Jersey has developed into one of the world's leading financial centres, offering investors and promotors in the private funds sector a well regarded and regulated jurisdiction, operating within the same time zone as London and with third country access to the EU. Together with the tax neutral status available to Jersey entities and the expert and highly skilled financial services providers available from within the jurisdiction, the use of Jersey limited partnership formed under the Limited Partnerships (Jersey) Law 1994, as amended (the LP Law) has continued to be an attractive way for investors to structure their portfolios.
The appeal of establishing a new limited partnership in Jersey as a business or investment structure has steadily increased over many years since legislation was introduced in 1994 and there has been a rise of enquiries from unincorporated foreign law governed limited partnerships wishing to continue their partnership as a Jersey law governed partnership.
As a result, new regulations have this week been lodged with the Jersey States Assembly, designed to provide a clear statutory process to allow for the continuance of unincorporated foreign limited partnerships into Jersey. It is expected that the new regulations, will be debated by the Jersey States Assembly in mid-July 2020, and if approved will become effective the day after they are passed. The proposals are summarised below.
Draft Limited Partnerships (Continuance) (Jersey) Regulations 202-
The draft Limited Partnerships (Continuance) (Jersey) Regulations 202- (the Regulations) establish the process by which an unincorporated foreign limited partnership can be approved for continuance into Jersey and the effect of the continuance on its pre-existing state. Upon its continuance into Jersey, the unincorporated foreign limited partnership will continue as an unincorporated limited partnership governed by the LP Law.
The Regulations, set out the requirements pursuant to which a limited partnership may apply to the Jersey Financial Services Commission (the JFSC) to continue as a Jersey law governed limited partnership. To be eligible for continuance the foreign limited partnership must satisfy the following conditions:
- the foreign law under which it is currently established does not prohibit its continuance within Jersey;
- the limited partnership is solvent;
- the limited partnership is not in a state of being wound up or put into administration; and/or
- the limited partnership is not in the process of being deregistered other than in respect of its continuance to Jersey.
As part of the application, the general partner of the limited partnership will be required to make a declaration confirming that: it is solvent; the limited partnership will not have legal personality on its continuance; it has applied for registration under the LP law and for the consent of the JFSC under article 10 of the Control of Borrowing (Jersey) Order 1958. The JFSC will also require evidence that the application to continue has been approved by the general partner; and if the law of the jurisdiction under which the eligible foreign limited partnership is or was formed requires an authorisation to continue as a limited partnership within Jersey, that the limited partnership has obtained that authorisation.
Finally, the Regulations set out the effect of the continuance, namely that the foreign limited partnership will no longer be treated as being formed under the law of the foreign jurisdiction and all its existing assets and property which it held before continuance will be treated as property held by the limited partnership under the LP Law. The draft Regulations make it clear and explicit that the continuance will not create a new legal entity, affect any partnership interests, rights, powers, functions or obligations of its partners nor will it affect any acts or things done by the limited partnership before its continuance into Jersey.
Jersey law already contains provisions for incorporated foreign law companies to continue into Jersey, meaning general partners of unincorporated foreign law limited partnerships can already apply for continuance into Jersey notwithstanding the proposed Regulations.
If the continuing limited partnership operates as an investment fund, additional regulatory applications will need to be made and authorisations obtained before the continuance has effect. It is expected that many continuing limited partnerships will seek approval as Jersey Private Funds and further detail can be found here.
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.