Limited Partnerships Reform
The Department for Business, Enterprise and Regulatory Reform (the DBERR) published its response to the comments on the Consultation Document relating to the proposed reform of limited partnerships law in March. The DBERR noted that despite the broad general support, the content of the responses indicated that they cannot proceed with the reforms by way of a legislative reform order (LRO) in its current form. This is because a LRO does not follow the same approval process as a Bill, which can be amended as it passes through Parliament. A LRO must be in final form when it is laid and therefore cannot be controversial. The DBERR have recently commented that the initial attempt to reform the law comprehensively in one LRO had been over-ambitious, but the DBERR felt that the was at least one significant, useful change for which there was a consensus that justified the current draft LRO. Since the end of April, the DBERR have continually revised the draft LRO to accommodate comments made by respondents to make the changes more helpful to limited partnership users.
On 1 June 2009, the Government laid the Legislative Reform (Limited Partnerships) Order 2009 in draft . If it comes into force, on 1 October 2009, it would clarify that limited partnerships registered after 1 October 2009 come into existence on the date of registration, and that the certificate issued by the registrar is conclusive evidence of its formation. It would also require all new limited partnerships to include at the end of their names an indication of their status (i.e. "limited partnership", "LP", "L.P."or a Welsh equivalent).
On 5 June 2009 DBERR became part of the Department of Business, Innovation and Skills (BIS) and it is anticipated that BIS will consult later this year on how best to structure the implementation of all of the reforms for which there is broad support. It is currently envisaged that there will be a "mechanical changes" LRO on processes such as dealing with Companies House, another LRO addressing "internal relations", such as clarifying permitted non-management activities for limited partners and addressing the current non-withdrawal of capital restrictions and at least one further LRO to "sweep up anything left over, and possibly consolidate the changes into a single document". In taking this approach, the DBERR is seeking to strike a balance between keeping each LRO "small and manageable" and keeping the overall number of LROs to a minimum so as to reduce the costs of adaptation and learning for firms and their advisers.
We have followed the progress of the reforms closely and have been involved with working parties responding to the DBERR's consultations and participating in discussions with the DBERR. Although it would have been preferable to introduce the proposed reforms in one single step, as was originally envisaged, it is thought that incremental implementation of helpful reforms will go some way to achieving the DBERR's objectives of modernising the law to ensure that English limited partnerships remain attractive in an increasingly competitive market and thus help to ensure that the UK continues to enjoy the economic benefit of being the location of choice for funds and related services.
For further information on the proposed limited partnership reforms, please contact Corinne Staves (corinne.staves@MTGLLP.com)
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