The UK's proposed Partnership (Accounts) Regulations 2010
(2010 Regulations), are intended to remedy a loophole created by
the Partnership (Accounts) Regulations 2008 (2008 Regulations),
namely the ability to avoid the 2008 Regulations if one of the
partners of a Limited Partnership (LP) was a natural person (or
other non-corporate body).
Many private equity structures using Scottish and English LPs,
will be caught by this new legislation thus becoming
"Qualifying Partnerships" in the terms of the 2010
Regulations. By maintaining an industry-driven regulatory
environment coupled with legislative innovation, Guernsey has the
opportunity to strengthen its position in the alternative funds
market and may now be considered the jurisdiction of choice for the
establishment of LPs as a result of the repercussions the
application of this new regulation will bring.
HOW ARE QUALIFYING PARTNERSHIPS AFFECTED?
A general theme of the private equity industry is
confidentiality. This is particularly true with regards to the
investor base. The 2010 Regulations fundamentally threaten these
principles as outlined briefly below: The 2010 Regulations may
require significant accounting disclosures effectively identifying
all parties involved in the fund. Qualifying Partnerships are
required to file their accounts publicly in the UK. This again
damages the ability to keep investment information and valuations
confidential. Details of deal structuring will also be made
In addition, accounts must be prepared in accordance with the UK
Companies Act and thus in compliance with UK GAAP or IFRS rather
than in accordance with the Limited Partnership agreement which is
currently standard practice. This is not only time consuming but
GUERNSEY TO BENEFIT?
With Guernsey being the preferred choice of private equity fund
managers in terms of fund administration the ability of Guernsey to
offer an alternative to English and Scottish LPs is vital. Guernsey
Limited Partnerships are not Qualifying Partnerships for UK
purposes and many have already made the move from English and
Scottish LPs to Guernsey LPs.
The structure and participants of the structure will remain
GAAP is not specifically required. Instead industry best
practice standards can be applied.
As GAAP is not required, there will be no requirement to
publicly file accounts.
It is yet to be seen as to whether the Guernsey LP will be
challenged. The possibility of a Guernsey LLP arriving in the near
future will only strengthen Guernsey's claim to have a complete
offering in terms of legislation and administration for the
alternative funds class.
Having already drawn the lion's share of private equity fund
administration work to the island, it is clear that as a
jurisdiction, Guernsey is doing everything right to support LPs.
The Guernsey LP is a suitable and easily manageable alternative to
the English and Scottish LP without the additional administration
associated with it. It would appear then only logical to believe
that Guernsey will again be the flexible jurisdiction it is
renowned for and create further legislation to support LPs into the
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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