In June 2016, the UK HM Treasury concluded the consultations on the proposal to change the limited partnership legislation for private investment funds. The new regime is fully operational and ready to be applied.
The intention of the changes was to amend the Limited Partnership Act 1907 (the “1907Act”) and to facilitate and streamline the approach of current legislation to private funds, and to transform the limited partnership into more appealing structure for asset managers.
Private Fund Limited Partnership “PFLP”
Therefore, the HM Treasury introduced the Private Fund Limited Partnership, with its acronym “PFLP” whose main features are summarized below:
- Only Collective Investments Scheme constituted by a written agreement can benefit from the new regime
- It is an elective status, whereby the managers can decide to transform their structure into this new one at any time, but is shall not be
- Investors are not taking part in the management of the PFLP, with the knowledge and the awareness of a “White List of permitted activities not considered to be “taking part in management”
- Capital Contributions – the members will not be forced to register any of those, but if they do make some capital contribution, these might be withdrawn from the PFLP without the obligation to publicize.
- There is no need of register the general nature of the PFLP
- No need of court order to wind up a PFLP where the general partner has been removed,
- Limited partners can appoint a third party to effectuate the procedure of winding up
- Gazette Notices – there is no obligation to publish any notice on the transfers of interests by limited partners, however, a notice would be necessary when a general partner becomes a limited partner (this notice will not determine effective date of chance).
“White List”
The most important prerequisite, for the Limited Partners in the PFLP, is to avoid to carry out activities that would involve their taking part in the management of the business. For this reason, a special “White List” was prepared to allow the explication of the limited partner’s role: the limited partner shall guide and monitor performance, advise the general partner and have his consent sought to actions taken by the general partner, but not to act on behalf of the partnership.
The “White List” includes some of the following activities:
- taking part in decisions to vary or waive the terms of the partnership agreement, to change the general nature of the partnership, to extend its term or to admit or remove partners;
- appointing a person to wind up the partnership;
- enforcing entitlements under the partnership agreement (provided that this does not extend to taking part in management of the partnership’s business);
- entering into, or acting under, a contract with the other partners (provided that this does not extend to taking part in management of the partnership’s business);
- providing surety or acting as guarantor for the partnership;
- approving the partnership accounts or valuations of its assets;
- consulting with or advising a general partner or partnership manager or adviser about the partnership’s affairs or accounts;
- taking part in decisions about changes to persons responsible for the day-to-day management of the partnership;
- acting, or authorising a person to act, as a director, member, employee, officer or agent of, or a shareholder or partner in, a general partner of, or a manager or adviser to, the partnership (provided that this does not extend to taking part in management of the partnership’s business);
- appointing or nominating a person to represent the limited partner on a committee of the partnership (such as an advisory committee), and authorizing that person to take any action in that capacity (provided that this does not extend to taking part in management of the partnership’s business);
- taking part in a decision approving or authorizing an action proposed to be taken by a general partner or manager of the partnership, such as the disposal of all or part of the partnership’s business; the acquisition of a business; the acquisition or disposal of a type of investment or particular investment (this would not include the selection process for investments) ; the participation of a limited partner in a particular investment (such as through co-investment rights) or the incurring, extension, variation or discharge of partnership debts.
This new regime represents a modernization of some law aspects applying to Limited Partnerships, and shall bring a higher degree of certainty and “freedom” inside the hoary boundaries of bureaucracy without any prejudice of the limited liability status for partners.
*source: Lexology, UK HM Treasury
