Gateley Holdings Plc: New status for private investment funds

The law relating to limited partnerships has remained almost unchanged for over 100 years since the Limited Partnerships Act 1907 first entered the statute books. But that has now changed as the old Act has been updated to cater for a new category of ‘private fund limited partnerships’ or PFLPs.

Why now?

Over recent decades, the English limited partnership has become the preferred structure for large private investment funds. A driving factor in this is their ability to offer their investors the protection of limited liability in return for no involvement in the management of the limited partnership’s business.

Whilst they remain a popular vehicle, some of the quirks of English limited partnerships have caused issues and these, linked with the associated administrative and financial burdens, have led to investment funds seeking alternative solutions, including the use of offshore vehicles. The introduction of the PFLP aims to remove these burdens and attract investment funds back to the UK.

What is a PFLP?

A PFLP is a sub-category of limited partnership and refers to a limited partnership that has been registered or designated as a PFLP.

For a limited partnership to be designated as a PFLP it must be:

  • constituted by a written agreement; and
  • a collective investment scheme as defined by statute – that is, a vehicle in which profits or income is shared through collective investment and in which the participants have no day-to-day control over the management of the property.

In practice, most UK private investment funds structured as limited partnerships should satisfy these conditions.

The Government has pulled back from its original suggestion of requiring these conditions to be confirmed by a solicitor which would have unnecessarily added to the cost and complexity of registering a PFLP. Instead, the conditions simply have to be confirmed by the general partner on registration of the PFLP.

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