Partnership Non-Petition Clauses Upheld

The Grand Court of the Cayman Islands has confirmed that limited partnership agreements preventing partners seeking to wind-up the partnership (non-petition clauses) are effective.  The decision was reached on the basis that, pursuant to long standing partnership law principles, unaffected by legislation, partners are free to negotiate the method by which a partnership ends.  Having decided that the partners were contractually bound by the relevant clause, the Court held that it was statutorily required to dismiss the winding-up petition.

The Court's reasoning does not expressly extend to companies.  For a company, it is generally established at common law that shareholders are not contractually bound by non-petition clauses contained in the Articles.  No Cayman Islands case has yet considered whether separate contractual non-petition agreements between a company and a shareholder are enforceable.