Section 11 of the Exempted Ltd Partnership Act (2021 Revision) and Rothenberg Ventures 2016 Feeder Fund, L.P. and Rothenberg Ventures 2016 Fund-A, L.P.

• Jurisdiction: Cayman Islands
• Court: Grand Court (Cayman Islands)
• Judge: Justice Kawaley
• Judgment Date: 15 April 2024
• Docket Number: CAUSE NOS. FSD 379 AND 380 OF 2023 (IKJ)

In the Matter of Section 11 of the Exempted Limited Partnership Act (2021 Revision)

And in the Matter of Rothenberg Ventures 2016 Feeder Fund, L.P.

And in the Matter of Rothenberg Ventures 2016 Fund-A, L.P.

Before:

The Hon. Justice Kawaley (in Chambers)

CAUSE NOS. FSD 379 AND 380 OF 2023 (IKJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Dissolution of general partner of exempted limited partnerships — failure of general partner's controller to apply to restore general partner to the register of companies or to appoint a replacement general partner-petitions on behalf of the limited partners seeking an order authorising the signing and filing of a statutory statement on behalf of the general partner appointing a replacement general partner-effect of non-compliance with time limit for filing statutory statement-construction of limited partnership agreement-Exempted Limited Partnership Act (2021 Revision) sections 10, 11, 36

Appearances:

Mr Erik Bodden, Dr Alecia Johns and Mr Romane Duncan of Conyers, Dill & Pearman LLP for CY Capital Limited, Korea Investment Partners Co. Ltd, ARCHina Capital Fund I L.P., Jiangfeng Lu and SMBC Trust Bank Ltd (the “Petitioners”)

The Respondents did not appear

( Mr Michael Rothenberg, the controller of the Respondents' General Partner, attended remotely)

IN COURT

REASONS FOR DECISION

Background

1 The Petitions presented by the Limited Partners of two exempted limited partnerships (Rothenberg Ventures 2016 Feeder Fund LP (“Feeder Fund”) and Rothenberg Ventures 2016 Fund-A LP (“Fund A”), together the “ELPs”) primarily raised a novel question about the consequences of failing to file a statement designating a replacement general partner within the prescribed time period. The ELPs were feeder funds with non-US investors which invested in Rothenberg Ventures 2016 Fund LP of Delaware (the “Main Fund”), founded by Michael Rothenberg (“Mr Rothenberg”). Mr Rothenberg was also the sole director and shareholder of the ELPs' General Partner, Rothenberg Ventures 2016 Feeder Fund GP, Ltd. (“GP Ltd”). GP Ltd was struck-off the register on 30 April 2021 and the ELPs were struck off on 31 October 2022.

2 As a result of proceedings brought by the US Securities and Exchange Commission (“SEC”), a civil judgment was obtained against Mr Rothenberg on 17 October 2018. Shortly before this occurred, he transferred control over the Main Fund to a Mr Burke Robinson and Jefferson Eppler. Messrs Robinson and Eppler sought to assume control of the ELPs, but Mr Rothenberg remained sole director and shareholder. The Limited Partners became aware that the ELPs had been struck-off in December 2022, as a result of their status coming to the attention of the Main Fund's new managers. On or about 5 May 2023, the Limited Partners instructed Conyers to investigate the status of GP Ltd as well, and discovered that it had also been struck-off. Mr Rothenberg was requested to restore the ELPs, which the Limited Partners wished to continue, and to regularise the position of GP Ltd.

3 When these requests were not complied with, Messrs Robinson and Eppler incorporated a replacement General Partner which the Limited Partners formally confirmed they wished to appoint in place of GP Ltd. By a letter dated 18 October 2023, Mr Rothenberg was asked to execute a Statement under section 10 of the Exempted Limited Partnership Act (2021 Revision) (“ELP Act”). He responded that he was preoccupied with a criminal trial which had commenced against him in Oakland, California that month. On 16 November 2023 Mr Rothenberg was convicted of 23 counts of fraud and money laundering in the United States District Court of Northern California. The Petitions herein were presented on 13 December 2023, each seeking an Order authorising Mr Eppler to sign and file a section 10 Statement with a view to replacing GP Ltd with the new General Partner approved by the Petitioners in their capacities as Limited Partners of the two ELPs.

4 Approximately 20 minutes into the unopposed hearing, with Mr Bodden in full flow, Mr Rothenberg communicated his desire to attend the hearing remotely. I decided to allow him to attend remotely, fully accepting that his right to formally participate in the hearing was extremely unclear. Having heard the Petitioners' counsel's full oral presentation, which made it clear that the relief sought should be granted, Mr Rothenberg made what appeared to me to be a largely symbolic plea for an adjournment. The purpose was to enable him to seek legal advice about the present proceedings. He had no standing to oppose the petitions in his personal capacity. And the registered GP had legally ceased to exist. I stated in material part as follows:

“ May I say that I understand how difficult it is for somebody that creates a business structure to be forced, against their will, for whatever reason, to relinquish control of the structure. You are not by any means the only founder of a commercial vehicle who has found it difficult to accept the time has come to let go. But unfortunately the evidence that has been placed before me demonstrates very clearly that I should grant the Order that the petitioners seek in respect of each of these Petitions for fuller reasons which I will give later.

And it is impossible for me to identify any proper basis for adjourning these proceedings to allow you to get counsel to appear before this Court. Because the length of the period of paralysis is so long and the alternative options available are so vague and intangible, that it is impossible to identify any tangible benefit which would accrue to the ELPs (which you accept need to be restored) from granting any adjournment. So the Orders sought in each of these cases are granted.”

5 The substance of the application was entirely straightforward. It was obvious that, in light of all the circumstances, the Petitioners should be permitted to cause an appointment of a new General Partner for the ELPs they had invested in. The only legal wrinkle was that the application was being made long after the expiry of the prescribed time limit. Mr Bodden persuaded me, despite this being a novel point, that the Petitioners' failure to comply with the statutory time limit and/or the time limit prescribed in the Limited Partnership Agreements for seeking the present relief was not fatal to their ability to obtain it.

6 I now give reasons for this decision.

The statutory jurisdiction

7 Section 9 (1) (e) of the ELP Act mandates filing particulars of, inter alia, the general partner with the Registrar of Exempted Limited Partnerships when an exempted limited partnership is initially registered. Section 10 of the ELP Act pertinently provides:

• “ (1) Without prejudice to subsection (2), if, during the continuance of an exempted limited partnership, any change is made or occurs in any matter specified in paragraphs (a) to (e) of section 9(1), a statement signed, subject to section 11, by a general partner specifying the nature of the change shall, within sixty days of the change, be filed with the Registrar.

• (2) A statement signed in accordance with subsection (1) in respect of any arrangement or transaction consequent upon which any person will be removed, replaced or admitted as a general partner in any exempted limited partnership, shall, within fifteen days of the arrangement or transaction, be filed with the Registrar and, until the statement is so filed, the arrangement or transaction shall, for the purposes of this Act and the partnership agreement, not be effective to remove, replace or admit that person as a general partner of the exempt limited partnership and with respect to a replacement or admitted general partner the documentation required by subsection 9(1)(e)(i), (ii) or (iii) of this Act shall be provided as the case may require.

• …

• (4) If default is made in compliance with this section, each general partner in default shall incur a penalty of two hundred dollars for each day that the default continues which penalty shall be a debt due to the Registrar and the general partner shall indemnify any person who thereby suffers any loss.” [Emphasis added]

8 Section 11 provides the following remedy for non-compliance with the section 10 filing obligations, which are primarily imposed on general partners:

“ Failure to file statement

11. If a person required by section 9(1), section 10( 1) or (2) or section 36, or by the partnership agreement to execute and file a statement or notice fails to do so, any other partner, and any assignee of a partnership interest who is or may be affected by the failure or refusal may petition the court to direct a person the court sees fit to sign the statement and file the same on behalf of the person in default.”

9 Section 36 (“Dissolution”) deals with the winding-up and dissolution of exempted limited partnerships. Of potential relevance to the present case was the following subsections:

• “ (7) The general partner or its legal representative shall promptly serve notice on all limited partners informing the limited partners of —

  • (a) the death;

  • (b) the commencement of liquidation, bankruptcy or dissolution proceedings; or

  • (c) the withdrawal, removal or making of a winding up or dissolution order, in relation to the sole or last remaining qualifying general partner and in this section each event is referred to an ‘event of withdrawal’.

• (8) If default is made in compliance with this section, each general partner or its legal representative, in default shall incur a...