This note provides an overview of Jersey Separate and Incorporated Limited Partnerships. This note explains the common features of these Limited Partnerships and the key advantages to using them.
Jersey has three types of limited partnership – Separate Limited Partnerships ("SLP"), Incorporated Limited Partnerships ("ILP") and 'standard' limited partnership, through the Limited Partnerships (Jersey) Law 1994, as amended (the "1994 Law"), the Separate Limited Partner (Jersey) Law 2011 and the Incorporated Limited Partnerships (Jersey) Law 2011.
In short, a limited partnership is a partnership made between one or more General Partners ("GP") and one or more other persons who are limited partners. The general partner tends to be responsible for the management of the limited partnership and is generally a limited liability company. Limited partners are the investors who do not participate in the management of the limited partnership.
The introduction of the SLP and the ILP in 2011 was welcomed by Jersey's private client and investment funds industries as it helped to maintain Jersey's international position as a flexible and innovative jurisdiction with which to do business.
Uses of a Limited Partnership
Jersey Limited Partnerships are regularly used for collective investment funds, private investment structures and family planning. They have also proved popular for structures and transactions where tax transparency is important (however, please see Key Features of an ILP below).
The 2011 Jersey laws relating to SLP and ILP are based on the 1994 law and draw on the law relating to the popular Scottish limited partnership.
The common features of Jersey limited partnerships are:
- Any general partner will have unlimited liability for the debts of the partnership, whereas the limited partners will be protected by limited liability provided that they have not participated in the management of the partnership;
- It must consist of one or more general partners and one or more limited partners;
- Confidentiality: neither the names and addresses of the limited partners nor the partnership agreement are matters of public record;
- There is no limit on the number of limited partners;
- A limited partner is permitted to assign its interest (subject to the terms of the partnership agreement);
- A limited partner may contribute cash or property;
- A limited partnership may be established for a specific period or for an unlimited period of time;
- There are no requirements for an audit, filing of an annual return or annual fee; and
- Registration and Control of Borrowing Order ("COBO") consent will be required, both of which are standard applications.
Key Features Of SLP
- SLPs have separate legal personality but are not a corporate body;
- SLPs are able to contract in and sue and be sued in their own name;
- SLPs are not subject to the principles and rules relating to companies;
- Like a traditional limited partnership SLPs are tax transparent;
- Because an SLP has a distinct personality it is possible to obtain judgement against either the SLP or the general partner;
- Legal proceedings may be brought in the name of the SLP or the general partner; and
- Property can be held in the name of either the SLP or the general partner.
Key Features Of ILP
- An ILP has separate legal personality (like an SLP) and is a body corporate (unlike an SLP);
- Like a company, it has perpetual succession;
- Whilst an ILPs are tax transparent for Jersey purposes in the usual way there has been some discussion regarding whether an ILP would be considered opaque for gains by other jurisdictions such as the UK;
- Like a director, a general partner must 'act honestly and in good faith' and exercise 'care, diligence and skill';
- The general partner is regarded as an 'agent' of the limited partnership and as such it will only be liable after the partnership has failed to satisfy the debt;
- 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;
- It is able to own property in its own name;
- It is able to contract, sue and be sued in its own name; and
- Due to its incorporated status, an ILP is capable of committing a criminal offence.
Limited Liability Partnerships ("LLP")
Jersey does offer LLPs, but they have not proved popular historically due to statutory requirements that the LLP must maintain a £5 million financial provision, under the Limited Liability Partnership (Jersey) Law 1997. That requirement was abolished in 2013 and the popularity of LLP's has increased as a result.
Limited partnerships with separate legal personality continue to be popular and the range of different options in Jersey continues to attract quality private client and fund work 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.