The Department for Business, Energy & Industrial Strategy (BEIS) has recently closed its consultation on the reform of limited partnership law. The current consultation follows on from BEIS's earlier Call for Evidence and includes a series of proposals for reforming limited partnerships.
One of the main focuses of the proposals is that BEIS are looking to improve the transparency and integrity of the legal framework surrounding Scottish Limited Partnerships.
Stephen Chan, Partner at Harper Macleod, met with BEIS in Edinburgh to discuss its consultation as the firm has been active in the consultation exercise with BEIS and this article provides some analysis of the measures being proposed.
Some of the proposals being put forward by BEIS include:
- The requirement for presenters of the registration form to be registered with an anti-money laundering (AML) supervisory body.
This was a proposal that we are wholly in favour of. While it may add an additional level of regulation for the registration of a Scottish Limited Partnership, it would dissuade registration by individuals who do not understand a Scottish Law Partnership or, even worse, who wish to use it for illegal means. Our proposal to BEIS goes even further to suggest that there would be a requirement for the presenter to insert its AML registration number (e.g. for a law firm this would be its registration with its Law Society).
- A requirement for a limited partnership to have a principal place of business in the UK or alternatively to allow the principal place of business to be based anywhere but require a UK-based service address.
Our comment on this is that as the Scottish Limited Partnership is frequently used for a UK fund structure which in turn can be used to invest in assets abroad, it may not be achievable for a Scottish Limited Partnership to have a principal place of business in the UK. Our proposal to BEIS was that we are in favour of the Scottish Limited Partnership having a service address in Scotland. We also intimated to BEIS that it is highly desirable for a Scottish Limited Partnership to have a Scottish-based service address (as opposed to a UK-based service address) in order for it to have the benefit of separate legal personality.
- The requirement to file an annual confirmation statement.
The information as to the identity of the general partner and limited partners can already be ascertained through the form LP5 and subsequent forms LP6. There is also now the requirement to lodge a form detailing the person with significant control (PSC). Therefore Companies House would have all the relevant information on the partners. However we commented that it may be sensible to have an annual confirmation statement to pull together all this information in one annual filing form.
- A proposal to give Companies House the power to strike off partnerships from the Register of Limited Partnership.
We are in favour of Companies House being given the power to strike off limited partnerships where the requirement for the presenter to be registered with an AML supervisory body has not been satisfied. However we cautioned BEIS on the use of this power for limited partnerships already on the Register. As a matter of partnership law, if a limited partnership has been struck off the Register then it would convert to a partnership under the 1890 Act. In such circumstances the limited partner will become an ordinary partner with the consequence that it loses its limited liability status.
We also raised the unfairness that if Companies House was to be given the power to strike off arising from non-filing of documents or non-response to correspondence from Companies House, it is only the general partner which can deal with this and if the general partner fails to do so, then it is the limited partners which are penalised.The next stage of the consultation is that a response would be published by BEIS in the autumn with new legislation possibly enacted in May/June 2019.
For any queries on this, please contact Stephen Chan.