New legislation now in force has introduced for the first time a “Private Fund Limited Partnership”, or PFLP, as a new form of limited partnership. Our solicitor Edward Garston explains more.
Primarily of interest to private investment funds (i.e. funds not authorised for promotion to retail customers), such as private equity funds and venture capital, the Legislative Reform (Private Fund Limited Partnerships) Order 2017 came into force on 6 April 2017.
The purpose of the legislation is to reduce the administrative and financial costs associated with the current limited partnership structure. Such partnerships are largely governed by the Partnerships Act 1890 and the Limited Partnerships Act 1907, which were originally designed to meet the requirements of a business structured as a partnership. Despite minor amendments, these statutes have been unable to fully meet the requirements of modern and frequently international investment activities undertaken by limited partnerships.
In fact, the international investment angle helped drive the legislation, and given that some overseas jurisdictions have adopted similar changes or are in the process of doing so, there was concern that the UK risked losing out.
The new rules provide that a PFLP’s limited partners will be able to take a number of specific actions without being regarded as taking part in the PFLP’s management. In turn, this will clarify situations where a limited partner might lose its limited liability status.
The legislation also removes the requirement for limited partners to contribute capital to the PFLP.
Despite the changes, Limited Partnerships will remain a specialist vehicle. Most recent figures available from Companies House show that there are fewer than 40,000 registered limited partnerships representing just 1% of all registered corporate bodies.
If you’d like to understand more about this new form of limited partnership, please contact Edward Garston, a Senior Associate in the Company Commercial Department. Call on 01708 229444 or email firstname.lastname@example.org. This article was written by Edward Garston, a company commercial solicitor at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of April 2017.