Charles Russell Speechlys cautiously welcomes the Government response to the UK Limited Partnership Law Reform Consultation
The Department for Business, Energy and Industrial Strategy (“BEIS”) has published its response to the April 2018 Consultation on the reform of UK limited partnership (“UKLP”) law. The response summarises the comments received during the consultation, which ended on 23 July 2018, and sets out the Government’s proposed responses and potential legislative changes.
The response is largely welcomed, given that it recognises the need to limit the risk of misuse of UKLPs (which has been well documented in the media of late) whilst also maintaining the appeal of UKLPs as an investment vehicle for legitimate domestic and overseas businesses. The Government note that more work is needed to finalise all the potential legislative changes, and in particular it is not yet clear what the impact might be on the Private Fund Limited Partnerships (PFLP) regime.
We have explained the most significant of the BEIS legislative proposals below where we also detail our thoughts. Please feel free to read our earlier briefing note here which helps to explain the context to the consultation and the key parts to the proposed reforms.
1.Maintaining a UK connection
On (a) application for registration of a UKLP and (b) on an ongoing basis, the Government intends to make it mandatory for an applicant to provide information about a UKLPs connection to the UK. Upon application, the applicant must provide a proposed principal place of business (PPoB) in the UK. To show an ongoing connection to the UK, UKLPs can:
- retain their PPoB in the UK;
- show that they are carrying out legitimate business activity in the UK; or
- show that they are engaging an agent that is subject to UK AML supervision and who’s address will be used as the UKLP’s UK address of service.
The Government has also shown that it intends to create a compulsory requirement for UKLPs to notify the Registrar of any change in its PPoB or if there is any change in an ongoing connection to the UK.
The Government is yet to provide any detail in respect of the evidence that will be required to meet the three criteria above and notes that it will also consider transitional arrangements for existing UKLPs.
We welcome the continued flexibility afforded to UKLPs which allows them to be located in a separate jurisdiction, given in particular that the application of the Alternative Investment Fund Managers Directive (AIFMD) is precipitated on whether the relevant Alternative Investment Fund and Alternative Investment Fund Manager is located within the European Union.
2. New annual reporting requirements
The Government intends to make it mandatory for a confirmation statement to be filed by all UKLPs every 12 months in order to confirm that information contained on the register is correct. The Government also intends to extend the information that LPs are required to submit on registration to the confirmation statement to include:
- contact information for all limited and general partners;
- the date of birth and nationality of all limited and general partners that are natural persons; and
- an SIC (standard industrial classification) code, identifying the nature of the LP’s business.
We welcome the implementation of the annual confirmation statement as opposed to the Government’s alternative suggestion of the preparation of publically available reports and accounts in line with limited companies. Aside from the fact that commercially sensitive information would be publically available, there would also be an increased cost for UKLPs meaning that the attractiveness of UKLPs as investment vehicles would be reduced. However, it is not yet clear how the different information requirements as between standard UKLPs and PFLPs might be affected, so we will in particular be engaging on the extent to which any additional information might be required in relation to contributions made by, or other information about, limited partners of UKLPs that are within the PFLP regime.
3. AML Supervision
The Government proposes to make it compulsory that all UKLPs’ registration applications must be accompanied by evidence which shows that the presenter is registered with an AML supervisory body. Overseas applicants will be subject to equivalent standards and so can still register UKLPs so long as they are subject to equivalent AML standards. The Government has stated that this might mean limiting applications from overseas to applicants from within the EEA. Further, any list of overseas jurisdictions with equivalent AML standards will be regularly reviewed.
As part of the consultation, we recommended that presenters of new applications who are providing services from law or accountancy firms should be able to provide a simple statement that the presenter is registered with one of the legal or accountancy AML supervisors demonstrate that the presenter is register with an AML supervisory body. However, it remains to be seen what evidence will be required and the Government has accepted that there may be an increase in administration as a result of the new measure.
We are pleased to see that this requirement is not proposed to be extended to ongoing filings, and will just apply to the initial registrations, which should keep the administrative burden to a minimum by allowing e.g. General Partners to submit subsequent filings.
4. Striking Off
The Government’s response shows that the Government intends to give the Registrar strike-off powers to remove LPs from the register of companies and this has been generally welcomed. It seems likely that the Registrar’s new strike-off powers will be subject to a ‘robust notification procedure’ in respect of dissolved UKLPs or UKLPs that are no longer companies. Nevertheless, the exact details of the procedures are to be determined. We are pleased to see that the Government has acknowledged the importance of protecting limited partners from potential unlimited liability and will follow the detailed proposals in this area as they develop.
We look forward to the Government progressing the legislation. It has stated that it “intends to legislate when Parliamentary time allows”.
News & Insights
RealDeals Private Equity awards 2019: Creditcall sale shortlisted for deal of the year
The Awards are the oldest, most respected accolades bestowed on the industry and those that advise it.
Charles Russell Speechlys advises fastjet on placing, subscription, open offer & balance sheet restructuring
Charles Russell Speechlys advise fastjet plc, on its placing, subscription, open offer and balance sheet restructuring to issue equity