CAYMAN ISLANDS Law and Practice Contributed by: Daniel Lee, Sophia Scott, Kimberly Robinson and James Turner, Maples Group
Exempted Limited Partnerships An exempted limited partnership (ELP) is a part - nership that is registered under the Exempted Limited Partnership Act (As Revised) of the Cayman Islands (the “ELP Act”) and is the most common type of partnership structure in the Cayman Islands, which provides a flexible vehicle for investors to pool capital and conduct investment activities outside of the Cayman Islands. It is frequently used as a private equity fund, hedge fund or feeder fund for international investors. The respective rights and obligations of the general partner and limited partners are set out in an ELP agreement. Limited partners benefit from limited liability with all management responsibility vesting in the general partner who is liable for the debts and liabilities of the ELP if the assets of the ELP are inadequate. Limited Liability Partnerships A limited liability partnership (LLP) is a partner - ship that is formed and registered under the Limited Liability Partnership Act (As Revised) of the Cayman Islands. It is the preferred structure used by professional firms to operate and organ - ise their business in the Cayman Islands due to having a separate legal personality and affording limited liability status to all its partners. An LLP is not a body corporate and, in this respect, differs from a UK LLP which structurally is more akin to a corporate rather than partnership vehicle. The LLP, rather than the partners, is liable for such LLP’s debts and losses. A partner may be liable for their own negligent acts or omissions where such partner has assumed an express duty of care and acted in breach of that duty (ie, in the context of providing professional ser - vices advice). An LLP must be established by at least two persons who may carry on a business in common for any lawful purpose. Any person, including natural persons, a body corporate or other partnerships, may be a partner in an LLP.
As there is no requirement for an LLP to under - take its business “with a view to profit”, an LLP may be a helpful structuring option for not-for- profit organisations and other social enterprises. Foundation Companies and Companies Limited by Guarantee A foundation company is incorporated under the Foundation Companies Act (As Revised) of the Cayman Islands (the “Foundation Companies Act”) as a body corporate with a legal personal - ity distinct from that of its members, beneficiar - ies, directors, officers, supervisors and founder. Accordingly, it has capacity to sue and be sued and to hold property. Uniquely, it is possible for a foundation company not to have any mem - bers, provided that its constitution so permits and it continues to have one or more supervi - sors. A foundation company may be formed for any lawful object, which need not be beneficial to other persons and must be limited by shares or by guarantee with or without share capital. It is a highly flexible vehicle and can, if so desired, include features of a common law trust within a corporate framework. They are typically used for wealth management, estate planning, and asset protection. If used in a private wealth context foundation companies are often incorporated as companies limited by guarantee, which avoids the need for probate to be obtained where shares are issued and one or more shareholders die. A company limited by guarantee is a Cayman company (exempt or ordinary) that, instead of having shareholders, has members. Typically, the liability of members of a company limited by guarantee is limited under its constitution to USD1. A Cayman company limited by guarantee has many of the same features as a Cayman company limited. It is a body corporate with a legal personality distinct from that of its mem - bers, directors and officers. Accordingly, it has
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