Earlier this year the Limited Partnership (Amendment) (Jersey) Law 2009 (the "Amendment Law") came into force, setting the stage for the introduction of two pieces of related legislation in the near future.
In the offshore context, limited partnerships have four main uses:
- as part of international tax planning arrangements utilising
the fiscal transparency of the limited partnership concept;
- as vehicles for private equity and venture capital
- as components in asset protection arrangements; and
- perhaps most importantly, as vehicles for collective investment schemes.
The Amendment Law amended the Limited Partnership (Jersey) Law 1994 (the "LP Law") which governs the setting up, conduct and dissolution of traditional limited partnerships ("LPs"). While the amendments to the LP Law are mostly minor, two are worthy of note:
First, powers are conferred on the registrar to deal with issues arising in relation to an LP's registered office. They are:
- the power to refuse to register a declaration of LP unless
satisfied that the occupier of the relevant premises has authorised
their use as such;
- the power to require that an LP nominates a new registered
office if not satisfied that the occupier of the premises currently
nominated has consented to their use as such; and
- the power to refuse to register a change of registered office unless satisfied that the occupier of the newly nominated premises has consented.
Second, an LP can now be de-registered without the partnership necessarily being terminated. This is intended to assist LPs wishing either to re-register as LPs in other jurisdictions or to convert to ordinary (non-limited) partnerships.
Perhaps most importantly, now that the LP Law has been amended, the legislative stage is set for the introduction of two further, and closely related, laws: the Incorporated Limited Partnerships (Jersey) Law 200- (the "ILP Law") and the Separate Limited Partnership (Jersey) Law 200- (the "SLP Law").
Both the ILP Law and the SLP Law have been modelled, as closely as possible, on the amended LP Law, the intention being that the only differences should be those necessary to accommodate their respective incorporated status or separate legal personality.
Incorporated Limited Partnerships
The major differences between an incorporated limited partnership (an "ILP") and an LP can be summarised as follows:
- an ILP will be a body corporate with a legal personality
separate from those of its partners;
- an ILP can contract in its own name and accordingly hold assets
in its own name rather than in the name of its general partner
(although, as will often be the case, it will still be possible for
the assets of an ILP to be held via a nominee);
- to incorporate an ILP, its general partner will have to supply
the registrar with, amongst other things, a statement that its
partnership agreement has been executed by the initial partners.
This is not the case for an LP and is driven by the need to
establish the precise moment at which an ILP comes into
- as a body corporate, an ILP will have perpetual succession in
contrast to an LP which, in general terms, is immediately dissolved
on the death, dissolution, bankruptcy or withdrawal from the
partnership of the general partner. In light of this, the
dissolution procedure for an ILP will be more formal than that for
an LP; and
- a general partner of an ILP will owe fiduciary duties to the partnership analogous to those owed by a director to a company. Breaches of these fiduciary duties can be sanctioned or ratified by all the partners in the partnership subject to the partnership continuing to be able to discharge its liabilities as they fall due.
Separate Limited Partnerships
While the concept of an unincorporated partnership having a separate identity to that of its partners is already familiar to Scottish law, it will be a welcome addition to Jersey partnership law. The key distinguishing features of a separate limited partnership (an "SLP") will be as follows:
- an SLP will have a separate legal personality but will not be a
- an SLP will be able to own assets either in its own name or in
the name of its general partner;
- as a corollary of the bullet point immediately above, legal
proceedings may be commenced against, or brought by, either the SLP
in its own name or its general partner; and
- as it is not a body corporate, the mechanics of an SLP's creation and dissolution will not be as formal as for an ILP and the general partner will not owe any fiduciary duties to the partnership.
The ILP Law is expected to come into force later this year with the SLP Law following shortly thereafter. Once in force the new laws will add considerably to the attractiveness of Jersey's limited partnership regime and thereby help ensure that the Island retains its competitive edge in this important area.
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.