Must your General Partner always give you “True and Full information”?19 Mar 2019
The Cayman Islands (‘Cayman’) Grand Court (‘Court’) has given important guidance on when a Limited Partner (‘LP’) of a Cayman registered Exempted Limited Partnership (‘ELP’) can insist that a General Partner (‘GP’) provides them with “true and full information” on the financial state of the ELP under Section 22 of the Exempted Limited Partnership Law (2014 Revision) (‘Law’). It also considered when a GP might be able to refuse.
What did the Plaintiff ask for?
The LP (‘DVL’) of a Cayman registered ELP applied to the Court under Section 22 of the Law for an order that the GP (‘XGP’) deliver up true and full information regarding the state of the business and financial condition of the ELP, including by reference to various categories of documents.
What does section 22 provide?
Section 22 of the Law provides:
“Subject to any express or implied term of the partnership agreement, each limited partner may demand and shall receive from a general partner true and full information regarding the state of the business and financial condition of the exempted limited partnership”.
How did the Defendant respond?
Section 22 states that it applies “Subject to any express or implied term of the partnership agreement…”. XGP argued that on a true construction of the relevant amended Limited Partnership Agreement (‘Amended LPA’) DVL’s rights to information were limited in scope and that there were set time parameters for when XGP had to provide the information. There were also clauses which required DVL to provide information. XGP’s argument was that the Amended LPA made provisions for disclosure of financial information and they took precedence over the general right for information given under Section 22. XGP then argued that it was both obvious and necessary to give business efficacy to the Amended LPA to have such a term, and so if the Court found that the clauses in the Amended LPA did not exclude DVL’s rights in Section 22, then it should imply a term into the Amended LPA which did.
What did the Court say?
The Court disagreed with XGP, finding that the clauses in the Amended LPA provided for and addressed the preparation of records and accounts and giving them to the LP. Those provisions related more to Section 21 of the Law which provides:
“21. (1) A general partner shall keep or cause to be kept proper books of account including, where applicable, material underlying documentation including contracts and invoices, with respect to:-…”
[Section 21 then continues to give specific examples of accounting information over six sub-sections, and three sub-subsections.]
Did Section 22 apply?
The Judge found that Section 22 of the Law dealt with the LP’s right to demand and receive from a GP true and full information regarding the state of the business and the financial condition of the ELP. The Judge found that was wider than simply the preparation and production of accounts, whether audited or unaudited. XGP was bound under Section 21 to keep detailed accounts, as well as information and documentation. Having assessed the clauses in the Amended LPA, the judge stated “In my judgment, there is nothing in the wording of the Amended LPA that is inconsistent with an overriding general right to information under Section 22 of the ELP.”. So, unless the Amended LPA expressly states that the LP was not entitled to true and full information, then Section 22 of the Law gives the LP the right to production of that information.
Section 22 has to be expressly excluded, and not implied
The Judge found that no reasonable man with the background knowledge of the parties could reasonably have understood the parties to have intended to exclude the LP’s right to demand information, and so such a term could not be implied into their contract.
The conclusion is that a LP has a right to demand and receive from the GP true and full information regarding the state of the business and financial condition of an ELP unless the LPA expressly excludes Section 22 of the Law. Conversely, if the parties to an ELP want to expressly exclude Section 22, they are able to do so. The Judge also noted that Section 22 of the Law (the 2014 Revision) has exactly the same wording as used in the current revision, the Exempted Limited Partnership Law (2018 Revision).