United States: 英国财政部回应提议的对有限合伙机制的变更(英文版)

On 24 March, HM Treasury published a summary of consultation responses ("Response") to its proposed modernisations to partnership legislation for private equity investments. The Response, which details the government's legislative intentions, suggests a number of significant amendments to the original proposals set out in HM Treasury's July 2015 consultation ("Consultation").

The proposed changes will introduce much-needed modernisations to the partnerships regime and ensure that the UK remains an attractive domicile for funds.

EXECUTIVE SUMMARY

The Response builds on the Consultation, which set out proposed changes to the Partnership Act 1890 and the Limited Partnerships Act 1907. Key changes include:

  • Instituting a process for new and existing limited partnerships to be designated as private fund limited partnerships ("PFLPs");
  • Creating a "white list" of activities in which a limited partner of a PFLP may engage without losing its limited liability status;
  • Removing the requirement for limited partners of a PFLP to contribute capital to the partnership; and
  • Simplifying or removing filing and notification requirements for PFLPs.

The changes, which are to be implemented by way of a Legislative Reform Order ("Order"), are designed to ease the regulatory and administrative burden of the present regime.

APPLICATION AND REGISTRATION

In order to register as a PFLP, a limited partnership must be:

  • Constituted by an agreement in writing; and
  • An unregulated collective investment scheme, or would be such a scheme but for one of the exceptions under section 235(5) of the Financial Services and Markets Act 2000.

While it was originally envisaged that new limited partnerships would need to request designation as a PFLP at the point of registration, the government conceded in the Response that many limited partnerships would not qualify as PFLPs from day one. It also acknowledged that the burden of obtaining a solicitor's certificate to verify a PFLP's status would be disproportionate to the benefit.

Therefore, it is now proposed that a limited partnership may apply to become a PFLP at any time in its life cycle. Responsibility will fall on the general partner to confirm that the partnership fulfils the requirements, and once a partnership has become a PFLP, it will not be able to revert back.

Existing limited partnerships which meet the criteria may apply to the Registrar of Companies for PFLP designation following the same process at any time.

OVERVIEW OF CHANGES

White List

Under the current regime, a limited partner involved in the general management of the partnership may lose its limited liability status and be responsible for the debts and obligations incurred by the partnership while taking part in its management.

The draft Order sets out a white list of activities in which limited partners could engage without compromising their limited liability status. The list includes:

  • Taking part in investment decisions of the partnership, including decisions related to partnership borrowings;
  • Taking part in decisions about whether a person should become, or cease to be, a partner;
  • Taking part in decisions about a change in the partnership business;
  • Approving partnership accounts or valuations of partnership assets;
  • Acting as a director, member, employee or officer of, or a shareholder or partner in, the general partner or the fund manager; and
  • Consulting or advising the general partner(s) or fund manager about the affairs of the partnership.

While not exhaustive, the list offers welcome clarity for investors about their participation in core fund activities.

The government clarified in the Response that the creation of the white list does not mean that the activities on the list are permissible for limited partners by right and that the list does not create any adverse presumptions for limited partners in other partnerships.

Capital Contributions

The Limited Partnerships Act 1907 currently requires limited partners to make capital contributions to a partnership. More problematic, in a funds context, is the statutory restriction which prevents a limited partner from withdrawing its capital from the partnership.

In practice, private equity investors deal with this restriction by splitting their funding commitment between a nominal capital contribution and a loan to the partnership. This approach created a grey area insofar as it was unclear whether fractional capital contributions could be disregarded on de minimis grounds.

In recognition of the fact that these requirements have little practical value, the reforms will remove them entirely for new PFLPs: a limited partner may withdraw capital from the partnership, and indeed there will no longer be a requirement for limited partners in new PFLPs to make any capital contribution.

While the original proposals suggested that the same treatment would be applied to existing partnerships, the Response now makes it clear that, where a limited partnership was formed before the implementation of the Order, capital contributed before redesignation as a PFLP will be treated as under the former regime. Capital contributed after the limited partnership is redesignated will then be treated in accordance with the new regime.

Winding Up

Currently, limited partners who wish to wind up a partnership following the removal of the general partner(s) require a court order to do so.

On the basis that this requirement is burdensome and unnecessary, the Order will permit limited partners in PFLPs to appoint a third party to wind up the partnership on their behalf (but not do so on their own accounts). The Response clarified that the white list will specify that making such decisions will not amount to taking place in the management of the partnership.

Removal from Register

A lacuna in the current legislation means that the Registrar has no ability to remove a dissolved partnership from the register. Given that most private equity funds subsist for a fixed term and are then wound down, this has resulted in an overcrowding of the register with dissolved limited partnerships.

While the draft Order envisaged the ability to strike PFLPs from the register on application by the partnership, the Response has now withdrawn this proposal. Many respondents were concerned that the measure could lead to limited partners unknowingly losing their limited liability status should an active PFLP be removed from the register. The government will consider further options for tidying up the register at a later stage.

Administrative Requirements

A further welcome change is a proposed reduction in the administrative burden on private equity funds.

Registration. HM Treasury indicated in its proposals that it sought to "protect investors' privacy" and simplify the registration process by removing some of application requirements for a new PFLP.

Under the new regime, PFLPs will not need to declare the nature of the business of the partnership or detail the partnership's term and character. Similarly, partnerships which convert to PFLPs will not need to notify the Registrar of changes to these particulars.

Gazette Notices. The draft Order pares back the circumstances in which changes to a limited partnership must be advertised in a Gazette. Under the new regime, PFLPs will not need to advertise the assignment of a partnership interest from one limited partner to another.

As this is a common occurrence in the life cycle of a fund, the change will reduce the compliance burden on general partners and fund managers.

Contrary to the original proposals, the Response makes clear that a PFLP will still need to advertise in the event of a general partner becoming a limited partner. This U-turn is a response to concerns that third parties would otherwise not know if they are dealing with a general partner who is liable for debts and obligations of the partnership. However, the provision will be amended such that the Gazette advertisement no longer constitutes the date at which the change comes into effect.

NEXT STEPS

In due course, HM Treasury will lay an amended draft Order before Parliament. On implementation, the changes will become operational within a year.

Managers should consider if any of their funds would be eligible for re-registration as PFLPs. Going forward, managers of new funds should consult with their legal advisors to ensure that limited partnerships are registrable as PFLPs where possible.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
John C. Ahern
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.