The last few years have seen a crackdown by the UK Government to tackle the abuse of companies and partnerships as a means to hide crimes, money laundering and tax evasion.Limited Partnerships are a type of hybrid business which have at least one general partner who has unlimited liability and a number of limited partners who do not usually get act...
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.