UK Private Fund Limited Partnerships - New Legislation Imminent

On 16 January 2017, HM Treasury published a draft Legislative Reform Order ("LRO") to amend the Limited Partnerships Act 1907 ("LPA 1907") and introduce a Private Fund Limited Partnership ("PFLP") structure. The structure will be available to private investment funds (predominantly being those funds not authorised to be promoted to retail consumers) which are structured as limited partnerships.

BACKGROUND

An English limited partnership is commonly used as an investment vehicle for a variety of funds including private equity, real estate and infrastructure funds. The principal legislation governing such partnerships is the Partnerships Act 1890 ("PA 1890") and the Limited Partnerships Act 1907 ("LPA 1907") (collectively the "Acts").

Both Acts have remained largely unchanged for much of the 20th century and as a result do not accommodate modern requirements. In a market where other jurisdictions, such as Luxembourg and Jersey, have already reacted to investors' requirements to reduce administrative cost and burden, the LRO looks to ensure that UK limited partnerships ("UKLPs") continue to be a preferred option for investors and fund managers alike.

WHAT ARE THE PFLP CONDITIONS?

A limited partnership may only be a PFLP if it is:

constituted by an agreement in writing (this is satisfied by a usual form of limited partnership agreement ("LPA")); and a collective investment scheme ("CIS") (as defined by S235 FSMA 2000). This condition will be met and the partnership can be a PFLP even if it takes advantage of one of the exemptions available to a CIS as S235 (5) FSMA is dis-applied. The general partner will need to confirm that these conditions are satisfied but, practically speaking, a private investment fund structured as a limited partnership should easily satisfy the requirements and have the option to be designated as a PFLP.

HOW CAN A LIMITED PARTNERSHIP REGISTER AS A PFLP?

To register a new PFLP, a Companies House Form LP7 should be completed and filed with the registrar. This form differs from the current form used to establish a limited partnership in that there is no requirement to provide information relating to:

the nature of the partnership's business; the term of the partnership; or the sum of capital contributed by any limited partner. And, as mentioned above, the general partner will be required to confirm that the limited partnership meets the conditions of a PFLP (as set out above).

Existing limited partnerships can apply to...