Welcome changes for Limited Partnerships

Following the government approval of proposed changes to the Limited Partnership Act 1907, a new form of limited partnership has been established: the private fund limited partnership (PFLP).

This new entity is aimed at private funds structured as limited partnerships that are not FCA authorised and will be mostly relevant to private equity and venture capital funds. A number of amendments have been made to the 1907 Act that apply to PFLPs and PFLP partners, with existing limited partnerships being able to convert to a PFLP if they meet the criteria.

PFLP criteria:

• a limited partnership (LP) constituted by an agreement in writing; and
• that is a collective investment scheme.

Amendments:

• the removal of the requirement for limited partners to contribute capital to a PFLP;
• amendments to the list of activities that a limited partner is able to undertake without being considered to be taking part in the management of the business and risking the status of the LP;
• revised definition of “collective investment scheme” allowing LPs which would meet the definition but for one exception to fall under PFLP scheme;
• disapplication of section 36(1) of the Partnership Act 1890, removing the requirement to file a Gazette notice when a limited partner assigns its interest and enabling limited partners to appoint a person to wind up a PFLP if there is no general partner to do so;
• amendments to facilitate the process of and reduce the administrative requirements in changing to a PFLP / applying to be designated as a PFLP;
• a set of revised forms to be used for applications and notifications to the registrar.

The objective is that the changes will make UK limited partnerships more competitive and the preferred vehicle of choice for private investors.