In December 2018, the government published its response to its April 2018 consultation on the reform of UK limited partnership (UKLP) law. Our previous update on the consultation is available here. The government’s response sets out its plans to change the legislation relating to UKLPs (including private fund limited partnerships (PFLPs)) and the consultation stated that the changes would take place “as soon as Parliamentary time allows”.
A summary of the government’s proposed actions is set out below:
Maintaining a connection with the UK
A UKLP will continue to be able to relocate its principal place of business outside of the UK after registration. To the extent it does so, however, the UKLP must demonstrate its ongoing connection with the UK to remain registered as a UKLP. It can do this by demonstrating that it is:
- pursuing some legitimate business activity at a UK address; or
- using an agent that is registered with a UK anti-money laundering (AML) supervisory body and using that agent’s address as its service address.
The government is considering what will be needed to evidence this and how to apply the new rule to existing UKLPs.
Additional reporting requirements
On registration of a UKLP, the following additional information will need to be provided to the Registrar:
- contact information for all general and limited partners (there is nothing in the current response suggesting that a service address could not be used for this purpose);
- the date of birth and nationality of all general and limited partners who are individuals; and
- a standard industrial classification code identifying the nature of the UKLP’s business.
Any changes to this information will need to be registered on an ongoing basis. A transition period will be introduced to enable exsiting UKLPs to submit the additional information. Currently, Scottish LPs are required to file an annual confirmation statement under the ‘Persons of Significant Control’ regime (under the statement the LP confirms that all details on the register are correct). The requirement to file an annual confirmation statement will be extended to English and Northern Irish Limited Partnerships.
The government did not consider that the case had been made for all UKLPs to prepare accounts and reports in line with limited companies. However, the response noted that “where there are any gaps in the requirements for partnerships to file basic accounts with the UK government, the government will close those gaps in a way that is not burdensome or duplicative.” It is not clear exactly what this means, and although there is nothing in the current proposals which would require UKLPs with a general partner in the form of an LLP (and therefore not currently classified as “qualifying limited partnerships”) to file audited accounts with the Registrar, this will be something to keep an eye on.
Registrar’s new power to strike off UKLPs
The government will grant the Registrar a power to strike off UKLPs that are dissolved or which it concludes are not carrying on business or in operation. A robust notification procedure for strike off will be established that is at least as robust as the one that applies to UK companies (the government will also consider introducing a procedure to restore a UKLP that has been struck off).
Presenters of new applications for registration of UKLPs will have to demonstrate that they are reigstered with an AML supervisory body and provide evidence of this on the application form. So a fund manager that is FCA authorised could be a presenter under a new regime as it is registered with the FCA. Fund managers that are not FCA authorised would not be able to register a new application themselves (they could instead instruct a solicitor or other person registered with an AML supervisor). Overseas applicants will be subject to equivalent standards and the government is considering options for achieving this. The government recognises that these changes will increase the administrative burden but considers that this is proportionate in its attempt to address UKLPs being registered for the conduct of illegal activity.
Osborne Clarke comment
The government has tried to strike a balance in ensuring that UKLPs are used for legitimate purposes without compromising the attractiveness of the UKLP as a vehicle for private investment funds. It has broadly achieved this, although the proposals on reporting (particularly as regards individual partners) could result in fund managers opting to use vehicles in other jurisdictions and this comes at an unwelcome time in the midst of the Brexit negotiations.
The government has promised to add colour to these proposals although there is no clear timeline for this.