in writing or by vote, to continue the business of the DELP in accordance with section 17-801 of the Act; or (b) an LP is admitted to the DELP in the manner provided for in the LPA; a de-registration of the ELP pursuant to sections 41 or 43 (section 35(a)). Strike off Where the Registrar has reasonable cause to believe that an ELP is not carrying on business or is not in operation, the Registrar may strike the ELP off the register and the ELP shall thereupon be dissolved. The GP may request that the ELP be struck off the register. Where an ELP is being wound up, and the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the ELP are fully wound up, the Registrar may strike the ELP off the register and the ELP Page 25 CAYMAN ISLANDS shall thereupon be dissolved without the need for a notice of dissolution to be filed pursuant to section 36(2) (sections 37(1)-(3)). A GP, LP or creditor who objects to an ELP being struck off the register pursuant to the above, on the grounds that the ELP was at the time it was struck off the register carrying on business, in operation or otherwise, may make an application to the Court for the name of the ELP to be restored to the register. Such application must be made within two years of the date upon which the name of the ELP was struck off the register; or within a period that the Cabinet may by order allow but which shall not exceed ten years of the date upon which the name of the ELP was struck off the register (sections 37(5) and (6)). The striking off the register of any ELP shall not affect the liability, if any, of any GP or LP, and the liability shall continue and may be enforced as if the ELP had at all times continued to be in existence (section 37(11)). DELAWARE 5. upon the happening of events specified in an LPA; or 6. entry of a decree of judicial dissolution under section 17-802 of the Act (section 17-801). On application by or for a partner the Court of Chancery may decree dissolution of a DELP whenever it is not reasonably practicable to carry on the business in conformity with the LPA (section 17-802). Unless otherwise provided in the LPA, the GPs who have not wrongfully dissolved a DELP or, if none, the LPs or a person approved by the LPs or, if there are more than one class or group of LPs, then by each class or group of LPs, in either case, by LPs who own more than 50 per cent of the then outstanding current percentage or other interest in the profits of the DELP owned by all of the LPs or by the LPs in each class or group, as appropriate, may wind up the DELP's affairs; but the Court of Chancery, upon cause shown, may wind up the DELP's affairs upon application by any partner, his personal representative or assignee, and in connection therewith, may appoint a liquidating trustee. Upon dissolution of a DELP and until the filing of a certificate of cancellation as provided in section 17-203 of the Act, the persons winding up the DELP's affairs may, in the name of, and for and on behalf of, the DELP prosecute and defend suits, whether civil, criminal or administrative, gradually settle and close the DELP's business, dispose of and convey the DELP's property, discharge or make reasonable provision for the DELP's liabilities, and distribute to the partners any remaining assets of the DELP, all without affecting the liability of LPs and without imposing the liability of a GP on a liquidating trustee (section 17-803). Upon the winding up of a DELP, the assets shall be distributed Page 26 CAYMAN ISLANDS DELAWARE in accordance with section 17-804 of the Act. Access to information/confidentiality Subject to any express or implied term of the LPA, 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 (section 22). Each LP has the right, subject to such reasonable standards (including standards governing what information and documents are to be furnished, at what time and location at whose expense) as may be set forth in the LPA or otherwise established by the GPs, to obtain from the GPs from time to time upon reasonable demand for any purpose reasonably related to the LP's interest as an LP: 1. true and full information regarding that status of the business and financial condition of the DELP; 2. promptly after becoming available, a copy of the DELP's federal, state and local income tax returns for each year; 3. a current list of the name and last known business, residence or mailing address of each partner; 4. a copy of any written LPA and certificate of limited partnership and all amendments thereto, together with executed copies of any written powers of attorney pursuant to which the LPA and any certificate and all amendments thereto have been executed; 5. true and full information regarding the amount of cash and a description and statement of the agreed value of any other property or services contributed by each partner and which each partner has agreed to contribute in the future, and the date on which each became a partner; and 6. other information regarding the affairs of the DELP as Page 27 CAYMAN ISLANDS DELAWARE is just and reasonable. A GP shall have the right to keep confidential from LPs for such period of time as the GP deems reasonable, any information which the GP reasonably believes to be in the nature of trade secrets or other information the disclosure of which the GP in good faith believes is not in the best interest of the DELP or could damage the DELP or its business or which the DELP is required by law or by agreement with a third party to keep confidential (section 17-305). Books of Account A GP shall keep or cause to be kept proper books of account including, material underlying documentation including contracts and invoices, with respect to: 4. 1. all sums of money received and expended by the ELP; 2. all sales and purchases of goods by the ELP; and 3. the assets and liabilities of the ELP. Books of account need to give a true and fair view of the business and financial condition of the ELP and to explain its transactions. Such books of account are required to be retained for a minimum period of five years and any GP who knowingly and wilfully contravenes the above mentioned requirements shall be subject to a penalty. Where the GP keeps the books of account at any place other than at the registered office of the ELP or at any other place within the Cayman Islands, the GP shall, upon service of an order or notice by the TIA pursuant to the Tax Information Authority Law (2013 Revision), make available, in electronic form or any other medium, at its registered office copies of its books of account, or any part or parts thereof, as are specified in the order or Page 28 CAYMAN ISLANDS DELAWARE Legal proceedings by or against an ELP may be instituted by or against any one or more of the GPs only, and no LP shall be a party to or named in such proceedings with the exception that an LP may bring an action on behalf of the ELP if any one or more of the GPs with authority to do so have, without cause, refused to institute proceedings (section 33). Service of legal process upon any DELP shall be made by delivering a copy personally to any managing or general agent or general partner of the DELP in the State of Delaware or the registered agent of the DELP in the State of Delaware, or by leaving it at the dwelling house or usual place of abode in the State of Delaware of any such managing or general agent, GP or registered agent (if the registered agent be an individual), or at the registered office or other place of business of the DELP in the State of Delaware (section 17-105). notice (section 21). Proceedings Notwithstanding the above, it should be noted that if the Cayman Islands' Court deems it just and equitable, any person or a GP shall have the right to join in or otherwise institute proceedings against any one or more LPs who may be liable in respect of taking part in the conduct of the business of the ELP under section 20(1) or to enforce any return of contribution required by section 34(1) (section 33(2)). A GP or a liquidating trustee of a DELP may be served with process in the manner prescribed in section 17-109 of the Act in all civil actions or proceedings brought in the State of Delaware involving or relating to the business of the DELP or a violation by the GP or the liquidating trustee of a duty to the DELP, or the liquidating trustee is a GP or a liquidating trustee at the time suit is commenced (section 17-109). An LP or an assignee of partnership interest may bring an action in the Court of Chancery in the right of a DELP to recover a judgment in its favour if GPs with authority to do so have refused to bring the action or if an effort to cause those GPs to bring the action is not likely to succeed (section 17-1101). Business transactions of partners Subject to any express or implied terms of the LPA to the contrary and to the duty imposed on the GP to act in good faith and, subject to any express provisions of the LPA to the contrary, in the interests of the ELP, a partner may lend money to, borrow from and transact other business with the ELP so that an asset, debt or obligation of the exempted limited partnership shall thereby be created and with or without Except as provided in the LPA, a partner may lend money to, borrow money from, act as a surety, guarantor or assume one or more specific obligations of, provide collateral for, and transact other business with, the DELP and, subject to other applicable law, has the same rights and obligations with respect thereto as a person who is not a partner (section 17-107). Page 29 CAYMAN ISLANDS DELAWARE interest or security as the GP shall determine. The obligations of the ELP to repay a debt to a GP shall, at all times, be subordinated to the claims of secured and unsecured creditors of the ELP (section 18). Indemnification [As a matter of Cayman Islands' law, there is no doctrine of third party beneficiary rights and therefore third parties named in an ELP's LPA will not be able to enforce directly rights under such LPA unless such third parties become a signatory to such LPA or such rights are extended directly to such third parties expressly in other contracts between such third party and the ELP.] Subject to such standards and restrictions, if any, as are set forth in the LPA, a DELP may, and shall have the power to, indemnify and hold harmless any partner or other person from and against any and all claims and demands whatsoever (section 17-108). Tax status and annual return/good standing An ELP may apply for an undertaking from the Governor in Cabinet that that any law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciations shall not apply to such ELP or to any partner thereof in respect of the operations or assets of the ELP or the partnership interest of a partner therein. The Undertaking will be for a maximum of 50 years and may also cover estate duty and/or inheritance tax (section 38). Every DELP and every foreign limited partnership registered to do business in the State of Delaware shall pay an annual tax, for the use of the State of Delaware, in the amount of US$100. An annual fee payable in January each year of approximately US$2,439.02 is payable to the Registrar in respect of unregulated ELPs. An annual return must also be filed in January in every year, signed by or on behalf of a GP, certifying that the ELP has during the prior calendar year, complied with its obligations under Section 10(1) of the ELP Law (see 'Changes to Certificate of Limited Partnership/Registration Statement' above) and that the ELP has not undertaken 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 (section 39). In the event of neglect, refusal or failure on the part of any DELP or foreign limited partnership to pay the annual tax to be paid on or before the 1st day of June in any year, such DELP or foreign limited partnership shall pay the sum of US$100 to be recovered by adding that amount to the annual tax, and such additional sum shall become a part of the tax and shall be collected in the same manner and subject to the same penalties. A DELP or foreign limited partnership that neglects, refuses or fails to pay the annual tax when due shall cease to be in good standing as a DELP or registered as a foreign limited partnership in the State of Delaware. A DELP that has ceased to be in good standing by reason of its neglect, refusal or failure to pay an annual tax shall remain a DELP formed under the Act. The Secretary of State shall not accept for filing any certificate (except a certificate of Page 30 CAYMAN ISLANDS DELAWARE resignation of a registered agent when a successor registered agent is not being appointed) required or permitted by this chapter to be filed in respect of any DELP or foreign limited partnership which has neglected, refused or failed to pay an annual tax, and shall not issue any certificate of good standing with respect to such DELP or foreign limited partnership, unless and until such DELP or foreign limited partnership shall have been restored to and have the status of a DELP in good standing or a foreign limited partnership duly registered in the State of Delaware. A DELP that has ceased to be in good standing or a foreign limited partnership that has ceased to be registered in the State of Delaware by reason of its neglect, refusal or failure to pay an annual tax may not maintain any action, suit or proceeding in any Court of the State of Delaware until such DELP or foreign limited partnership has been restored to and has the status of a DELP or foreign limited partnership in good standing or duly registered in the State of Delaware. An action, suit or proceeding may not be maintained in any Court of the State of Delaware by any successor or assignee of such DELP or foreign limited partnership on any right, claim or demand arising out of the transaction of business by such DELP after it has ceased to be in good standing or a foreign limited partnership that has ceased to be registered in the State of Delaware until such DELP or foreign limited partnership, or any person that has acquired all or substantially all of its assets, has paid any annual tax then due and payable, together with penalties and interest thereon. A LP of a DELP or foreign limited partnership is not liable as a general partner of such DELP or foreign limited partnership solely by reason of the neglect, refusal or failure of such DELP or foreign limited partnership to pay an annual tax or by reason of such DELP or foreign limited partnership ceasing to be in Page 31 CAYMAN ISLANDS DELAWARE good standing or duly registered. The certificate of limited partnership of a DELP shall be deemed to be cancelled if the DELP shall fail to pay the annual tax due under section 17-1109 of the Act for a period of three years from the date it is due, such cancellation to be effective on the third anniversary of such due date (sections 17-1109 and 17-1110). Third party beneficiaries [There is no doctrine of third-party beneficiary rights under Cayman Islands law, therefore third parties named in an LPA will not be able to enforce directly their rights unless they become a signatory to the LPA (see 'Indemnification' above).] Generally, a third party named in an LPA need not be a signatory to the LPA in order to be able to enforce directly its rights under the LPA. Negligence standard Cayman Islands law does not recognise the distinction between gross negligence and negligence. It is common to include a definition of gross negligence in the LPA which is frequently defined as having the meaning ascribed to such term in a jurisdiction where it is recognised (eg Delaware). An alternative approach is to set out an explanation, by way of a defined term, of what the parties to the LPA intend gross negligence to mean. Where an onshore fund has been set up in parallel with the offshore fund, it may appropriate to use the same definition for gross negligence as has been used in the onshore fund for consistency. Delaware law recognises the distinction between gross negligence and negligence. Construction and application of the act and the LPA Modification of duties Delaware law gives maximum effect to the principles of freedom of contract and to the enforceability of the LPA (section 17-1101(c)). The obligation of the GP to act at all times in good faith is an inviolable provision of the ELP Law and cannot be reduced by specific or implied terms of the LPA. However, the duty of the GP to act in the interests of the ELP may be modified by the To the extent that, at law or in equity, a partner or other person has duties (including fiduciary duties) to a limited partnership or to another partner or to an other person that is a party to or is otherwise bound by the LPA, the partner's or other person's Page 32 CAYMAN ISLANDS terms of the LPA. DELAWARE duties may be expanded or restricted or eliminated by provisions in the LPA; provided that the LPA may not eliminate the implied contractual covenant of good faith and fair dealing (section 17-1101(d)). Updated: March 2014 For further information please refer to your usual contact or: Cayman Islands - Rolf Lindsay, Partner | [email protected] | +345 914 6307 Dubai - Daniel Wood, Partner | [email protected] | +971 4 363 7912 Hong Kong - Arwel Lewis, Partner | [email protected] | +852 2596 3319 London - Hughie Wong, Partner | [email protected] | +44 (0) 207 220 4982 Singapore - Tom Granger, Partner | [email protected] | +65 6603 1694 The information contained in this memorandum is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.
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