By Daniel O'Connor
Jersey has introduced two new forms of limited partnership. A separate limited partnership (SLP) is a legal person, similar to a Scottish limited partnership. An incorporated limited partnership (ILP) is a legal person and a body corporate. Carey Olsen registered the first of the structures (an SLP) in 2011 and others have followed since.
The 'traditional' Jersey limited partnership (JLP) is treated as transparent for all UK tax purposes and counsel's advice is that SLPs and ILPs will receive the same treatment. The SLP and ILP laws have been tailored to reinforce the existence of separate legal personality and body corporate status before foreign courts:
- An SLP is a legal person whose capacity is not limited and which can sue and be sued in the name of the SLP or its general partner (GP);
- An ILP is a body corporate with perpetual succession and unlimited capacity, which can only be dissolved in accordance with detailed (company style) winding-up provisions or Jersey's insolvency legislation. The GP is the agent of the ILP, owes duties to the ILP (as well as to other partners) and has liability for ILP debts only after the ILP has defaulted.
The SLP and ILP are ideal as carried interest and other profit distribution structures, as fund vehicles, and also to act as GP for UK and other limited partnerships. The UK's qualifying partnerships regime is expected to be expanded shortly, requiring many English and Scottish limited partnerships to prepare accounts audited to UK GAAP (Generally Accepted Accounting Principles). The use of a Jersey ILP as the GP is expected to take these partnerships outside the scope of the new regime.
Common features of all types of Jersey limited partnerships
Like a JLP, an SLP/ILP consists of one or more GPs who are jointly and severally liable for all the debts of the partnership, and one or more limited partners, who are not liable beyond the amounts they agree to contribute. Other common features of all Jersey limited partnerships include the following:
- 'Stackability' – can act as a general or limited partner to any Jersey or other LP without prejudicing the limited liability of its limited partners;
- Capital and profits can be distributed at any time without formality, provided partnership is solvent;
- No public inspection of limited partner names;
- Unless partnership is regulated as a fund or a financial service business, there is no requirement for Jersey service-providers; a Jersey GP; Jersey directors; filing any annual return or accounts; or any audit. Where the LP is regulated, its accounts must be audited but do not need to comply with any GAAP;
- Partnerships can be listed;
- There is full commercial flexibility on the terms of the partnership agreement.
There is a non-exhaustive list of 'safe harbours', allowing limited partners to have greater involvement in management than in some other jurisdictions. The benefits of Jersey limited partnerships are now available in structures where Scottish or other vehicles have conventionally been used. The ability to establish structures across fewer jurisdictions, combined with the flexibility of Jersey companies and limited partnerships, offers new opportunities for cost savings and greater simplicity in corporate and fund structuring.
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.