The effect of the introduction of two new types of limited
partnership in Jersey
The States of Jersey are awaiting approval from the Privy
Council to complete legislation which will introduce two new
limited partnership structures and hence broaden the options for
fund structuring using limited partnerships. This approval is
expected in the early part of this year.
These two new forms of limited partnership are Separate Limited
Partnerships (SLPs) and Incorporated Limited Partnerships
The Jersey Limited Partnership
The current Jersey Limited Partnership (LP) already provides an
effective vehicle for investors to participate in a structure which
allows them to have a certain level of influence without being seen
as having an active role in the management and control of the
partnership affecting the tax position or putting their limited
liability at risk.
How do the new structures change things?
The SLP and ILP will follow the general form of and have the
benefits of the existing LP structure but with added
Both the SLP and ILP will have separate legal personality and
the ILP will also be a body corporate.
Separate legal personality
The distinct legal personality means that both structures will
be able to enter into contracts, hold assets and sue or be sued in
their own right without acting through their general partner as is
the case for current LP structures.
The SLP can also act through its general partner, if that is
required, but the ILP cannot as it is a body corporate.
The ILP as a body corporate
The main effects of this are as follows:
ILPs will have perpetual succession and their existence would
not depend on its partners.
There will be detailed winding up and insolvency provisions for
The general partner of an ILP will have fiduciary duties
similar to that of a director of a limited company.
The general partner of an ILP has more limited responsibility
for the debts of the partnership than is the case in relation to
LPs and SLPs.
Early indications are that the SLP will be tax transparent for
both UK income tax, stamp duty land tax and capital gains taxes
whereas the ILP will be transparent for income taxes and stamp duty
land tax but opaque for taxation on capital gains.
Therefore, the choice of structure may differ depending on
operational considerations and the investments to be held.
The tax treatments in other jurisdictions will obviously vary
but the basic benefit of all the partnerships will be tax
transparency as that leaves the investor to deal with the tax
issues in their own jurisdiction without adding an extra layer of
The opportunities offered by the new structures
The two new structures offer a number of opportunities for
structuring for both the fund services provider and for general
Along with the tax planning benefits stated above, and the
different characteristics of the two new structures provides
greater choice and hence allows the structure to be tailored to
specific circumstances and requirements.
One specific benefit that has already been identified even
before the completion of the legislative process is the use of an
ILP or SLP as a carried interest partner in another partnership as
having a separate legal personality allows them to be seen as a
'person' for the purposes of being a partner.
A common Fund structure has a Scottish Limited Partnership
(ScLP) as a partner to the main fund partnership through which the
fund promoter can receive their carried interest return based on
the performance of the fund.
The structure of the SLP is very close to that of the ScLP and
so it can be seen as a direct alternative to it. The added bonus
for the SLP is that it will be outside the HMRC guidance for filing
information and details on non UK investors.
Overall the SLP and ILP should be a popular extra string to
Jersey's bow when looking at possible structuring of fund and
other investment vehicles.
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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