The Exempted Ltd Partnerships Act (2021 Revision) and ECM Straits Fund I, LP Malaysia Venture Capital Management Berhad Plaintiff v (1) ECM Straits Fund I, LP (2) ECM Straits Fund GP I, LP (3) ECM Straits Fund UGP I, Ltd Respondents
| Jurisdiction | Cayman Islands |
| Judge | Raj Parker |
| Judgment Date | 20 December 2022 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO: FSD 230 OF 2022 (RPJ) |
In the Matter of the Exempted Limited Partnerships Act (2021 Revision)
And in the Matter of ECM Straits Fund I, LP
The Hon. Raj Parker
CAUSE NO: FSD 230 OF 2022 (RPJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
ss.9,36 Exempted Limited Partnerships Act (2021)-voluntary winding up-s.11(2) Grand Court Act (2015)-GCRO.15r6 — Part V Companies Act — Companies Winding Up Rules 2018-disapplication of ss.124,131–133 Companies Act by s.36 ELPA
Peter Sherwood of Carey Olsen on behalf of the Applicant
On 24 November 2022 I granted the following relief:
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(a) a declaration that ECM Straits Fund I, LP (the “Partnership”) entered voluntary winding up on 25 November 2021 in accordance with the terms of the Amended and Restated Exempted Limited Partnership dated 25 November 2013 and pursuant to section 36(1)(a) of the Exempted Limited Partnership Act (2021 Revision) (the “ELP Act”);
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(b) Orders pursuant to sections 36(3)(g) and 36(13) of the ELP Act appointing Mr Michael Penner and Mr Michael Green of Deloitte & Touche LLP and Mr. Matthew Becker of Deloitte LLP (Singapore) to conduct the winding up of the Partnership in place of ECM Straits Fund GP I, LP (the “General Partner”);
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(c) Orders as to the Liquidator's powers.
This Judgment gives reasons for that decision which traverse a new area of law in relation to liquidators powers under a voluntary liquidation in respect of an exempted limited partnership.
Malaysia Venture Capital Management Berhad (the “Applicant”) is a subsidiary of the Malaysian government and is the only known Limited Partner of the Partnership.
The Partnership is a Cayman Islands exempted limited partnership (“ELP”) registered on 6 November 2013 pursuant to Section 9(1) of the ELP Act. The purpose of the Partnership was to make venture capital investments in tech-enabled growth companies located primarily in Malaysia, Indonesia and Southeast Asia.
The Partnership is governed by the terms of the Amended and Restated Exempted Limited Partnership dated 25 November 2013 (the “ LPA”).
The general partner of the Partnership is ECM Straits Fund GP I, LP (the “General Partner”). It is also a Cayman Islands exempted limited partnership registered on 6 November 2013 pursuant to the ELP Act (but has since been struck off the register). The general partner of the General Partner is ECM Straits Fund UGP I, Ltd (the “UGP”).
The Partnership's assets are primarily shareholding interests in entities which the Partnership has, indirectly or directly, invested (the “Portfolio Entities”).
Clause 9.1 of the LPA provides that the Partnership “ shall be dissolved on the eighth anniversary of the Final Closing Date” unless extended in accordance with the provisions of that clause.
It has not been possible to determine the “ Final Closing Date” from the LPA alone.
However, on 1 April 2021, the General Partner informed the Applicant that the term of the Partnership would expire on 25 November 2021 and would not be extended. The letter stated that the General Partner “ is working aggressively to liquidate its portfolio holdings and provide the LP's exits prior to wrapping up the Fund.”
Consistent with section 36(13) of the ELP Act clause 9.4 of the LPA provides that the General Partner shall be the liquidator of the Partnership upon the commencement of the winding up and the General Partner's letter stated that it “ is working aggressively to liquidate its portfolio holdings and provide the LP's exits prior to wrapping up the Fund.”
Clause 9.4(b) of the LPA provides a scheme for the winding up of the Partnership and the distribution of surplus assets to the limited partner(s).
The following facts appear from the Applicant's evidence and documents submitted 1.
Since the Partnership's term expired, little progress has been made and it now appears that the Partnership has effectively been abandoned by the General Partner and the individuals with authority to act on the General Partner's behalf:
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(a) responsibility for managing the Portfolio Entities was apparently split between three individuals, Mr Ahmed, Mr Azahar and Mr Hussain, the managing directors of the UGP. However, only Mr Ahmed has remained in communication with the Applicant. Mr Ahmed explained in an email on 22 June 2022 that the three individuals have “ gone their separate ways”, and that he would only be able to assist with the distribution of the five Portfolio Entities which he purportedly manages (out of the 12 Portfolio Entities under the Partnership);
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(b) on 27 April 2022, Mr Ahmed issued an invoice to the Applicant for US$125,000 for what was described as “ de facto management fees since fund termination”. There is no contractual basis for these fees, or for Mr Ahmed in his personal capacity to charge any fees to the Applicant;
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(c) the registered office provider for the Partnership, the General Partner and the UGP has resigned (which is usually indicative of a failure to pay registered office fees and/or to comply with statutory filing obligations);
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(d) both the General Partner and the UGP were ultimately struck off the register on 29 July 2022; and
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(e) the Partnership was designated “ pending strike off” by the Registry but the Applicant wrote to the Registrar to explain the situation and request that the Partnership is not struck off pending the outcome of the present application. The Registrar has helpfully returned the status of the Partnership to “ active”.
In addition, on 14 June 2022, the Applicant raised concerns with the General Partner that Mr Ahmed has instructed Portfolio Companies to transfer shares in those companies held on behalf of the Partnership to entities related to him. No substantive response to this allegation has apparently been received.
As the General Partner is no longer acting, the Applicant seeks the appointment of independent liquidators to wind up the Partnership's affairs and to conduct such investigations into the Partnership's affairs as the liquidators consider appropriate.
Section 36(1)(a) of the ELP Act provides that:
“ An exempted limited partnership shall be voluntarily wound up in accordance with the provisions of the partnership agreement –
(a) at the time or upon the occurrence of any event specified in the partnership agreement; or […]”
Section 36(10) provides that the winding up of an exempted limited partnership “ shall be deemed to commence upon the earlier of:
(a) the expiry of the period fixed for the duration of the exempted limited partnership;
(c) the occurrence of an event provided by the partnership upon which the exempted limited partnership is to be wound up;”
[…]
A number of recent decisions of the Grand Court have considered the jurisdiction of the Court (or lack of jurisdiction) to order the winding up of an exempted limited partnership on the petition of a creditor or limited partner. While the reasoning in these decisions differed to a certain extent, there does not appear to be any controversy surrounding the route into voluntary winding up via section 36(1)(a) in those decisions 2.
In ( In Re Duet Real Estate Partners 1 LP unreported, FSD 22 of 2020, 9 June 2020) a limited partner successfully petitioned for a winding up order under the Companies Act despite the fact that the term of the exempted limited partnership had already expired (and therefore pursuant to section 36(1)(a) of the ELP Act the voluntary liquidation had already commenced). It is not clear why the petitioner in that case sought a winding up order under the Companies Act rather than relying on section 36(1)(a) (which does not appear to have been considered) and the question of whether a winding up order can be made in respect of an exempted limited partnership that is already in voluntary liquidation is not discussed in the judgment. I accept Mr Sherwood's submission that it may be that an application under the Companies Act is not the proper route as, with very limited savings, it would seem to have no application to voluntary liquidations-see 36(3)(d) of the ELP Act.
The wide jurisdiction of the Court to grant declaratory relief in relation to the commencement of a voluntary winding up is derived from section 11(2) of the Grand Court Act (2015 Revision) which provides that:
“ Without prejudice to subsection (1), the Court shall have and shall be deemed always to have had power to make binding declarations of right in any matter whether any consequential relief is or could be claimed or not.”
Also relevant is Order 15 rule 16 of the Grand Court Rules which provides that “ the Court may make binding declarations of right whether or not any consequential relief is or could be claimed”.
The...
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