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Welcome to EQUITY ISSUES, a short note on a relevant issue in the private equity and venture capital industry.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.  

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Claire Cummings

020 7585 1406

claire.cummings@cummingslaw.com
www.cummingslaw.com


 

EQUITY ISSUES

BEIS consultation on reform of limited partnership law


BEIS recently published a consultation paper seeking views on proposals to reform the law of limited partnerships.  The consultation paper was published following a call for evidence by BEIS in January 2017.  The call for evidence was prompted by media reports alleging that some LPs registered in Scotland were being used as vehicles for criminal activity. The number of Scottish LPs had risen sharply since 2010, disproportionately so when compared to LPs registered in other parts of the UK.  It had been alleged that this may have been attributable to the fact that only Scottish LPs have separate legal personalities. BEIS sought respondents' views and evidence on the reasons behind this significant rise in the number of Scottish LPs and, among other things, the types of economic uses to which LPs are put and the legal characteristics of LPs that might act as enablers to criminal activity.  As a result of the responses to the call for evidence, BEIS published a consultation paper proposing reforms to the law of limited partnerships.

The proposals include:
  1. Requiring anyone presenting an application for an LP to provide evidence of supervision under money laundering regulations. If the presenter does not disclose the information, or it cannot be checked, the application would be refused. It is noted this would mean applications could not be made directly by individuals; instead a formation agent would have to be used to register a new partnership.  The government also seeks views on how the measure should be applied to registrations from overseas.
  2. (Requiring LPs to do business or maintain a service address in the UK. The first option would require a limited partnership’s principal place of business to remain in its jurisdiction of registration; that address could be used by competent authorities to communicate with the LP and serve proceedings; and all LPs would have to return an annual confirmation statement confirming or updating the principal place of business, accompanied by evidence of real commercial activity at that address. The alternative would allow a principal place of business to move outside the UK but introduce a requirement for a service address to be maintained within the jurisdiction of registration; that would be the address competent authorities could use for communication and service of proceedings; and all LPs would have to return a confirmation statement confirming or updating the service address and principal place of business.

  3. Requiring all LPs to file an annual confirmation statement confirming that the information on the register is correct. The government is also interested in views on whether there is a case for LPs to have to prepare accounts and reports in line with the requirements for private companies.

  4. Giving the Registrar powers to strike off LPs in the circumstances that mirror those in place for limited companies (voluntary strike off and non-operating strike off). Failure to deliver a confirmation statement may form the basis for the Registrar's belief that a limited partnership is not carrying on a business or in operation. The process would follow those already in place for companies. It also seeks views on the operational and legislative procedures that could be put in place to mitigate the risk of LPs being struck off in error.

The government states that the following measures will not form part of this consultation: increased regulation of formation agents; LP registration fees; and allowing LPs to be registered electronically.  Responses must be received by 23 July 2018.
 

This document is for general guidance only. It does not contain definitive advice.


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Cummings

Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327

Cummings Law
42 Brook Street
London Greater London W1K 5DB
United Kingdom

www.cummingslaw.com

14 12 2018

 
 

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