UK government provides feedback on plans to reform its limited partnership law

On 10 December 2018, the UK Government’s Department for Business, Energy & Industrial Strategy (BEIS) published a feedback document, “Limited Partnerships: Reform of Limited Partnership Law. The Government response to the consultation” (the Response), setting out the policy decisions it has taken following its April 2018 consultation paper in which it proposed certain reforms to the law on limited partnerships (LPs).


In April 2018, the UK Government’s Department for Business, Energy & Industrial Strategy (BEIS) published a consultation paper proposing reforms to the law on limited partnerships (LPs).

The driver behind the consultation was evidence, according to BEIS, of misuse of LPs (especially Scottish LPs) and prominent examples featuring in international money laundering schemes.

BEIS sought respondents’ views on a number of proposals to reform LP law (entailing “the lifecycle of a limited partnership - from creation by registration through to dissolution”) in order both to (a) limit the risk of misuse and (b) align limited partnership law more closely with that governing limited companies.

The consultation period closed in July and, on 10 December 2018, BEIS published its feedback document, “Limited Partnerships: Reform of Limited Partnership Law. The Government response to the consultation” (the Response), setting out the themes arising from the responses received and the decisions it has taken in light of these.

What did the consultation propose and what has the Government decided?

Proposals included in the consultation centred around four key areas

  • Reform of registration requirements
  • The LP’s Principal place of business
  • Reporting and transparency requirements and
  • Strike off provisions

Looking at each in turn

Reform of registration requirements

The vast majority of LPs are established using formation agents. In its consultation paper, BEIS proposed that such agents seeking to register a limited partnership must be (and must submit evidence to prove that they are) registered with an anti-money laundering supervisory body.

In the Response, BEIS confirmed that the government

  • intends to make it mandatory for presenters of new applications for registration of LPs to demonstrate that they are registered with an AML supervisory body, and to provide evidence of this on the application form
  • will seek to ensure that applications from overseas will be subject to equivalent standards and is considering options for achieving this, and
  • accepts that this may increase administration and fees for registrations but expects those increases to be minimal and considers the change to be e a proportionate measure to increase transparency and accountability of presenters who are required to conduct money laundering checks on their customers.
Principal place of business

LPs must register a ‘principal place of business’ (PPoB) and inform the Registrar if that changes. Evidence suggested to BEIS that some LPs may not be complying with this requirement and it noted, in addition, that nothing requires the partnership to maintain a connection with the UK.

The consultation sought views on two alternative measures

  • to require an LP’s PPoB to remain in the UK, and for that to be evidenced on a routine basis, or
  • to allow its PPoB to be moved outside the UK subject to a service address being maintained within the UK

Following feedback, BEIS:

  • accepts that the ability to move a LP’s PPoB outside of the UK is an attractive feature of the LP model for some investors - especially those part of global structures
  • also accepts that making it mandatory for the PPoB to remain in the UK would limit the flexibility of the model and might discourage some legitimate investors from using it
  • believes, though, that it is vital for LPs registered in the UK under this country’s legal framework to maintain some demonstrable link to the UK
  • intends to request information about a LP’s connection to the UK
    • when it applies for registration (at which time, it must provide a proposed PBoB in the UK), and
    • on an ongoing basis
  • intends to allow an LP a choice as to how it proves such a demonstrable link (and so remains eligible as an LP), by either
    • retaining its PPoB in the UK
    • demonstrating that it is continuing some legitimate business activity at an address in the UK, or
    • demonstrating that it continues to engage the services of an agent that is registered with a UK AML supervisory body and which has agreed to provide its address as a service address for the LP
  • will consider what evidence will be needed to demonstrate each of these three criteria
  • will require an LP which does not retain its PPOB in the UK to notify the Registrar of any change in its PPOB and of any change in the way that it demonstrates its ongoing connection to the UK, and
  • will consider how these provisions would apply to existing LPs (including the possibility of transitional arrangements).
Reporting and transparency requirements

The LP Act 1907 sets out no regular reporting requirements. As these now exist for limited companies, there could be a risk that LPs “create a weak point in the broader framework” - the BEIS consultation sought views on whether to require regular reporting of all LPs registered in the UK along the lines of reports submitted by limited companies.

In the Response, BEIS notes that it

  • does not consider the case has been made for all LPs to prepare accounts and reports in line with limited companies but, where there are any gaps in the requirements for partnerships to file basic accounts with the UK government, it will close these gaps “in a way that is not burdensome or duplicative”
  • intends to introduce a requirement for all UK LPs to file a confirmation statement at least every 12 months (as this already mandatory for Scottish LPs, such a change would only impact LPs in in England and Wales, and Northern Ireland)
  • considers that the information currently required of LPs on applications for registration should be expanded and be confirmed by the confirmation statement
  • intends to require applications for registration to include the following additional information
    • 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 Standard Industrial Classification code, identifying the nature of the LP’s business

  • intends to introduce a transitional period and mechanism to enable all existing UK LPs to submit the additional information and capture information where changes have occurred that have not been registered, and
  • will undertake further work to explore whether to require beneficial ownership information from corporate partners that do not already hold a PSC register, taking into account “the value to law enforcement of this information; their relevance to the UK’s compliance with international standards; the existing reporting requirements of these entities; and the potential burden of introducing these reporting requirements”
Strike off provisions

At present, the Registrar has no powers to strike off the name of an LP from the register - when an LP is voluntarily dissolved, there is no mechanism for the partners to apply for it to be struck off, nor does the Registrar have the opportunity to make enquiries whether the LP is still operating and, if not, to begin the process of striking it off the register.

The consultation proposed to give the Registrar powers to strike off an LP in certain situations and BEIS has confirmed that it

  • intends to grant the Registrar the power to strike off LPs that are dissolved or which the Registrar concludes are not carrying on business or in operation
  • intends to make these new powers subject to following a robust notification procedure. This procedure will be “at least as strong” as that in place for striking off companies. (Before a limited company can be struck off the Register, the Registrar must write two letters to the company. A notice is then placed in the Gazette, stating the intention to strike the company off the register unless reason not to do is shown within two months.)
  • will continue discussing with stakeholders how to design a process that ensures, as far as is possible, that all general and limited partners are given due notice that an LP is being considered for strike off
  • recognises that particular safeguards will be needed in applying this to historic LPs that were registered many years ago, and
  • will consider the circumstances when it would be appropriate to restore a LP, and an appropriate procedure for the restoration of a LP that has been struck off.

What happens next?

No specific changes are anticipated in the immediate future but the UK government will now “develop legislation to give effect to its proposals” and intends to legislate “when Parliamentary time allows”.

There are also a number of areas (noted above) where BEIS has committed to undertaking further work, often in association with industry, in order to determine exactly how some of the intended provisions would work in practice.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.