Proposed amendments are likely to add to the attractiveness of Jersey limited partnership law, thereby helping to ensure that the island remains competitive in this area. The proposed amendments are included in a position paper authored by the States of Jersey’s Economic Development Department (EDD). It is anticipated that the amendments will be presented to the States of Jersey.
The Limited Partnerships (Jersey) Law 1994 already provides a flexible partnership vehicle for sophisticated or institutional investors who wish to participate financially as limited partners, up to a fixed capital amount with the benefit of limited liability, but without taking part directly in the management of partnership affairs.
Limited partnerships are primarily used in four areas:
- part of international tax planning arrangements utilising the fiscal transparency of the limited partnership concept
- vehicles for private equity and venture capital schemes
- components in asset protection arrangements, and as
- vehicles for collective investment funds in Jersey
As it stands, Jersey limited partnerships do not have legal personality and are fiscally transparent for the purposes of Jersey taxation, allowing non-Jersey resident investors who act as limited partners in a Jersey limited partnership to be exempt from Jersey income tax on their share of the partnership profits.
Some of the proposed amendments are:
Flexibility on the issue of legal personality is proposed. The EDD is proposing that Jersey mirrors Guernsey’s approach by including a provision that a limited partnership will have legal personality if at the time of registration the general partner so elects. The election to have legal personality is to be irrevocable, and if made, the name of the partnership will end with the term ‘Incorporated’ or ‘Inc.’. One key benefit of a limited partnership having separate legal identity is that it is perceived to afford the limited partners a different tax treatment compared with ‘traditional’ limited partnerships.
One of the key questions is, in mirroring the Guernsey approach, should Jersey allow existing limited partnerships within a short transitional window to apply for legal personality? Apparently a small number of existing limited partnerships have indicated in submissions that it may cause them difficulties if they were to be presented with an option to assume legal personality. So in the absence of any evidence to the contrary, it seems unlikely that existing limited partnerships will be given this option.
As a consequence of limited partnerships assuming legal personality, small amendments will be made to Jersey’s insolvency laws, allowing such limited partnership to be declared ‘en désastre’ (i.e. bankrupt).
General Partner as Trustee?
It is also proposed that Article 11 of the Limited Partnership (Jersey) Law 1994 be expanded to clarify that a general partner is not automatically a trustee for the limited partnership. It has been proposed that Article 11(2) should provide that "the general partner shall only be a trustee of those assets to the extent that the partnership agreement so provides".
Deregistration or Dissolution
Article 22 of the existing law provides that the registrar shall cancel the registration of a declaration of limited partnership upon delivery of a statement of dissolution. However, there may be circumstances where the limited partnership wishes to be de-registered without being formally dissolved. For example, the limited partnership may wish to re-register as a limited partnership in another jurisdiction or convert to an ordinary partnership. It is therefore proposed to include in the law a power allowing a limited partnership to be removed from the register and be de-registered in circumstances where the registrar receives a request to this effect from the general partner.
It is also proposed that a new article be inserted, which is likely to be based upon Article 200 of the Companies (Jersey) Law 1991, clarifying the ability of the registrar to accept documents in any form acceptable to him / her. This would enable, for example, electronic submissions, provided they are in a form acceptable to the registrar.
Quote: "As it stands, Jersey limited partnerships do not have ‘legal personality’ and are fiscally transparent for the purposes of Jersey taxation, allowing non-Jersey resident investors who act as limited partners in a Jersey limited partnership to be exempt from Jersey income tax on their share of the profits."
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