A limited partnership established pursuant to the Limited Partnerships (Jersey) Law 1994 provides the benefit of limited liability to investors, but remains an unincorporated association with no separate legal personality or perpetual succession vested in the partnership. Jersey will shortly have two new types of statutory limited partnerships improving the choice of structures available to clients when considering commercial structuring.
Both the Separate Limited Partnerships (Jersey) Law 200- and the Incorporated Limited Partnerships (Jersey) Law 200- were adopted by the States on 25 May 2010 and await Royal sanction before registration in the Royal Court. Their adoption is an indication of Jersey's willingness to maintain its competitive edge for corporate and fund matters.
Separate Limited Partnerships ("SLP")
A SLP is an limited partnership regarded as a legal person, but is expressly not to be regarded as a body corporate. Features to note are:
- Its capacity as a legal person will not be limited;
- It must have a registered office in Jersey;
- It must consist of one or more general partners and one or more limited partners;
- A limited partner will be permitted to make contribution via money, other property or the provision of services;
- There shall still be no limit on the number of limited partners;
- A limited partner will be permitted to assign its interest (subject to unanimous consent of all partners and the terms of the partnership agreement);
- It may be established for a specific term or with unlimited duration;
- No audit requirements;
- Legal proceedings may be brought in the name of the SLP or the general partner; and
- It will be possible to hold property in the name of either the SLP or the general partner.
Incorporated Limited Partnerships ("ILP")
An ILP is a body corporate having legal personality separate from that of its members. It will have unlimited capacity and perpetual succession so cannot be dissolved otherwise than in accordance with the law. Incorporation brings important considerations and obligations for both the partners analogous with those applicable when considering the relationships between companies, directors and shareholders (for example, a general partner must 'act honestly and in good faith with a view to the best interest of the ILP' which mirrors a director's statutory duty under the Companies (Jersey) Law 1991). Features to note are:
- It must have a registered office in Jersey;
- An annual administration fee is payable to the JFSC;
- It must consist of one or more general partners who will be agents of the partnerships and one or more limited partners;
- Any debt or obligation incurred by a general partners in conduct of affairs of an ILP shall be a debt or obligation of the ILP;
- A limited partner will still be permitted to make its contribution via money, other property or the provision of services;
- A limited partner will still be permitted to assign its interest;
- Like a director, a general partner must 'act honestly and in good faith' and exercise 'care, diligence and skill';
- Like shareholders, the partners of an ILP can ratify a breach by a general partner provided all partners authorise and the ILP is able to discharge its liabilities as they fall due;
- Winding up is to be governed by Regulations and therefore will be different from the provisions made for winding up of limited partnerships and SLPs;
- It will own property in its own name;
- It will contract in its own and name and will be able to sue and be sued in its own name; and
- Due to its incorporated status, an ILP will be capable of committing a criminal offence.
The same JFSC requirements and either consent under the Control of Borrowing (Jersey) Order 1958 or authorisation under the Collective Investment Funds (Jersey) Law 1988 will be applicable to both a SLP and an ILP.
The laws relating to SLPs and ILPs do not prescribe requirements as to the contents of the limited partnership agreement. Therefore sponsors and investors have full commercial flexibility to set out in detail the rights and obligations of the partners.
There are subtle and important differences between the types of partnership which will shortly be available in Jersey. The choice of partnership will be determined by taxation and the best interests of the potential investors.
Considering the popularity of limited partnerships with separate legal personality in other jurisdictions it is vital that Jersey improves upon its current offering if it intends to maintain its premier position in the financial centres market. The introduction of SLPs and ILPs will certainly help and thereby Jersey should continue to attract quality fund work as a result in the future.
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.