The response is a constructive steer, and very much welcome as it recognises the need to maintain the UKLP as an attractive vehicle for both domestic and overseas investment, although the full picture will not emerge until legislation is produced. We also await further details in some areas – for instance, on UKLP striking-off procedures and transitional provisions. Timing on these developments is to be confirmed, stated to follow “when Parliamentary time allows.”
Importantly, the Government agrees with many of its stakeholders and respondents to the Consultation, that there is a continuing need to offer UKLPs for business purposes, including the Scottish LP (as the UKLP with legal personality, reportedly an attractive option for illicit activity). The proposals are designed to limit the potential misuse of UKLPs for criminal activity, whilst ensuring that they remain attractive for legitimate investment and business purposes.
We have set out below the main elements of the BEIS proposals along with some of our thoughts. You can read our earlier briefing, which sets out the background to the Consultation and our comments on the original proposals.
A requirement for UKLPs to maintain a UK connection
The Government intends to retain the ability for a UKLP’s place of business to be relocated outside the UK after initial registration without affecting its registration status. This will be well-received by the investment management industry, as it allows continued flexibility in geographical location as well as, for instance, determination of whether a fund is an EEA or a non-EEA AIF for AIFMD purposes.
However, the ‘quid pro quo’ of this optionality will be a new mandatory requirement for UKLPs to retain a demonstrable link with the UK, either by (i) retaining a UK principal place of business (PPoB); (ii) carrying on of a legitimate business activity in the UK; or (iii) having a UK service address with a UK service agent (that is subject to UK AML supervision).
A UKLP will have to inform Companies House of any changes in its PPoB (if it’s non-UK) and in its UK connection. We await further details in terms of how these requirements are to be evidenced, as well as details of transitional provisions for existing UKLPs.
Extension of reporting requirements
The Government has concluded that all UKLPs will have to provide an annual confirmation statement to Companies House, to confirm that all of the information on the register is correct. This is one of the compliance requirements of the UK’s public register of persons with significant control (PSC), which was extended to Scottish limited partnerships in June 2017. English and Northern Irish LPs will therefore also have this additional annual filing requirement going forward, albeit no more than confirming that all required registration information has been provided.
Although the upshot of the Consultation is that the Government will not require all UKLPs to publish their accounts on a public register, the Government will be looking to “close any gaps in the requirements for partnerships to file basic accounts”. It seems that the Government is not seeking to put the UK as an outlier with its competitor jurisdictions in this regard, but again, we await some more information to understand the actual impact.
In addition to providing evidence of the partnership’s UK connection, UKLPs will have to provide some additional information to the Registrar, on registration and as part of the annual confirmation statement, as follows:
- contact information for all limited and general partners;
- the date of birth and nationality of all limited and general partners that are natural persons; and
- a SIC (standard industrial classification) code, identifying the nature of the UKLP’s business.
We would expect this proposal to have minimal impact on the investment management industry, where this information can be readily produced. Existing UKLPs will be given a grace period to provide the additional information/any changes where these are not already registered – another area where the detail is to follow.
A final (and new) point is that the Government will also be looking into whether or not corporate limited partners not already subject to a PSC register should have to provide beneficial ownership information. Alongside value to law enforcement, existing reporting requirements for corporates and the UK’s compliance with international standards, the potential burden of this additional requirement will be taken into account.
Striking off UKLPs from the Companies House register
The response document re-affirms the Government’s intention, which as a concept has always been met with broad approval, to allow the Registrar to remove defunct UKLPs from the register. It also acknowledges some of the problematic issues around past striking-off proposals (for instance, a risk of limited partners inadvertently incurring unlimited liability on removal of a UKLP from the register and around the consequences of a UKLP being removed from the register without the knowledge of the partners). A ‘robust notification procedure’, similar to that in place for UK companies, seems a likely mechanism for UKLPs that are dissolved or no longer carrying on business, with operational safeguards in place and an appropriate restoration procedure. However, the exact details of the procedures are still being developed (we assume for both voluntary application, as well as removal by the Registrar).
UKLP registration applications only submitted by those registered with an AML supervisory body
UKLP registration applications will only be able to proceed when the presenter provides evidence of its AML supervision. Overseas applicants can continue to register UKLPs, provided they are subject to equivalent AML standards. In some cases, individuals or corporates who are not supervised by a regulatory body may not be able to submit direct applications. Although we expect this to apply in a minority of cases, it will cause administrative inconvenience: for example, an in-house lawyer in a firm that is not FCA-authorised can no longer make UKLP filings, whereas any person can freely register limited companies. We raised this in our joint response to the Consultation, but note that the Government view this as a proportionate measure which may help prevent the establishment of UKLPs with illicit intentions.
Please feel free to call any of the BCLP Investment Management team or your usual BCLP contact if you would like to discuss any of the issues raised in this briefing in more detail, including how they may apply to your specific fund structures and planning.