A long and winding road: another instalment from the Grand Court to the divergent authorities on the winding up of ELPs
On 6 November 2025, the Honourable Justice Asif KC in In the Matter of ATP Life Science Ventures, L.P. (ATP Life Science) ruled that the Grand Court cannot give directions under the Companies Winding Up Rules (CWR) that an exempted limited partnership (ELP) participate in the proceedings of a just and equitable winding up petition because an ELP does not have separate legal personality. His Lordship therefore directed that the petition continue as a proceeding between the limited partner petitioners and the general partner (GP) as required by section 33(1) of the Exempted Limited Partnership Act (ELPA).
While the decision in ATP Life Science was directed to a relatively narrow issue on the compatibility of certain CWR provisions with the ELPA, the Court’s reasoning will be of wider interest to the market as it relates to the proper basis by which ELPs can be wound up – which is the subject of increasingly extensive lines of divergent authority in the Cayman Islands. In this article, we consider the decision and its impact on those divergent lines of authority, as well as other important takeaways for GPs.
THE DIVERGENT AUTHORITY ON WINDING UP ELPs
Before considering the decision of ATP Life Science,[1] it is worth briefly summarising the existing divergent lines of authority in Cayman on the winding up of ELPs.[2]
The ELPA and Companies Act vs Partnership Act
Ostensibly, there are two apparent statutory routes under the ELPA to wind up an ELP. First, section 36(3) of the ELPA seeks to apply the provisions of Part V of the Companies Act, and the CWR, to the winding up of ELPs, except to the extent that those provisions are inconsistent with the ELPA. Second, the ELPA adopts the provisions of the Partnership Act, which provides under section 35, five cases in which the court can decree dissolution of a partnership.
It has been said that the legislative purpose of section 36(3) of the ELPA is to allow an ELP to be wound up in the same manner as a company under Part V of the Companies Act; and that the section seeks to move further away from the traditional Partnership Act constraints on dissolution and to embrace “so far as is possible,” the more flexible winding-up mechanisms applicable to companies.[3]
In the matter of Padma Fund Limited L.P.
In In the matter of Padma Fund Limited L.P.[4] Justice Parker found that there was no jurisdiction for the court to make a winding up order against an ELP itself on a creditor’s winding up petition. His Lordship reasoned that because the presentation of a creditor’s petition against an ELP was contrary to section 33(1) of the ELPA – which provides that legal proceedings can only be issued against the GP – section 36(3) could not apply. Therefore, the petition needed to be presented against the GP (and not the ELP), with the Court’s jurisdiction being founded in the Partnership Act, and not the Companies Act.[5] His Lordship concluded that this outcome was also consistent with an ELP not having separate legal personality.[6]
In the matter of Formation Group (Cayman) Fund I L.P.
In the later decision of In the matter of Formation Group (Cayman) Fund I L.P.[7]Justice Kawaley disagreed with Padma. In that case, limited partner petitioners presented a winding up petition against an ELP (and not the GP), and the GP applied to have the petition struck out on that basis. Justice Kawaley dismissed the application. His Lordship held that section 36(3) of the ELPA expressly permitted a winding up petition to be presented against an ELP, and that an ELP may be wound up in the same manner as a company under Part V of the Companies Act.[8] His Lordship observed that: (i) section 33 of the ELPA does not prohibit proceedings against an ELP; (ii) in any event, section 36(3) of the ELPA expressly provided that a winding-up petition could be presented against an ELP in the same manner as in relation to a company and this special provision overrides the general terms of section 33(1); and (iii) the fact that an ELP strictly has no separate legal personality was beside the point because the legislature had decided to extend the companies winding up procedure to ELPs.
FACTS AND DECISION
In ATP Life Science, the limited partner petitioners (Petitioners) presented a petition on the just and equitable basis against the ELP and the GP in its capacity as general partner of the ELP. The basis for the petition was a loss of trust and confidence in the GP’s ability to manage the ELP’s affairs in the best interests of the partnership. The Petitioners had contributed 98% of the ELP’s capital; and Dr Seth Harrison, who was also the controlling mind of the GP, had contributed approximately 2%. The relationship between Dr Harrison and the Petitioners had recently broken down resulting in various proceedings in the Cayman Islands and in Delaware.
The issue for the Court to determine principally related to whether a direction could be given under the CWR that the petition be treated as an inter partes proceeding between the Petitioners and the GP.[9] If the Court was able to give this direction, the general rules as to costs under the CWR would apply, such that (it was argued) the GP would not be able to have recourse to the assets of the ELP in order to defend the petition.[10] The GP resisted the Petitioners’ application, on the basis that the petition should be heard as between the Petitioners and the ELP itself.
While Justice Asif KC ultimately ordered that the petition continue as between the Petitioners and the GP, his Lordship did not make the direction under the relevant CWR provisions, but instead did so in accordance with section 33(1) of the ELPA.[11]
In short, His Lordship’s reasons were as follows:
- An ELP does not have any separate legal personality and cannot have any separate interest or position to put forward in opposition to the petition.[12]
- Therefore, the Court cannot give directions that the proceeding be treated as against the ELP under the relevant provisions of the CWR[13] (and therefore it followed that the general rules as to costs under the CWR equally could not apply[14]).
- Given the above, there is an inconsistency between the ELPA and the relevant CWR provisions,[15] and therefore in accordance with section 36(3) of the ELPA, the ELPA must prevail over these specific CWR provisions.[16]
COMMENT
The following observations can be made on the decision in ATP Life Science:
- His Lordship made the observation that it is difficult to contemplate circumstances where a just and equitable petition would be heard between parties other than one or more limited partners on the one side, and the GP on the other, possibly with any other “intermeddling” limited partners, and/or any other limited partners who wish to take an active role in defending the petition.[17] This is because the limited partners do not owe duties to each other and have no role in management, while the GP owes fiduciary duties and has sole responsibility for the management of the assets.[18]
- Although Justice Asif observed that the GP in this application was the “winner”,[19] there are two important takeaways from the decision that GPs should be aware of: (i) where the GP is a named party to the petition, it, rather than the ELP, will be prima facie liable for costs (subject to any right of recoupment pursuant to any indemnity it has under the relevant limited partnership agreement);[20] and (ii) His Lordship supported Justice Kawaley’s comments in In the Matter of One Thousand & One Voices Africa Fund LLP,[21] where it was said that the “best way for a manager who has lost the confidence of the investors to demonstrate their probity is to step aside”.[22] This reiterates that the Court’s starting point that an orderly handover is appropriate where there has been a breakdown between the GP and the limited partners.
- Practitioners should be aware that His Lordship considers that there is an “obvious error” in CWR O.24, r.(8)(2)(b), which should instead be read as follows:[23]
“(b) if the Court has directed that the winding up petition be treated as an inter partes proceeding between one or more members of the [company as petitioners and the] other member[s] or members of the company as respondents, the general rule is that none of the costs should be paid out of the assets of the company and the unsuccessful parties should pay the costs of the successful party, such costs to be taxed on the standard basis unless agreed.” - Justice Asif stated that In the Matter of Cybernaut Growth Fund L.P.[24] should not be relied upon as authority for the proposition that the Court can apply CWR O.3, r.12 in the context of an ELP.[25]
- The decision is broadly consistent with Justice Parker’s reasoning in Padma, in that it makes clear that, as an ELP does not have separate legal personality, an ELP cannot be the proper respondent to a just and equitable winding up petition.[26] However, ATP Life Science was focused on a discrete procedural question of the applicability of certain CWR provisions and Justice Asif did not need to indicate the jurisdictional basis on which the Petitioner’s petition will be substantively heard and determined. The petition has been presented against both the ELP and the GP, and states that its statutory basis is the ELPA and the Companies Act,[27] and/or the Partnership Act.[28] Practitioners will therefore have to await further decisions in the proceedings for Justice Asif’s determination as to the proper basis of its statutory jurisdiction (though Justice Asif’s reasoning more naturally sits with the Partnership Act rather than the Companies Act being the proper jurisdiction).
- Nevertheless, given the divergent lines of authority, further decisions by Justice Asif in this proceeding cannot provide certainty as to the proper statutory jurisdiction. That certainty will need to be provided by the Cayman Islands Court of Appeal (CICA). In that regard, it should also be noted that ATP Life Science does not necessarily sit neatly with the earlier indication by the CICA, albeit in obiter, that the ELPA provides a clear route under section 36(3) for the provisions of Part V of the Companies Act to apply to the winding up of an ELP.[29] Practitioners will therefore need to wait until the CICA has an opportunity to issue a judgment squarely addressing this point and resolving the uncertainty. Parliament could seek to clarify the basis on which ELPs are to be wound up more generally (whether on the just and equitable basis or otherwise). We understand that such amendments are currently under consideration. Given that Cayman ELPs are increasingly the fund structure of choice for fund managers around the world, such clarity would undoubtedly be welcomed by market participants.
[1] Neutral Citation Number: [2025] CIGC (FSD) 106.
[2] The first major case in this area was In the Matter of XIO Diamond (unreported, 30 April 2020, FSD 256 of 2019 (IKJ)).
[3] In the matter of Formation Group (Cayman) Fund I LP. [2022 (1) CILR 594] at [35] (‘Formation’).
[4] In the matter of Padma Fund Limited L.P. [2021 (2) CILR 556] (‘Padma’).
[5] By virtue of section 3 of the ELPA – Padma at [88].
[6] Padma at [91].
[7] [2022 (1) CILR 594].
[8] Formation at [36]-[37].
[9] CWR O.3, r. 12
[10] CWR O.24, r.8(2).
[11] ATP Life Science at [39]. As above, section 33(1) relevantly provides that legal proceedings against an ELP may be instituted against any one or more of the GPs only.
[12] ATP Life Science at [32] – [34], [41]. It is worth noting that in a general proceeding commenced under the Grand Court Rules, an ELP can be treated as a party pursuant to O.81, r.12. That rule does not strictly apply in the context of proceedings commenced under the CWR.
[13] CWR O.3, r.12(a) or (b); ATP Life Science at [37].
[14] CWR O.24, r.8(2).
[15] ATP Life Science at [36].
[16] ATP Life Science at [36].
[17] ATP Life Science at [30] & [34].
[18] ATP Life Science at [30]-[31], [34].
[19] At [47].
[20] At [40] – [41].
[21] [2024 (1) CILR 371]
[22] At [32], referred to in ATP Life Science at [44].
[23] At [13]
[24] [2014 (2) CILR 413].
[25] At [38].
[26] ATP Life Science at [33] – [34].
[27] Section 36(3) of the ELPA and section 92(e) of the Companies Act.
[28] Section 35 of the Partnership Act.
[29] Re One Thousand & One Voices Africa Fund I, L.P. (in voluntary liquidation) [2025] CICA (Civ) 9 at [31].
