One Thousand & One Voices Africa Fund: Court of Appeal upholds decision to remove GP as liquidating agent

The Cayman Islands Court of Appeal has dismissed an appeal brought by the general partner of an exempted limited partnership against the decision to remove the general partner as liquidating agent and appoint independent liquidators in its place.¹ Despite numerous arguments raised by the general partner to the contrary, the Court of Appeal held that section 36 of the Exempted Limited Partnership Act gave the court the jurisdiction to do so.

Background

In November 2023, the limited partners (LPs) of the exempted limited partnership One Thousand & One Voices Africa Fund I, LP (the ELP) resolved that the ELP be wound up. The winding up was conducted by the General Partner (GP) acting as liquidating agent under the terms of the limited partnership agreement (LPA). In January 2024, one of the LPs (with 97 per cent of LP support) petitioned for the removal of the GP and the appointment of independent liquidators as the persons responsible for the winding up of the affairs of the ELP.

On 24 April 2024, Justice Kawaley granted the relief sought in the petition and the GP was removed as liquidating agent.² The GP filed its notice of appeal on 13 May 2024, confining its challenge on appeal to whether the court has jurisdiction under section 36 of the Exempted Limited Partnership Act (2021 Revision) (ELPA) to interfere with the voluntary liquidation provisions of the LPA.

The appeal

Issue 1 – Did the commercial bargain recorded in the LPA reign supreme?

The GP argued that amendments to the ELPA in 2014 were intended to make the parties' commercial bargain 'King'. The Cayman Islands Cout of Appeal (CICA) disagreed and held that the ELPA provides a clear route by which an LP may 'set at naught' the agreed contractual provisions for liquidation of an ELP. Section 36(3) of the ELPA provides (with some exceptions) that Part V of the Companies Act applies to the winding up of ELPs. One of the applicable provisions is section 94 of the Companies Act which concerns the ability to petition for a company to be wound up by the court. Given this option would not be in accordance with the terms of the LPA, it was obvious that the contractual terms of the LPA could be subverted in certain circumstances.

Issue 2 – section 36(1) mandated the application of the liquidation provisions of the LPA

Given the answer to issue 1, this was also rejected. Section 36(1) of the ELPA provides that an exempted limited partnership shall be voluntarily wound up in accordance with the provisions of the LPA.

The CICA held that section 36(1) did no more than provide a starting point that the voluntary liquidation of an ELP shall be conducted in accordance with the provisions of the LPA. Read in the context of section 36 as a whole, section 36(1) could not be understood as imposing an unqualified requirement to wind up voluntarily in accordance with the terms of the LPA.

Issues 3(1) and (2) – Does Section 36(13) apply to voluntary liquidations at all (because the reference to subsection 3(g) signifies it is only available where Part V of the Companies Act had been engaged)?

If section 36(13) does apply to voluntary liquidations, is this only to 'fill in the gaps' (eg where the LPA is silent on the identity of the Liquidating Agent or the mechanism for winding up)?

These issues became redundant on appeal as the GP abandoned them and argued instead for the first time that section 36(13) did not contain an express power of removal of a voluntary liquidator; it only dealt with the appointment. Before dealing with the removal point, the CICA went ahead and considered these issues anyway, and upheld the First Instance Judge's decision rejecting them.

Section 36(13) of the ELPA provides that upon the commencement of the winding up of an ELP its affairs shall be wound up by the GP, or other person appointed pursuant to the LPA, unless the court orders otherwise on the application of any partner, creditor or liquidator of the ELP pursuant to subsection (3)(g).

Section 36(3)(g) of the ELPA provides that the provisions of Part V of the Companies Act and the Companies Winding Up Rules shall apply to the winding up of an ELP and that the court may make orders and give directions for the winding up of an ELP as may be 'just and equitable'.

The crux of the GP's argument was that because section 36(13) cited section 36(3)(g), this meant that 36(13) could only be exercised for the purpose of applying the specific sections of Part V of the Companies Act permitted under section 36(3)(d), which did not cover voluntary liquidations.

The CICA found this argument to be wrong for various reasons, including that:

(i)   section 36(2), which also concerns voluntary liquidations, references section 36(13) (although this is mistakenly stated as 36(12)), which evidences the intention that the 36(13) power is available in voluntary liquidations;

(ii)  section 36(9), which deals with a situation where the sole or last qualifying GP has ceased to be able to act as such by reason of an event of withdrawal, also references 36(3)(g), however nothing in the Companies Act provides for such a situation; and

(iii) if it were correct, it would mean that section 36(13) would not apply to anything at all. That is because in the case of a compulsory winding up questions of the identity of the official liquidator are matters for the court exercising its jurisdiction under the Companies Act, not under the ELPA.

Issue 5 – section 36(13) does not contain an express power of removal

The new point argued by the GP on appeal was that, on its own terms, section 36(13) of the ELPA contained only a power to appoint a liquidator and not a power to remove one.

The CICA made short shift of this argument, concluding that:

(i)   this argument was, as a matter of statutory construction, wrong; and

(ii)  this was highlighted by the fact that the GP's arguments, even on their own terms, were merely that the petitioner had chosen the wrong method of bringing the complaints before the court. The GP accepted that the petitioner could have sought the same relief pursuant to section 129 of the Companies Act. Therefore, as observed by the CICA, viewed in the light of that concession 'the appeal represents no more than an arid dispute about procedure.'

Comment

Despite the dogged and persistent arguments of the previously removed GP, its appeal failed as squarely as its first instance challenge to its removal had done.

As such, this case removes any doubt that the court can appoint an independent liquidator in place of a liquidating agent under the LPA. As the CICA concluded, in clear and straightforward terms:

'In its application to voluntary liquidations of exempted limited partnerships, the Companies Act has limited application; but tools which would otherwise be available to the court in the case of voluntary liquidations, such as removal of the liquidator and the exercise of overall supervision, are replaced by the general powers contained in section 36(3)(g) and section 36(13) [of the ELPA].'

¹ One Thousand & One Voices Africa Fund I, LP [2025] CICA (Civ) 9.

² For more information on the first instance Grand Court decision, please see our previous update here.