Section 15(4) of the Exempted Ltd Partnership Law (2012 Revision) Cybernaut Growth Fund, L.P.

• Jurisdiction: Cayman Islands
• Judge: The Hon Mr Justice Andrew J. Jones
• Judgment Date: 23 July 2013
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO: FSD 73 OF 2013 (AJJ)
• Date: 23 July 2013

In the Matter of Section 15(4) of the Exempted Limited Partnership Law (2012 Revision)

In the Matter of Cybernaut Growth Fund, L.P.

[2013] CIGC J0723-3

The Hon Mr Justice Andrew J. Jones QC

CAUSE NO: FSD 73 OF 2013 (AJJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

RULING

Introduction

1 Cybemaut Growth Fund, L.P. (‘the Partnership’) was registered as an exempted limited partnership on 20^th May 2008 under the Exempted Limited Partnership Law (2007 Revision) (‘the Law’). On 4^th June 2013 five of the limited partners (who collectively own 49.96% of the partnership interest) presented a winding up petition against the Partnership pursuant to section 15(4) of the Law. The petition is opposed by the general partner, Cybemaut Capital Management Limited (‘the GP’) and Oriental Financial Holding Corporation (‘Oriental’) which is the only other limited partner, The GP and Oriental are related parties and together own 50.04% of the partnership interest. By summonses issued on 20^th June (as amended on 25^th June) the GP and Oriental seek to have the petition struck out as an abuse of the process on the grounds that (i) it has been presented in breach of a valid and binding arbitration agreement, (ii) an alternative remedy, namely arbitration, is available to the Petitioners who are acting unreasonably by not pursuing it and (iii) on a true construction of the limited partnership agreement, the Petitioners have contracted out of their right to present a winding up petition or apply to the Court for the appointment of an independent liquidator. Alternatively, they seek a stay of the petition pending the outcome of an arbitration which was commenced in New York pursuant to the rules of the American Arbitration Association shortly after the presentation of the winding up petition.

2 The relevant provisions of the limited partnership agreement (‘ LPA’) are as follows:

1. DEFINITIONS

1.1 In this Agreement the following expressions shall have the following meanings:

‘Cause’ means (a) any act of gross negligence, reckless disregard, willful misconduct or bad faith by the General Partner, (b) a material breach of any applicable law, statute, rule or regulation by the General Partner, or (c) the filing or entering into a proceeding of bankruptcy, insolvency, administration, involuntary reorganisation or similar proceedings in respect of the General Partner;

‘Special Majority Limited Partner Consent’ means the written consent consisting of one or more documents in the like form each signed or approved in writing, by facsimile or by electronic mail by Investors (excluding any defaulting Investor and the General Partner whether in its. capacity as such or as general partner of any Additional Partnership or as a Limited Partner or as a limited partner in any Additional Partnership) whose aggregate Commitments represent at least 75 per cent of the Fund Commitments;

8 TERMINATION AND LIQUIDATION

8.1 Termination

• (a) The death, bankruptcy, insolvency, dissolution or liquidation of a Limited Partner, the transfer of any Limited Partner's interest in the Partnership to a Substitute Limited Partner, the increase of an existing Limited Partner's Commitment or the admission of a new Limited Partner shall not operate to terminate the Partnership and the estate or trustee in bankruptcy or receiver or liquidator of a deceased, bankrupt or insolvent Limited Partner shall not have the right to withdraw such Limited Partner's Commitment prior to the termination of the Partnership.

• (b) Subject as provided in Clause 8.2 and the Partnership Law, the Partnership shall terminate on the earlier of the Termination Date or the happening of any of the following events: —

  • (i) the election of the Limited Partners by a Special Majority Limited Partner Consent by giving to the General Partner not less than 60 days' written notice following the occurrence of an event of Cause and a failure by the General Partner to remedy such event within 60 days from the date of such occurrence to the reasonable satisfaction of the Limited Partners. The General Partner shall give prompt notice to the Limited Partners of the commencement of any proceedings which are brought against the General Partner for any of the aforementioned matters and, upon their conclusion, of the outcome of all such proceedings;

  • (ii) the agreement of the General Partner and all of the Limited Partners;…

8.3 Liquidation of the Interests of Partners

• (a) The General Partner shall not be personally liable for the return of the Capital Contributions of the Limited Partners without prejudice to Clauses 5. 3 and 6.8.

• (b) Upon termination of the Partnership, no further business shall be conducted except for such action as shall be necessary for the orderly winding-up of the affairs of the Partnership and the distribution of the Partnership Assets amongst the Partners. TheGeneral Partner shall act as liquidating trustee provided however that if the Partnership is terminated for a reason set forth in Clause 8.1(b)(i), the Limited Partners may by a Special Majority Limited Partner Consent designate some other party or parties to act as a liquidating trustee or trustees and to receive such remuneration for so acting as the Limited Partners shall agree.

• (c) Upon termination of the Partnership, the liquidating trustee or trustees shall use all reasonable efforts to sell within a 12-month period any or all of the Partnership Assets on the best terms available but, if unsuccessful, it may distribute all or any of the Partnership Assets in specie on the basis and in accordance with the value established pursuant to Clause 6,7, whether or not the same are Listed, The liquidating trustee or trustees shall cause the Partnership to pay all debts, obligations and liabilities of the Partnership and/or to make appropriate reserves and retention in respect of the same (including any contingent liabilities) and to pay all costs of liquidation and the remaining proceeds and assets shall be allocated and distributed amongst the Partners on the basis set out in Clause 6.5(a), provided however that if, upon termination of the Partnership, the proportion which the Capital Contributions of the Founder Investor bears to the aggregate Capital Contributions of all the Limited Partners shall be greater than the proportion which the Founder Investor's Commitments bears to the Partnership Commitments, the General Partner shall adjust on a pro rata basis the distributions of liquidation proceeds to be made to the Limited Partners pursuant to this Clause 8.3(c) so as to ensure that the proportion which the Capital Contributions of the Founder Investor bears to the aggregate Capital Contributions of all the Limited Partners is equal to the proportion which the Founder Investor's Commitments bears to the Partnership Commitments, and if the amount of liquidation proceeds to be distributed pursuant to this Clause 8.3(c) shall be insufficient to achieve such equalisation, each Limited Partner shall pay to the Founder Investor its pro rata share of such shortfall.

10 MISCELLANEOUS

10.11 Governing law and Arbitration

• (a) This Agreement and the rights of the parties hereto shall be governed by and construed in accordance with the laws of the Cayman Islands.

• (b) Any dispute arising out of or relating to this Agreement, or the breach thereof, shall be formally resolved by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction. The arbitration will be conducted in the English language in the city of New York, New York, in accordance with the United States Arbitration Act. There shall be three arbitrators, named in accordance with such rales.

Have the Petitioners contracted out of their statutory right to present a winding up petition?

3 The GP/Oriental submit that Clause 8 of the LPA constitutes a comprehensive...