Jersey Unreported Judgments

Partnership - reasons for the winding up of the limited partnership.

[2018]JRC194

Royal Court

(Samedi)

18 October 2018

Before     :

J. A. Clyde-Smith, Esq., Commissioner, and Jurats Nicolle and Ramsden

 

IN THE MATTER OF THE REPRESENTATION OF PRIVATE EQUITY FUND FINANCE LIMITED

AND IN THE MATTER OF RENAISSANCE VENTURES L.P.

AND IN THE MATTER OF AN APPLICATION PURSUANT TO ARTICLE 24 OF THE LIMITED PARTNERSHIP (JERSEY) LAW 1994

Advocate M. P. Cushing for the Representor.

judgment

the COMMISSIONER:

1.        On the 14^th September, 2018, the Court ordered the winding up of Renaissance Ventures L.P. ("the Limited Partnership"), a Jersey limited partnership established under the Limited Partnerships (Jersey) Law 1994 ("the Limited Partnerships Law") and we now set out our reasons.

2.        The Limited Partnership was established on 24^th September, 1997, as a vehicle to invest in early stage European medical ventures.  It was administered by the JTC Group.  Renaissance Partners Limited, a Jersey incorporated company administered by Intertrust, was the general partner ("the General Partner") and the limited partners remaining at the date of the application were the Representor, the largest capital contributor to the Limited Partnership, and the First, Second and Third Respondents.   The Fourth and Fifth Respondents were directors of the General Partner.

3.        The initial term of the Limited Partnership was to 30^th November 2004, but it was extended on a number of occasions, and ultimately to 31^st December 2016; accordingly it was at its run-off stage. 

4.        Unbeknownst to the limited partners, the General Partner was allowed to be struck off the register of companies on 1^st October 2016, due to a failure to file its annual return.  The directors of the General Partner had apparently been assured that non payment of the annual return would result in the company going into a state of suspension, from which it could be revived at a later date on payment of a modest fine. 

5.        In fact, the effect of the General Partner being struck off was that the Limited Partnership was dissolved as at that date, pursuant to Article 24(1) of the Limited Partnerships Law, which provides as follows:-

"24     Dissolution of partnership on death etc., of general partner

(1)       Notwithstanding any provision, express or implied, of the partnership agreement to the contrary, but subject to paragraph (2) -

(a)   where the sole or last remaining general partner is an individual, the general partner's death, legal incapacity, bankruptcy, retirement or withdrawal from the limited partnership; or

(b)   where the sole or last remaining general partner is a body corporate, its dissolution, bankruptcy or withdrawal from the limited partnership,

shall cause the immediate dissolution of the limited partnership which shall forthwith be wound up -

(i)            in accordance with the partnership agreement; or

(ii)           on the application of a limited partner or a creditor of the limited partnership, in accordance with the directions of the Court."

6.        Article 24(2) provides that "a limited partnership shall be deemed not to have been dissolved" and "shall not be required to be wound up if within 90 days of the dissolution, the limited partners, either unanimously or as otherwise provided for in the partnership agreement, elect one or more general partners". That did not occur.

7.        Article 24(3) goes on to provide:-

"(3)     If a limited partnership is dissolved under paragraph (1), and the activities of the limited partnership are not taken over and continued in accordance with paragraph (2), a statement of dissolution signed by a limited partner shall be delivered by him or her to the registrar."

8.        Article 23 provides that:-

"In the event of the dissolution of a limited partnership its affairs shall be wound up by the general partners unless the activities of the limited partnership are taken over and continued in accordance with Article 24(2) or unless the Court otherwise directs under Article 25(2)."

Article 25(2) allows the Court to give directions for the winding up of a limited partnership where it has ordered its dissolution under Article 25(1), which is not the case here.

9.        There are assets of the Limited Partnership, namely one investment and bank accounts administered by JTC Fund Solutions (Jersey) Limited, part of the JTC Group, which assets, pursuant to Article 11(2) of the Limited Partnerships Law, are deemed to be held by the General Partner.  Upon the dissolution of the General Partner, those assets would arguably have escheated to the Crown as bona vacantia.

10.      Clause 9.3 of the partnership agreement makes provision for the distribution of the partnership assets, after payment of expenses and creditors, to the partners, but it contemplates the General Partner still being in existence, and the Limited Partnership extant.

11.      Restoration of the General Partner would not now restore the Limited Partnership or assist in the winding up of the Limited Partnership as the partnership agreement does not contain any provisions covering the winding-up of the Limited Partnership.  Furthermore, the Representor has been informed that the directors of the General Partner would not consent to acting as directors if the General Partner was restored to the register.

12.      The Representor therefore proposed, with the support of the other limited partners, that pursuant to Article 24(1)(b)(ii), it be authorised by the Court to collect in and realise the assets of the Limited Partnership, to ascertain the amount of creditor claims against the Limited Partnership, which are understood to consist of unpaid fees of the JTC Group (the administrators of the Limited Partnership), to settle creditor claims out of the assets, and to deal with any surplus in accordance with the provisions of Article 27 of the Limited Partnerships Law, which is in these terms:-

"27     Settling accounts on dissolution

Where accounts are settled after the dissolution of a limited partnership, the liabilities of the partnership to creditors, except to -

(a)       limited partners on account of their contributions or profits; and

(b)      general partners,

shall be paid first and then, subject to the partnership agreement or to a subsequent agreement, the other liabilities of the partnership shall be paid in the following order -

(i)            to general partners other than for capital and profits;

(ii)           to limited partners in respect of the capital of their contributions;

(iii)          to limited partners in respect of their share of the profits on their contributions;

(iv)          to general partners in respect of capital;

(v)           to general partners in respect of profits."

13.      To facilitate the winding up, the Representor had reached agreement with H.M. Receiver General, subject to the Court's approval, for the transfer of the movable assets of the Limited Partnership to the Representor, subject to a fee calculated on a time costed basis up to a maximum of 5% of the aggregate value of the assets held or purportedly held bona vacantia, to be paid to the office of the Receiver General on such transfer.

14.      It is currently envisaged by the Representor that it will be possible to effect a solvent winding-up of the Limited Partnership, but in the event that that is not possible, the position of the creditors would be adequately protected by a provision requiring the Representor to return to Court for further directions.  The Representor has also reached agreement with the JTC Group over the payment of its outstanding fees and work in progress.

15.      The Court accepted that the Limited Partnership had been dissolved immediately upon the General Partner being struck off the register of companies, resulting in the assets of the Limited Partnership arguably escheating to the Crown, and the liabilities of the Limited Partnership remaining unpaid.

16.      In the absence of provisions within the partnership agreement for the affairs of the Limited Partnership to be wound up, it was appropriate for the Court to provide for an orderly winding-up by the giving of directions to the Representor pursuant to Article 24(1)(b)(ii) of the Limited Partnerships Law.  Accordingly, the Court made the following orders:-

(i)        That the assets of the Limited Partnership shall be transferred to the Representor and that the Representor shall be authorised to collect in and realise the assets of the Limited Partnership and, provided that there are sufficient assets to do so, to pay the creditors of the Limited Partnership from those assets with any surplus assets being paid in accordance with the priorities set out in Article 27 of the Limited Partnerships Law;

(ii)       That the transfer to the Representor by H.M. Receiver General of the movable assets of the Limited Partnership held or deemed to be held by the General Partner ("Assets") be approved and that the Representor shall be authorised to pay to H.M. Receiver General his fee in relation to the transfer of the Assets out of the assets of the Limited Partnership;

(iii)      That the transfer to the Representor of the monies in the bank accounts in the name of the Limited Partnership be approved;

(iv)      In the event that the Representor be unable to collect in and realise sufficient assets to pay the creditors of the Limited Partnership in full (or is otherwise unable to reach agreement with creditors for the settlement of creditor claims), the Representor shall return to Court to seek further directions in relation to the winding-up of the Limited Partnership before making any payment to creditors;

(v)       That pursuant to Article 24(3) of the Limited Partnerships Law and upon the completion of the winding up of the Limited Partnership, the Representor shall deliver a statement of dissolution signed by the Representor to the registrar; and

(vi)      That there shall be liberty to apply.

Authorities

Limited Partnerships (Jersey) Law 1994