Private Equity – Limited Partnership Reforms
HM Treasury has issued a consultation on changes to the Limited Partnership Act 1907.
For the avoidance of doubt the proposals are applicable only to those UK LPs that are collective investment schemes that are not authorised by the FCA i.e. the typical fund structure for private equity and venture capital funds. The aim of the amendments is to ensure that the UK limited partnership remains the market standard structure for such funds and other types of private fund.
An LP which is a private fund limited partnership (PFLP) will be appropriately designated at the point of registration – existing LPs will have the option to become designated as private fund LPswithin the first year of the changes coming into effect.
Points of note include (references in brackets relate to the draft Legislative Reform (Limited Partnerships) Order 2015):
- Limited partners will not be under any obligation to contribute any capital or property to the PFLP (Article 2, paragraph (3))
- Under certain circumstances a limited partner can wind up a dissolved PFLP (Article 2, paragraph (4))
- Limited partners will be permitted to undertake certain activities (‘white list’) without being regarded as taking part “in the management of the partnership business” – which would ordinarily make that partner liable for all the debts and obligations of the LP incurred whilst taking part in the management of the business. The ‘white list’ will include activities such as taking part in a decision about whether to allow a particular investment by the partnership or whether the general nature of the partnership business should change (Article 2, paragraph (5))
- Partnerships that wish to register as a PFLP will need to include in the application a certificate signed by a solicitor to confirm that the LP conforms to the PFLP conditions (Article 2, paragraph (6))
- A similar signed certificate will be required for those existing LPs applying to be designated as a PFLP (Article 3)
- The registrar will be able to strike PFLPs off the register (Article 2, paragraph 11)
Comments are invited (lp.consultation@HMTreasury.gsi.gov.uk) by 5 October 2015.