Changes to UK Limited Partnership law: Economic Crime & Corporate Treasury Bill

Issue

Requirements under the Bill

Steps

Commentary

1.

Registered office for UK limited partnerships

The registered office of a UK limited partnership must be in its jurisdiction of registration and must be at an appropriate address at all times.

An appropriate address is specified as being:

1. the address of the principal place of business of the limited partnership;
2. the usual residential address of a general partner who is an individual;
3. the address of the registered or principal office of a general partner that is a legal entity; and/or
4. an address of an authorised corporate service provider (ACSP) that is acting for the limited partnership.

This is likely to have the greatest impact for UK limited partnerships that have a principal place of business outside the UK.

At present, a UK limited partnership can migrate its principal place of business to a non-UK jurisdiction without having to maintain a particular nexus with the UK.

Under the proposals set out in the Bill, a UK limited partnership must maintain a registered office in the UK at all times.

From a UK regulatory perspective, a UK limited partnership with a non-UK principal place of business is likely to be classified as a non-UK AIFM.

By requiring UK limited partnerships to have a registered office in the UK, it is likely that this will result in the partnership being re-classified as a UK AIF. Depending on the AIFM that is appointed, this could have significant regulatory consequences.

The Registrar will also have the power to change the registered office of a UK limited partnership if it is satisfied that the specified address is not an appropriate address within the meaning of the Bill.

2.

Registered officers for general partners

A general partner, which is a corporate vehicle or LLP, must have at least one individual appointed as a registered officer whom the Registrar can contact.

This requirement applies equally to any subsequent or replacement general partners that are appointed after the date of registration.

The Bill also introduces a requirement for confirmation on registration of a UK limited partnership that the proposed registered officers of the general partner are not disqualified under the director’s disqualification legislation.

There is a duty to maintain a register of registered officer and named contacts.

General partners which are corporates or LLPs will need to ensure that they have at least one individual officer appointed.

In applying a new requirement that no individuals that have been disqualified under the director’s disqualification legislation may be permitted to act as general partner of a UK limited partnership, the Bill is aiming to align UK limited partnerships with the corporate governance protections that are in place for UK companies.

In practice, this is unlikely to be onerous, but may require general partners structured as LLPs to appoint an individual as a member, consultant or employee.

3.

Information about partners

General partners must submit specified information about each partner and notify the Registrar of changes to those partners.

If a general partner fails to notify the Registrar of notifiable changes to partners within 14 days of the change occurring, the partnership will have committed an offence and be liable to summary conviction for which the penalty is a fine.

Such information includes (for any partner who is an individual) their name, date of birth, nationality, any former names and residential address.

In relation to general partners, a service address will also need to be provided.

Filings are required to be made by an ACSP and therefore general partners will need to ensure that they build in time to appoint an appropriate ACSP who will verify the information and file with the Registrar.

This is likely to be onerous, costly and potentially problematic for general partners, particularly in relation to limited partners who are individuals. Much like the PSC regime, general partners will be reliant upon partners promptly informing the general partner of any changes to their information.

4.

Annual confirmation

UK limited partnerships will have to file an annual confirmation statement to Companies House, within 14 days of each review period, to confirm that all information on the register is correct and deliver any necessary updates.

For existing UK limited partnerships, the first review period is between registration and the end of the six-month transition period.

For new UK limited partnerships, the first review period is 12 months from the date of registration.

Then each subsequent 12-month period (which can be shortened on notice to the registrar from the general partner).

The annual confirmation does not replace the current ad hoc Form LP6 filing requirements for notice of changes.

This, therefore, introduces an additional (albeit minimal) layer of administration and brings UK limited partnerships in line with the approach adopted for UK companies.

5.

Delivery of documents

All registration applications as well as confirmation statements and notices of change must be presented by a registered ACSP.

The ACSP needs to be an entity supervised under UK AML rules.

UK limited partnerships will need to reach out to ACSPs in order to register and provide annual confirmation statements to the Registrar.

This means applications that are not made by FCA regulated investment firms themselves will have to be made by company service providers or other advisers that are appropriately supervised and offer this service.

It remains to be determined whether a FCA regulated investment firm which acts as the manager of UK limited partnership would be permitted to deliver such documents. 

6.

HMRC power to obtain partnership accounts

HMRC has the power to obtain UK limited partnership accounts on written notice.

It is yet to be confirmed whether UK limited partnerships will need to provide the accounts in a particular form.

For UK limited partnerships that are already required to provide accounts under law or regulation, it would be helpful to receive confirmation that the accounts can be provided in their existing format to avoid UK limited partnerships having to change the format that they are currently using or having to prepare separate accounts solely for these purposes.

7.

Dissolution and winding up of limited partnership

The Bill makes it clear that a limited partnership is dissolved if it ceases to have a general partner or ceases to have any limited partners.

If the limited partnership is dissolved at a time when the limited partnership has at least one general partner, the general partner must notify the Registrar that the firm has been dissolved and they must wind it up.

Where the limited partnership has no general partner, the limited partners are required to notify the Registrar that the limited partnership has dissolved and the affairs of the partnership must be wound up by a person who is appointed by the limited partners.

These rules have been proposed to help ensure that the register of limited partners is a more accurate record of limited partnership that are inactive rather than dissolved. Whilst this change is welcome, it will be interesting to see how this will work in practice.

Any limited partner that engages in “management activity” risks losing its limited liability status, and therefore the amendments helpfully clarify that appointing a person to wind up the limited partnership is not considered to be “management activity” and therefore can be done be done by a limited partner.