The law of partnership in the British Virgin Islands ("BVI") is governed by the Partnership Act 1996 ("the Act"). This legislation accomplishes two goals, the first is the codification of the law of partnership generally, and secondly, the Act provides for the establishment of limited partnerships. The Act combines elements from the UK Limited Partnership Act 1907 and the Delaware Revised Uniform Limited Partnership Act 1983. International clients who chose the BVI will enjoy all the usual tax and limitation of liability benefits and have the added advantage of being offshore and the option of also using BVI offshore companies ("IBCs") as the general and the limited partners themselves.

The personal liability of partners in a general partnership presents significant risks to the partners. This risk can be minimized to some extent by inclusion in the partnership of a corporate partner, which may own the physical assets of the firm. However, the partners will remain at risk for liabilities in excess of the value of the assets held in the name of the corporate partner. The Act allows these risks to be effectively limited by the establishment of the firm as a limited partnership.

One of the main advantages of operating through a partnership, rather than a company, relates to the peculiar tax treatment of partners. In a company, for instance, members are effectively taxed twice, once at the corporate level and again at the personal level. In a partnership, the flow-through provisions remove the first "level" of taxation, so that the general and limited partners are taxed once only. Because the BVI offers tax exemption for non-BVI limited partnerships, the partners are not taxed at all, while the limited partners enjoy the further advantage of their limited liability.

Non-BVI, or International Limited Partnerships are also attractive vehicles for use as mutual funds or other arrangements traditionally housed in a corporate structure. There are no company law rules governing matters such as maintenance and return of capital, meetings, dividends, duties of directors, etc, and these rules can be set by the Articles of limited partnership.

Limited Partnerships Examined

A limited partnership must be formed by two or more persons, who may be natural persons, companies, trusts, other partnerships (general or limited) or any other individual or entity in its own or any representative capacity. It must have one or more general partners and one or more limited partners, and may be either a local limited partnership or an international limited partnership. A company with limited or without limited liability may be a general partner or a limited partner of a limited partnership. Limited partnerships may carry on any business save banking business, trust business, insurance business or any other business prohibited by its constitutional documents. International limited partnerships may not carry on business with persons resident in the BVI, nor may they own interests in land in the BVI save for business leases.


The procedures for formation of a limited partnership are fairly simple and can be quickly achieved. Two or more persons are required to execute articles of limited partnership which equate with a partnership agreement. The articles must be submitted to a BVI registered agent who is named in the articles. The partners are then required to submit to the Registrar of Companies and Limited Partnerships ("the Registrar") a memorandum providing, inter alia, the following information regarding the partnership: the name of the firm (which must have at its end the words "Limited Partnership" or "L.P." denoting a limited partnership);

  • the objects and purposes of the partnership;
  • the address of the registered office of the partnership in the BVI;
  • the name and address of the registered agent of the partnership;
  • the full names and addresses of the general partners;
  • a statement that the partnership is limited;
  • a statement that every partner not named as a general partner is a limited partner; and
  • in the case of an international limited partnership a statement that it may not carry on those businesses prohibited by the Act.

The memorandum must be subscribed by the registered agent and, together with the prescribed fee, must be submitted to the Registrar who on being satisfied with compliance with all statutory requirements, shall register the partnership and shall issue a Certificate of Limited Partnership which is prima facie evidence of compliance with all statutory requirements.

The memorandum is the only document that must be filed. The articles of limited partnership detail the basic agreements and understandings between the partners and so equates with a partnership agreement. The articles will typically contain provisions regarding admission of partners, capital contributions, profit sharing, rights and powers of partners, management structure, dissolution provisions and other matters governing the internal workings of the entity. The articles are not required to be filed and therefore are not available for public inspection. However, the articles must be retained by the registered agent who must provide a statement to the Registrar to the effect that the articles have been received by him. It is believed that the confidentiality of the agreements set forth in the articles will be protected by professional privilege.

Limited Liability

In a BVI limited partnership, general partners are jointly liable for the debts and liabilities of the firm as well as for the wrongful acts of other partners during the course of the firm’s business and for contractual obligations arising between partners and third parties during the course of business. In a limited partnership, a limited partner is not liable for the obligations of the limited partnership unless he is also a general partner or, in addition to the exercise of his rights and powers as a limited partner, he participates in the control of the business of the partnership. In the latter case he shall be liable as a general partner to those persons who transact business with the limited partnership believing the limited partner to be a general partner

Generally, however, and with the exception of the situation outlined above, limited partners are not liable for those debts or obligations beyond the amount they have invested in or contributed to the firm. A limited partner will be liable for the difference between his contribution actually made and that stated in the articles as having been made, and for any unpaid contribution, which he agreed in the articles to make in the future.


The rights of management of a limited partnership are reposed in the general partners. The Act states that the general partner has the rights and powers of a partner in a partnership without limited partners and these generally include the right to participate in the management of the partnership subject to any limitations set forth in the partnership agreement. A limited partner has the same rights as a general partner to inspect the firm’s books, to receive on demand true and full information of all things affecting the partnership and a formal account of partnership affairs whenever the circumstances render it just and reasonable.

The Act does not expressly confer on limited partners any greater rights than those indicated above and generally limits the rights and powers of a limited partner to the right of access to partnership information. This is consistent with the fact that limited partners are primarily passive investors in the business of the firm, who provide capital in exchange for economic benefit in the form of distributions of profits. Participation by a limited partner in the control (management) of the partnership will have the result of removing the limitation of liability in the manner outlined above.

Compensation Of Limited Partners

A limited partner may receive from the partnership the share of the profits or compensation by way of income stipulated in the articles, provided that after the payment is made, whether from the property of the partnership or that of the general partner, the partnership assets are in excess of all liabilities of the partnership except liabilities to limited partners for their contributions and to general partners.


International limited partnerships are exempt from all forms of taxation. Neither local (BVI) nor international limited partnerships are formed as taxable entities as are limited companies, but rather are what is referred to as a "flow-through" entity in respect of liability for and payment of tax. Partners are taxed at the personal level. Many United States tax advisers still opt for a partnership structure even with the advent of the "tick the box" regulations, which appear to allow a company to elect to be treated as a partnership.


Dissolution of a BVI limited partnership will take effect on the expiration of any term for which the partnership was fixed or the termination of the purpose for formation of the partnership, by notice given by any partner, by the death or bankruptcy of any of the partners, illegality of the business purpose of the partnership, or by court order on the application of any partner on the grounds that a partner has become of unsound mind or otherwise incapable of performing his part of the partnership contract, breach of agreement by another partner, that the partnership business can only be carried on at a loss, or on the grounds that it would be just and equitable for the partnership to be dissolved.

On dissolution, the general partners in the case of a voluntary dissolution only may appoint a liquidator to wind-up the affairs of the partnership. The duties of the liquidator are practically identical to those conferred on the liquidator of a limited company, that is to say, the liquidator is bound to take custody of the assets, pay creditors and distribute the assets in accordance with the terms of the agreement.

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.