This week we examine final proposals to create a new designation of limited partnership for private investment funds, as well as the PLSA's new governance policy and voting guidelines. We also briefly look at the SFO's largest deferred prosecution agreement to date and the outcome of the Brexit case.


The court has approved a deferred prosecution agreement ("DPA") between Rolls-Royce plc and the Serious Fraud Office (the "SFO").

The DPA relates to proceedings brought against Rolls-Royce for offences spanning a period of 24 years, including failing to prevent bribery under section 7 of the Bribery Act 2010. It requires Rolls-Royce to disgorge profits of 258,170,000 and pay a financial penalty of 239,084,645.

Rolls-Royce must also pay costs incurred by the SFO totalling 12,960,754 and commit to a compliance programme for four to five years. If Rolls-Royce complies with that programme, the charges against it will be dropped.

This is only the third DPA to date under the Bribery Act, but it is by far the most significant. The total payment of around 510 million required by Rolls-Royce dwarfs the previous penalties imposed on Standard Bank ($31.5 million) and XYZ Ltd (6.5 million). This is after taking into account a 50 per cent discount on the financial penalty to reflect what the SFO called "extraordinary co-operation".

Our Litigation colleagues have produced a more detailed note on the case, which can be found here.


The Supreme Court has delivered its judgment in the case of Miller and another v Secretary of State for Exiting the European Union (the so-called "Brexit" case or "Article 50" case). The court held that the Government may not serve notice under Article 50 for the UK to leave the European Union unless it has first been authorised to do so by an Act of Parliament.

It also held that the Parliament is not required to seek consent from the Scottish Parliament, Northern Ireland Assembly or Welsh Assembly in order to serve that notice or pass that Act of Parliament.


The Treasury has published a revised legislative reform order to create a new class of limited partnership, known as a "private fund limited partnership" (or "PFLP"). PFLPs will be exempt from some of the more stringent rules governing limited partnerships ("LPs").

The purpose is to recognise that LPs are frequently used as fund, private equity and venture capital vehicles, but that issues arise over the potential liability of limited partners in those structures.

The order is in draft, but it is to be laid before Parliament and become effective on 6 April 2017.

What is a PFLP?

To qualify, the LP must have a written partnership agreement and be a collective investment scheme. It will be possible to establish a PFLP from scratch, but existing LPs may also redesignate themselves as PFLPs if they meet these conditions.

How this helps limited partners

Apart from administrative changes to filings and notices, the benefits of PFLPs will be as follows:

  • Capital contributions. Limited partners will not be required to contribute capital to a PFLP. This contrasts with "regular" LPs, where some contribution is required (even if only 1). This should not have a substantial impact in practice (limited partners typically make only a nominal capital contribution and advance further funds by way of loan), but it will remove an administrative hurdle.clearer linkage between executive pay and performance;
  • Decision-making. A key concern when setting up an LP is ensuring the limited partners do not take part in managing the LP's business, or they may lose their limitedliability status.

Limited partners in PFLPs, however, will be able to take part in certain decisions (the so-called "white list") without being regarded as taking part in the PFLP's management. These will include changes to the PFLP agreement or its business, extending the life of the PFLP, approving the PFLP's accounts and asset valuations, and deciding who will run the PFLP's day-to-day business.

Limited partners of PFLPs will also be allowed to consult with the general partner on the PFLP's affairs, to be an employee, director or shareholder of the general partner, and to appoint representatives to a limited partner committee.

The "white list" addresses many of the problem areas that are frequently cited as potential causes for concern for limited partners. In particular, it effectively endorses the current practice of forming limited partner committees to consult with and provide their views to the general partner.

  • Other duties, such as rendering accounts and not competing with the LP, will not apply to limited partners in PFLPs. The duties are normally excluded by the LP agreement anyway, and PFLP agreements may continue to do this, but it is helpful that any doubt on this will be removed.

Other potential changes

Other changes to limited partnership law generally have been mooted, but mostly it is not possible or appropriate to do this through a legislative reform order. These include giving LPs separate legal personality and introducing a formal strike-off procedure for LPs.

However, the Department for Business, Energy and Industrial Strategy ("BEIS") has recently published a call for evidence on reforms to limited partnership law. Although driven primarily by media reports that some Scottish LPs are being used to hide criminal activity, the call for evidence explores other potential proposals applicable to all LPs (including PFLPs). These include requiring LPs to render accounts, allowing LPs to be struck off the public register when they come to an end, and restricting LPs from having their principal place of business outside the UK.

Practical implications

We will have to see what proposals the BEIS call for evidence ultimately throws up.

However, the PFLP regime contained in the draft order brings welcome clarity for institutional investors and fund managers who prefer LPs for their fund/investment vehicles.

In particular, by blessing limited partner committees and allowing limited partners to take part in certain decisions, the changes will allow institutional investors to voice their concerns and opinions more freely, without fear of exposure to third parties.


The Pensions and Lifetime Savings Association (formerly NAPF) has issued an updated version of its Corporate Governance Policy and Voting Guidelines for 2017. There are various changes to the previous version (published in 2015). The key changes are as follows.

The board

There is added emphasis on the need for directors to consider stakeholders other than shareholders, such as workers, customers, suppliers, society and the environment.

Shareholders are encouraged to vote against the chair or (if different) the chair of the nomination committee if there is no evidence the board is considering its own diversity sufficiently. This might happen where there is a failure to move towards the Davies Report target of 33 per cent of women on the board, or a failure to move towards a board that is not "all white".


The Guidelines exhort companies to provide more detail in their annual report about their workforce and its importance to the company's long-term success. Shareholders may vote against an annual report if it does not contain the recommended level of disclosure.

Executive remuneration

The PSLA believes the evidence suggesting pay incentives are necessary to motivate or reward executives and achieve success is "questionable". It encourages remuneration committees to take a critical approach to pay increases and exert downward pressure on executive pay.

It also encourages shareholders to vote against a remuneration policy if it fails to meet the PLSA's principles or could result in awards that bring the company into public disrepute. They should normally also vote against the remuneration committee chair, if he/she has been in post for more than one year.

If any revised policy still fails to meet PLSA principles, the Guidelines suggest that shareholders vote against the chair of the board.

The Guidelines set out additional circumstances where voting against the remuneration policy may be warranted. They include:

  • where pension payments exceed 50 per cent of annual salary;
  • a failure to disclose variable pay performance conditionsfor annual bonuses;
  • and excessively generous salary or performance-related pay awards. 

Finally, the PLSA recommends that, if shareholders are unable to support a company's annual remuneration report, they should vote against it on the non-binding vote, rather than abstain.