Cayman Islands’ Limited Liability Partnership Law, 2017 comes into force
We are pleased to report that the Limited Liability Partnership Law, 2017 (Law) came into force on 5 June 2017, making the Cayman Islands limited liability partnership (LLP) available for the first time in the jurisdiction. The Law provides for the formation, registration and operation of an LLP. We expect the regulations under the Law to be gazetted shortly.
What is an LLP?
An LLP is a statutory entity with limited liability. The key feature that distinguishes an LLP from a limited partnership registered under one of the Cayman Islands’ other partnership statutes (LP) is the LLP’s independent legal personality; the Law provides for the formation of an LLP as an entity with legal personality other than a body corporate which is separate and distinct from the partners in the LLP. The affairs of an LLP are governed by its partnership agreement. Unless otherwise provided in its partnership agreement, an LLP shall be capable of exercising all the functions of a natural person of full capacity irrespective of any question of benefit.
Other key features of an LLP
An LLP can be formed to carry on a business for any lawful purpose provided it has at least two partners.
The registration of an LLP is simple, requiring the filing of a registration statement and payment of the appropriate fee. If the LLP is to have a corporate managing partner or a managing partner which is a partnership to be registered under the Law, a certificate of incorporation or certificate of registration, as the case may be, and a certificate of good standing in respect of that managing partner will also be required. The proposed name of the LLP must include “LLP”, “L.L.P.” or “Limited Liability Partnership” and should be checked in advance with the Registrar of Limited Liability Partnerships (Registrar).
With a few exceptions, no partner or former partner of an LLP shall be liable for any debt or loss of the LLP, including any debt or loss caused by the act or omission of another partner or former partner in the LLP. Nothing in a partnership agreement may deprive the partners of this benefit. However, (i) a partner or former partner in an LLP shall be liable for any loss caused by a negligent act or omission of that partner or former partner where that partner or former partner assumed an express duty of care to a person and acted in breach of that duty; and (ii) partners in an LLP may agree, as between partners, to indemnify any of the partners or any former partner in respect of any debt or loss.
Unlike an LP, an LLP does not distinguish between general partners and limited partners. An LLP may have one or more managing partners with the responsibilities set out in the Law and under its partnership agreement, failing which for the purposes of the Law all partners will be managing partners.
There are no residency requirements for partners in an LLP, but an LLP must have a registered office in the Cayman Islands at which it is required to maintain, among other things, a register of partners (indicating which partners, if any, are managing partners) and a register of mortgages, both of which are to be open for inspection by the public.
An LLP may apply for a 50-year tax undertaking certificate from the Cayman Islands Government if the application is accompanied by a declaration by the LLP that it 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 LLP outside the Cayman Islands.
On meeting prescribed conditions, existing Cayman partnerships may convert into LLPs and foreign LLPs may continue into the Cayman Islands as LLPs under the Law.
Uses of an LLP
We expect the LLP structure will be popular with professional services firms in the Cayman Islands, which have traditionally been established as general partnerships. However, the Law has been drafted broadly enough for LLPs to be used for international financial services transactions as an alternative to companies or LPs.
The Law is the natural outcome of the Cayman Islands paying attention and responding to the input and needs of global industry and its participants and further consolidates the Cayman Islands’ position as a leading offshore jurisdiction.
