New legislation will introduce more flexible regime for limited partnerships.

Legislation to maintain the United Kingdom’s competitive position in private investment funds has been laid before Parliament this month (January 2017).

The legislation follows the 2015 consultation on Partnership Legislation for Private Equity Funds, to which Morgan Lewis contributed. The government’s response to the consultation was published in the 2016 Budget.

When the legislation is enacted, the amendments will introduce a new “Private Fund Limited Partnership” (PFLP) category for private funds. The PFLP category will offer a more flexible regime for limited partnerships, the most commonly used structure for UK private equity and venture capital funds, and reduce administrative burden.

The draft Legislative Reform Order will now be considered by the Parliamentary Regulatory Reform Committee and the Delegated Powers and Regulatory Reform Committee.

Key Changes

Limited partners will no longer be required to contribute capital to partnerships; a range of permitted activities for limited partners (the “white list”) will be introduced; and some statutory administrative obligations will be abolished.

Only UK limited partnerships that meet the PFLP conditions—limited partnerships that are essentially fund vehicles and qualify as “Collective Investment Schemes” under the Financial Services and Markets Act—will be able to take advantage of the new regime.

Maintaining Competitiveness

Other jurisdictions in which such funds are typically domiciled, such as Luxembourg and the Channel Islands, either have or are introducing laws to ensure that private fund sponsors have the flexibility to structure funds in the most efficient way, and to avoid incurring unnecessary costs and administrative burdens.

Read more about the consultation process.