On 6 April 2017, a new form of limited partnership came into
existence with the introduction of a 'private fund limited
partnership' (PFLP) under the Legislative Reform (Private
Fund Limited Partnership) Order 2017 (LRO). The PFLP is
intended to make the limited partnership structure more attractive
for asset managers and investors by reducing some of the
administrative and financial burdens of the LP structure and by
clarifying which activities a limited partner can undertake without
losing or risking its limited liability. The Government hopes that
the new PFLP structure will make the UK an attractive domicile for
funds compared to other jurisdictions.
Designation as a PFLP
Existing and new UK limited partnerships may elect to be
designated as a PFLP if two 'private fund conditions' are
It is constituted by an agreement in writing;
It is a collective investment scheme (as defined in section 235
of the Financial services and Markets Act 2000 (FSMA).
It is expected that most funds and co-investment and
alternative investment vehicles will satisfy these conditions.
An existing LP may choose to apply for PFLP status if it
fulfils the above conditions by application to Companies House in
the UK. Similarly, a new LP may apply to Companies House for
registration as a PFLP. Once registered and designated, the
registrar will issue a certificate of registration and a
certificate of designation as a PFLP or a combined certificate.
An LP that is designated as a PFLP will not be able to
reverse the process and return to LP status.
Advantages of a PFLP
Non-exhaustive 'white list' of
permitted activities - In a traditional LP a limited partner
may not take part in the management of the LP's business
without becoming liable for the LP's debts, and there has,
until now, been uncertainty as to which activities would amount to
'taking part in the management' of the LP. For PFLPs
section 6A of the LRO sets out a non-exhaustive 'white
list' of activities a limited partner of a PFLP may carry on
without being considered to take part in the management of the
business and without losing its limited liability. The
'white list' of activities is particularly intended to
cover institutional investors which have a strong interest in the
relevant fund and have obligations to their own members or
investors. The 'white list' includes:
Taking part in a decision about the variation or waiver of
a term of the partnership agreement or associated documents,
changes to the general nature of the partnership business, an
entity becoming or ceasing to be a partner and termination or
extension of the term of the partnership;
Appointing a person to wind up the partnership;
Enforcing an entitlement under the partnership agreement;
Entering into, or acting under, a contract with the other
partners in the partnership;
Providing surety or acting as guarantor for the
Approving the accounts of the partnership;
Reviewing or approving a valuation of the partnership's
Taking part in a decision regarding changes in persons
responsible for the day-to-day management of the
Appointing or nominating a person to represent the limited
partner on a committee; and
Taking part in a decision about how the partnership should
exercise any right as an investor in another collective investment
No capital contributions - Unlike for traditional
LPs, in a PFLP limited partners are not required to contribute any
capital to the PFLP, and any capital contributed may be withdrawn
during the life of the PFLP;
No need to file Gazette notices - The LRO has
removed the obligation to file a Gazette notice on a transfer of an
interest by a limited partner of a PFLP. However, the requirement
to file remains where any person will cease to be a general partner
in a PFLP.
Administrative burdens removed - Unlike LPs which
are not PFLPs, a PFLP is not required to file notices at Companies
House of changes to the partnership's business or term of the
partnership or details of capital contributed by any limited
Disadvantages of a PFLP?
Although there don't appear to be any disadvantages with
funds registering to be designated as a PFLP, existing funds (as
with new funds) will incur some administrative time and costs in
re-designating an LP as a PFLP. It will depend on the terms of the
relevant partnership agreement, but there may be a requirement to
notify or obtain the consent of the limited partners before
applying for a re-designation.
Winding-up a PFLP
The requirement for limited partners to obtain a court
order to wind-up a limited partnership when there is no general
partner does not apply to a PFLP. The LRO grants the limited
partners of a PFLP the power to authorise a third party to wind-up
the partnership on their behalf.
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.
The recent case of Dickinson v NAL Realisations (Staffordshire) Ltd is a "101" guide to how not to run a small business, providing insight into the pitfalls that can await any director or shareholder...
As the Brexit negotiations start, one direct impact is an interest from clients and advisers looking to have flexibility in their organisational structure ahead of any legislative or other changes being implemented.
An assignment of rights under a contract is normally restricted to the benefit of the contract. Where a party wishes to transfer both the benefit and burden of the contract this generally needs to be done by way of a novation.
Any UK companies doing business with the rest of the EU, or even just in the UK but relying on customers and suppliers who deal with the rest of the EU, should be keeping an eye out for the ramifications of Brexit.
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).