One Thousand and One Voices: Identity of the Liquidator in a Voluntary Liquidation of an ELP

In a Nutshell

The identity of the party that will act as liquidator and control the liquidation process can be an important consideration and is sometimes an area of dispute between investors and management. In the context of voluntary (solvent) liquidations of ELPs, the Cayman Islands statutory provisions provide for a flexible framework that permits the parties to agree the identity of the liquidator in advance in the partnership agreement (“LPA”). It is common practice to specify in the LPA that the general partner (the “GP”) will act as liquidator. The Cayman Islands Court of Appeal (“CICA”) considered when the Grand Court (the “Court”) has the jurisdiction to step in and remove and replace the liquidator specified in the LPA, holding that the Court could appoint someone else an alternative liquidator where it is just and equitable to do so.

In this decision, the CICA rejected a number of jurisdictional arguments raised by the GP to challenge the decision of the Court in the proceedings. The decision therefore leaves undisturbed the important principle applied by the lower court that, when determining the identity of a liquidator, significant weight will be placed upon the views and wishes of the parties with an economic stake in the liquidation process. For a solvent voluntary liquidation of an ELP, that will normally be the limited partners.

Background

By way of reminder ELPs are commonly used by the Cayman Islands investment funds industry, particularly as the legal structure for closed ended and private equity funds. Therefore, guidance from the Court in relation to end of life matters for these vehicles is highly relevant in the fund context.

The CICA addressed the scope of the jurisdiction of the Court to remove and replace the GP as liquidating agent of an ELP during its voluntary liquidation. This was in the context of the voluntary winding up of an ELP named One Thousand & One Voices Africa Fund I, L.P., where limited partners holding approximately 97% in interest resolved to wind up the partnership. The petitioner, a limited partner, sought the removal of the GP as liquidating agent and the appointment of independent third parties in its place. The GP challenged the Court’s jurisdiction to make such an order, relying on the terms of the LPA and the Exempted Limited Partnership Act (2021 Revision) (“ELPA”).

Statutory and Contractual Framework

The ELP was governed by the LPA, which provided that the GP would act as liquidating agent and could only be removed upon the occurrence of a “Cause Event” and a supermajority vote of the limited partners. The ELPA, and section 36, sets out the statutory regime for the winding up of ELPs. Section 36(1) provides that a voluntary winding up shall be conducted in accordance with the LPA. However, section 36(13) provides that, following the commencement of winding up, the affairs of the ELP shall be wound up by the GP or other person appointed pursuant to the partnership agreement “unless the court otherwise orders on the application of any partner, creditor or liquidator” pursuant to section 36(3)(g), which empowers the Court to make orders and give directions for the winding up and dissolution of an ELP as may be just and equitable.

The GP’s Challenge

The GP argued that the Court had no jurisdiction to remove a contractually appointed liquidating agent in a voluntary liquidation, contending that section 36(1) of the ELPA gave primacy to the LPA and that section 36(13) did not confer a power of removal, but only of appointment in limited circumstances (e.g., where the LPA was silent or the agreed mechanism was unavailable). The GP further submitted that the Companies Act provisions relating to removal of voluntary liquidators were expressly disapplied to ELPs in voluntary liquidation, and that to allow the Court to intervene would undermine contractual autonomy.

Decision

The CICA rejected the GP’s arguments, dismissing the appeal, holding that section 36(13) of the ELPA confers a broad jurisdiction on the Court to appoint a person other than the GP to wind up the affairs of an ELP, even where this is inconsistent with the terms of the LPA.

¹ [2025] CICA (Civ) 9