Tom Carey & David Crosland of Carey Olsen consider
the introduction of the Limited Liability Partnerships (Guernsey)
In response to the increasing demand for limited liability
partnership (LLPs) structures in Guernsey the Limited Liability
Partnerships (Guernsey) Law, 2013 came into force on 13 May this
The key features of a Guernsey LLP are similar to those
registered in other jurisdictions but certain enhancements have
been made to the legislation to broaden the scope of their
commercial use and to benefit sponsors looking to use Guernsey as a
domicile for private equity funds.
A Guernsey LLP is a body corporate with unlimited capacity and
its own legal personality separate from that of its members and may
be formed to carry on lawful business with a view to profit or any
other lawful activity.
A member will not liable for any debt of the LLP, or of any
other member, by virtue solely of their membership of it. A
member's liability to contribute funds, and specifically a
shortfall on its winding up, will be limited to whatever the member
has agreed with the other members or with the LLP.
A member is not required to contribute capital or any effort and
skill to the business to become a member. There are no rules
restricting the manner by which the LLP may issue, maintain or
distribute capital and income within the LLP and to its members
other than the requirement to maintain solvency and members may
take a full and active part in the conduct and management of a
Guernsey LLP without losing their limited liability status.
A Guernsey LLP owns its own assets and is subject to the duties
and liabilities of the business to the exclusion of its members. It
carries on business itself with the members acting as its agents
and may sue and be sued in its own name. A Guernsey LLP must have
two members and a written agreement but sponsors have complete
flexibility to determine the terms of its ownership, operation and
management structure within that agreement.
Guernsey's modern, electronic registry system allows new
LLPs to be formed on a same-day basis and there's no
requirement to file the written agreement with the registry - a
positive feature for those seeking business confidentiality. In
addition Guernsey LLPs are not required by law to prepare annual
accounts nor to file such accounts with the registry unlike the
As a result the value of its assets and the respective shares of
its members can remain private and confidential. If accounts are
required by the members they are free to choose the applicable
accounting standards (LLPA GAAP) and are not tied to UK GAAP or
IFRS in the same way as UK LLPs.
Guernsey LLPs are tax transparent for Guernsey tax purposes with
members liable for their share of the profits and gains of the
Uses and benefits
The fact that LLPs can be used for any lawful purpose means that
LLPs are proving popular in structuring solutions for the private
equity industry. In particular LLPs are ideally suited as special
purpose management companies or general partner vehicles and as
such are a solution to the issues arising under the UK's
Partnership Accounts Regulations and the Alternative Investment
Fund Managers Directive.
LLPs have been established to hold aircraft and other assets and
may be used for real estate joint-ventures and investment
"clubs" where participants will be attracted by the
ability to take an active part in the management of the LLP and its
investments without giving up their limited liability. Indeed, the
ability to tailor the economics of LLPs will also make them
attractive as carry vehicles where the incentive arrangements can
be determined by a managing member in its sole discretion.
As is being proved already the LLP is another structuring tool
in the Guernsey tool box which maintains the island's position
as the premier jurisdiction for private equity funds.
An original version of this article was published
inFunds Europe, October
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