Our Cayman Private Equity team advises promoters and investors on establishing and operating Cayman private equity funds. We advise on all types of funds, including venture capital funds, real estate funds, infrastructure funds, technology funds, energy funds, health care funds, art funds, pre-IPO funds, buy-out funds and distressed assets funds.
We advise on the key terms of private equity vehicles, including: investor allocations and distributions; carried interest waterfalls; preferred returns; catch up provisions; hurdles; other fee provisions; default provisions; clawbacks; key man provisions; and advisory committee terms.
About Cayman private equity funds
The Cayman exempted limited partnership, LLC and exempted limited company are flexible structures ideally suited for use as closed-ended investment vehicles permitting investment during a limited capital raising period and drawing down capital commitments to fund investment opportunities and operating costs as they arise.
The exempted limited partnership structure is the most commonly used entity for private equity funds established as a contractual arrangement between its passive investor limited partners and a managing general partner. The managing general partner is established as a special purpose vehicle to insulate the promoter from the general partner’s liability for the fund’s debts and obligations. The Cayman LLC provides a vehicle with a legal corporate personality distinct from that of its members and managers. The LLC provides its investors with capital accounts in the same what that an exempted limited partnership operates.
The LLC law lists default provisions which can be imposed on members who fail to meet their capital commitments, including a legally enforceable penalty. The Cayman private equity fund structure is flexible. For example, the law allows for an LLC fund to use negative consent to provide for changes to its constitutional and offering documents.
Where a Cayman exempted limited company is used in a private equity structure, the subscription documents will set out the terms on which investors commit to subscribe for shares during the life of the fund.
Cayman private equity funds can be established as stand-alone vehicles or as parallel funds, feeder funds or co-investment vehicles to address the needs of investors in the fund structure. They are commonly found alongside the Delaware limited partnership of the Delaware LLC in private equity funds seeking commitments from both US and non-US investors.