MINISTER FOR ECONOMIC DEVELOPMENT
LIMITED LIABILITY PARTNERSHIPS CONSULTATION PAPER
- THE ISSUE AND RECOMMENDATION
- The Limited Liability Partnerships (Jersey) Law 1997 (“the Law”) introduced into Jersey law an entity known as a Limited Liability Partnership (“LLP”). An LLP is a partnership, governed by its partnership agreement, but sharing certain features with a company, notably legal personality and limited liability.
- In 1997 this was a relatively innovative vehicle internationally. Since then LLPs have been introduced in a number of other jurisdictions. It is therefore now appropriate to review the Law in the light of international developments so as to ensure that Jersey has a competitive LLP offering.
- In accordance with States policy, a consultation paper has been prepared so that all interested parties will have an opportunity to contribute to this review.
- It is recommended that the Minister approve the consultation paper and that the paper should be issued.
- THE CONSULTATION PAPER
- After an introduction setting out the background and advantages of the LLP structure, the consultation paper sets LLPs in their Jersey context by comparing them with other Jersey legal entities.
- The paper then sets out a number of potential changes to the Law. These relate to the application of customary law, the legal status of LLPs, the formalities for the creation of an LLP, the £5 million bond requirement, disclosure and accounting requirements, tax treatment, insolvency treatment and the migration of LLPs. Other suggestions are also invited. The paper does not attempt to prejudge any of these issues, but invites respondents to give their views.
- Finally, the question is posed as to whether any changes should take the form of an amendment to the existing Law or whether it would be preferable to replace the Law with a new law.
- RECOMMENDATION
- It is recommended that the Minister approve the consultation paper and that the paper should be issued.
JAMES MEWS
Finance Industry Development Executive
21 April 2008
-
Economic Development Department
Green Paper
PURPOSE OF CONSULTATION To invite comments on whether the Limited Liability Partnerships (Jersey) Law 1997 should be revised
DEADLINE FOR RESPONSES 11 July 2008
SUMMARY / QUESTIONS TO CONSIDER
The aim of this Consultation is to consider whether the Limited Liability Partnerships (Jersey) Law 1997 (“the 1997 Law”) should be amended or replaced by a new law in order to make the product as competitive as possible and useful as a vehicle of choice for local and international businesses.
Limited Liability Partnerships (“LLPs”) are partnerships governed by the terms of their partnership agreements but having some features of companies, notably a separate legal personality and limited liability. This gives them a flexible structure which can be used for a variety of purposes: for instance, by professionals, by small businesses and in financial services. They were a relative innovation when introduced in Jersey in 1997. Since that date, various overseas jurisdictions have introduced their own LLP laws. It now seems appropriate to review the Jersey LLP structure to ensure it remains up-to-date and competitive.
Eight possible areas of reform are identified in this paper. These eight areas are: the application of customary law; the legal status of Limited Liability Partnerships; the creation of LLPs; the £5 million bond; disclosure and accounting requirements; tax treatment of LLPs; insolvency treatment of LLPs; and migration and conversion of LLPs. Respondents are invited to comment on whether and what changes should be made in each of these areas, together with any other changes which may be desirable.
SEND COMMENTS TO
James Mews Director Finance Industry Development Chief Minister’s Department 5th Floor Cyril Le Marquand House The Parade St Helier JE4 8QT Telephone: 01534 440444 Facsimile: 01534 440408 e-mail: j.mews@gov.je | Robert Kirkby at Jersey Finance Limited is co-ordinating an industry response that will incorporate any matters raised by local firms or entities. His contact details are: Robert Kirkby Jersey Finance Limited 27 Hill Street St Helier Jersey JE2 4UA Telephone: 01534 836004 Facsimile: 01534 836001 e-mail: Robert.Kirkby@jerseyfinance.je It is the policy of Jersey Finance to make individual responses it receives available to the Economic Development Department upon request, unless a respondent specifically requests otherwise. |
This consultation paper has been sent to the following individuals / organisations:
The Public Consultation Register
1. Introduction
The Limited Liability Partnerships (Jersey) Law 1997 (“the 1997 Law”) introduced a new Jersey legal entity, the Limited Liability Partnership (“LLP”). This aimed to give local and international businesses a further choice when selecting the structure which best suited their needs.
The LLP structure has many advantages. LLPs are legal persons distinct from their members. This means LLPs, in their own names, can enter into contracts, own property, sue and be sued.
There is enormous flexibility in the structure of an LLP. Unlike a company, where many matters are laid down by statute, the constitution and governance of an LLP are set out in the partnership agreement. This flexibility means that the LLP partners are free to choose the structure which works best for them.
A key feature of LLPs is that the partners’ liability is limited. The limitation of liability is attractive to professionals, who commonly work in partnerships, because it protects them from potentially unlimited (and uninsurable) liabilities for the negligence of their fellow partners. This protection in turn can aid the recruitment of high calibre individuals.
By converting to an LLP, existing partnerships are able to gain the advantage of limited liability without incurring the costs and inconvenience of restructuring as a company and without any adverse tax consequences. In some cases, as with solicitors, restructuring as a company is not available as regulatory requirements prevent incorporation.
As well as being used by professionals in this way it is also understood that a number of financial services businesses have established themselves as LLPs because of the advantages of the flexibility of the LLP model. Furthermore, it is understood that LLPs are sometimes used for a variety of land transactions, both for investment and trading purposes.
When LLPs were introduced in Jersey in 1997 they were a relatively new concept although they existed in many US states. After their introduction in Jersey, LLP laws were adopted in many other jurisdictions including the UK, Japan, Singapore, Dubai and Qatar. It is understood that an Indian LLP Bill is currently under consideration.
In the UK, where LLPs have existed since 2001, the structure has been widely adopted by UK businesses and there are now around 26,700 LLPs. However uptake appears to have be lower in other jurisdictions: e.g. there are only 10 LLPs incorporated in Dubai, albeit that the Dubai law has been in place for a shorter time (since 2004).
Despite the widespread use of the LLP elsewhere, particularly in the UK, none have been established in Jersey under the 1997 Law. It is understood that there are 3 reasons for this:
- A Jersey LLP is required to provide financial security amounting to £5 million. This provision is understood to have deterred smaller partnerships from incorporating as Jersey LLPs.
- In 1997, the UK Department of Trade and Industry announced that it would promote UK LLP legislation under which the LLP would not be required to provide financial security. This took the form of the Limited Liability Partnership Act 2000 (“the UK Act”) which came into force in 2001.
- In March 1997 the UK Board of Inland Revenue announced that it would not recognise Jersey LLPs as partnerships for tax purposes. Instead it would treat them as bodies corporate. This made the Jersey LLP offering unattractive to a number of large UK firms who had previously expressed an interest.
Comments are invited as to whether there are any other reasons why businesses have not registered as Jersey LLPs.
Comments are invited as to why the UK Act has seen a significantly higher number of LLPs registered than the 1997 Law.
Comments are invited as to the uses to which LLPs have been put in overseas jurisdictions. Is there potential for LLPs to be put to the same uses in Jersey? Are there any additional uses for LLPs which might apply in the Jersey context? Should Jersey LLPs be aimed at Jersey based professionals or at investors or both?
2. Other similar structures in Jersey law
In order to place the distinctive features of LLPs in context, other existing and proposed partnership structures in Jersey law are set out below. Companies and trusts have also been considered for comparison.
2.1 General partnerships in Jersey
General partnership law in Jersey is a matter of customary law, originating from Norman French partnership law but heavily influenced by developments in English law.
In a Jersey general partnership, all the partners are jointly and severally liable for the debts of the partnership. (In some other jurisdictions, including England and Wales, the partners are only jointly liable.)
Jersey general partnerships are taxed separately from the partners under Article 74 of the Income Tax (Jersey) Law 1961 (“the IT Law”). The precedent partner must make a tax return on behalf of the partnership and pay the tax due. It is understood that this differs from the tax treatment of partnerships in other jurisdictions. The partnership will be treated as an overseas partnership (and will not be liable for tax other than on profits from trade in Jersey) if its management and control is situated abroad.1 It should be borne in mind that Article 74 is primarily a provision for administrative convenience. The partners are able to apply their personal tax free allowances to partnership income or to set taxable losses elsewhere off against partnership income (or vice versa), so the partnership is still a tax transparent structure in the sense that the income of the partnership is treated as the income of the partners.
2.2 Limited partnerships in Jersey
Limited partnerships, although of ancient origin in other jurisdictions, were created in Jersey by the Limited Partnerships (Jersey) Law 1994 (“the LP Law”). The scheme of this law was to retain substantially the customary law of Jersey partnerships but with the additional feature of “limited partners”, whose liability is limited to the amount of their contributions. Limited partners are excluded from management of the partnership. If they do participate in management then they become liable as if they were general partners.
The key difference between a limited partnership and an LLP is that in a limited partnership there must be at least one general partner, who has unlimited liability and who is responsible for the partnership’s management. Also, a limited partnership is not (in Jersey) a legal person.
A limited partnership is taxed differently from a general partnership, by virtue of Article 76A of the IT Law. If a limited partnership has no Jersey partners and is engaged in international business, there is no need for any partnership tax return. Otherwise, the general partner has to prepare and deliver to the Comptroller a statement of the profits and gains attributable to each of the partners from the activities of the partnership, but the tax is payable by the partners themselves.
Since 1994, the Jersey limited partnership has proved to be a popular investment vehicle, with a general partner taking the role of investment manager and various limited partners being largely passive investors.
2.3 Incorporated limited partnerships in Jersey
A draft Incorporated Limited Partnerships (Jersey) Law 200- (“the ILP Law”) is currently being prepared. The proposed law retains the existing limited partnership law, but with the additional feature of incorporation. An incorporated limited partnership (“ILP”) will thus be a legal person, with the ability to own property and enter into contracts in its own name and having perpetual succession. It is currently envisaged that ILPs will have unlimited capacity. One point to note is that the customary partnership law of Jersey will continue to apply to ILPs, save for (i) the existence of limited partners and (ii) incorporation.
It is proposed that the tax provisions in relation to ILPs will be the same as those applying to limited partnerships, so that the decision whether or not to incorporate a limited partnership will be tax neutral, at least as far as Jersey tax is concerned. It is understood that there are perceived tax advantages to incorporation in relation to certain other jurisdictions.
The key difference between an ILP and an LLP is that the former requires at least one general partner with unlimited liability.
2.4 Existing Jersey LLPs
Jersey LLPs under the 1997 Law are a form of customary partnership.2 The partners are not liable for the LLP’s debts, although there are claw-back provisions which apply when partners withdraw funds from the LLP when it is (or will soon be) insolvent.3 LLPs are legal persons without being bodies corporate4 and the customary law of Jersey is applicable to matters not expressly specified in the 1997 Law.5 As has been mentioned above, the 1997 Law requires the provision of £5 million bond.6
There are provisions in Part 5 of the 1997 Law,7 for the winding up of an LLP following its dissolution, including provisions for insolvent winding up with the appointment of an insolvency manager and insolvency committee. The need for such provisions arises because the LLP is a legal person capable of owning assets and owing obligations in its own name.
The tax position of LLPs in Jersey is understood to be the same as the tax position of general partnerships as discussed above.8
2.5 Companies
Although a company is legally speaking a very different type of entity from a partnership, it is considered that in many cases the decision as to whether to structure a business or transaction through an LLP or a company or some other entity will be taken on commercial grounds. Therefore it is worth considering the features of a company by way of comparison.
A company, of course, is a body corporate, like LLPs in many other jurisdictions, but unlike existing Jersey LLPs, which are legal persons without being bodies corporate.
There are two categories of companies: public and private companies, which are treated differently for regulatory purposes. In particular, private companies are not required to disclose the identities of their directors or to file accounts. However, private companies are required to disclose the identity of their shareholders (where the holding exceeds 1% of the relevant class of shares)9 and are required to prepare annual accounts and lay them before the company in general meeting.10
One difference between LLPs (and partnerships in general) and companies is the division in the case of a company between (loosely speaking) the shareholders, who own the company, and the directors, who control it. Directors owe fiduciary duties to their company, which are spelt out in Article 74 of the Companies (Jersey) Law 1991 (“the Companies Law”). There are no equivalent express duties owed by partners in an LLP to the LLP itself, although some fiduciary duties are implied by reason of the partners’ agency.
2.6 Trusts
As with companies, although trusts are conceptually very different from the various partnership structures outlined above, commercially they may be viewed as one of the other choices available in structuring a given arrangement and therefore a comparison with LLPs is relevant.
There is no requirement to register trusts and therefore no information has to be publicly disclosed. Similarly, there are no requirements to file accounts, although Article 21(5) of the Trusts (Jersey) Law 1984 (“the Trusts Law”) does require the trustee to keep accounts and Article 29 requires the trustee, subject to the terms of the trust, to disclose the accounts to the beneficiaries of the trust.
Similarly to the case of companies, there is a distinction with trusts between the beneficiaries, who are entitled to the trust property, and the trustees, who control it. The duties of the trustees to the beneficiaries are set out at some length in Article 21 of the Trusts Law. There are no equivalent duties imposed on a partner in an LLP.
Comments are invited as to whether the range of partnership-type and other entities currently existing or planned in Jersey corresponds to the range of investor and business needs and as to what distinctive features a revised Jersey LLP should have in relation to other Jersey entities.
Comments are invited as to whether the duties applicable to directors and/or trustees should be extended in any form to partners in LLPs and as to whether the existence of such duties is relevant to the level of disclosure required.
3. Potential changes to the Jersey LLP
3.1 Application of customary law
The 1997 Law retains the customary law applicable to a partnership except where it is inconsistent with the express provisions of the Law.11 By contrast, the UK and Singapore LLP Acts expressly exclude the existing law of partnership from applying to LLPs.12 In these jurisdictions the LLP is therefore a purely statutory creation, whereas the current Jersey LLP is a modified form of customary partnership.
Comments are invited as to the effect of retaining customary law in relation to LLPs and whether the Jersey LLP should be placed on a purely statutory basis.
3.2 Legal status
At present Jersey LLPs are legal persons without being bodies corporate. In this respect they are similar to Scottish partnerships,13 and unlike LLPs in the UK, Singapore and Dubai.14
The principal difference between a Jersey LLP and a body corporate is that the latter has perpetual succession: its existence is not dependent on its partners. By contrast, a Jersey LLP is automatically dissolved if the number of partners falls below two15 and it can be dissolved (in accordance with the partnership agreement) by an act of a partner.16
It is not clear how much difference perpetual succession makes in practice. Except when the number of partners falls below two17 an LLP remains a legal person with property vested in it after its dissolution until the cancellation of its registration18 (the term “dissolution” is therefore perhaps inapt). The registrar will not cancel the registration19 until he or she has received notice20 that the LLP’s affairs have been wound up. In the UK an LLP may be voluntarily wound up in accordance with the partnership agreement21 or a compulsory winding up order may be made22 when the number of partners falls below two23 or in various other circumstances. In practice, therefore, the position appears to be much the same in either jurisdiction.
The theoretical difference is that a body corporate, having perpetual succession, will only be wound up and dissolved by some definite act. By contrast, a Jersey LLP, which does not have perpetual succession, will be wound up and dissolved automatically in some circumstances, notably when the number of partners falls below two. In practice, provided there are proper provisions in place for the orderly winding up of the LLP’s affairs, so that at the point when it ceases to have legal personality it has no assets and no liabilities, it may make little difference to the creditors or partners of the LLP whether it has perpetual succession.
However, this theoretical difference may have a practical effect when Jersey LLPs are being considered by overseas governments and lawyers. Setting out clearly that a Jersey LLP has perpetual succession might reassure those unfamiliar with the Jersey legal environment that it is not a merely transient entity and that the interests of creditors are protected.
In the UK and Dubai the terminology of “members” is used rather than “partners” to reflect the LLPs’ status as bodies corporate.24 However in Singapore, the term “partners” is retained.25 Clearly this point is a presentational one only.
Comments are invited as to the significance of Jersey LLPs’ not being bodies corporate and as to whether this status should be changed.
Comments are also invited as to whether the terminology used should refer to members rather than partners.
3.3 Creation of LLPs
A Jersey LLP is created by registration. To register an LLP two or more persons wishing to carry out business with a view to a profit must agree: (a) that the business shall be carried on in the form of an LLP, (b) that they shall each contribute effort and skill to the business and (c) that the profits of the business shall be divided between them and that they shall each have an interest in the property of the LLP.26 A declaration must then be filed with the registrar stating that this condition is fulfilled together with the name and registered address of the LLP and the names and addresses of all the partners.27
The information to be provided to the registrar is very similar to that required for registration in other jurisdictions (although the form is different).
The requirements that the partners of an LLP all contribute effort and skill to the business and share the profits may have been imposed with professional LLPs in mind. These requirements may be less suitable in other contexts in which LLPs have been used overseas. There are no similar requirements in the UK, Singapore or Dubai regimes.
The requirement that the names and addresses of the partners be registered is different from the case of a general partnership. This lack of confidentiality is seen as being a quid pro quo for limited liability and may be seen as similar to the requirement to disclose the identities of shareholders in the case of a company. In the case of a limited partnership, the general but not the limited partners need to be identified to the registrar.28
Comments are invited as to whether the requirements that all the partners contribute effort and skill and that the profits be shared are useful.
Comments are also invited as to whether the requirement to provide the names and addresses of the partners is necessary.
3.4 £5 million bond
By Article 6 of the 1997 Law, an LLP is required to provide security for its debts in the sum of £5 million. This serves to protect the interests of creditors in circumstances where the liability of the partners is limited. Although a company (which also provides limited liability) is required to maintain its capital, in practice this is often a nominal amount. It is questioned why an LLP should be required to make such substantial financial provision when other limited liability vehicles are not.
It does not appear that there is any similar requirement for security in any other jurisdiction. However, it appears to be accepted in all jurisdictions that have adopted LLPs that if a partnership is to be granted the benefit of limited liability, there must be some additional mechanism put in place to protect the interests of creditors. In the case of overseas jurisdictions, this takes the form of additional disclosure requirements as discussed at 3.5 below rather than a cash bond.
The £5 million bond can be seen as an inflexible requirement. It takes no account of the size of the LLP or of its actual or potential liabilities. In the case of a small partnership, the bond probably has the effect of making the LLP structure unavailable. In the case of a large partnership, the bond would probably not represent a meaningful guarantee of partnership debts. The attitude in other jurisdictions appears to be that, if provided with the necessary information, creditors are best placed to know what, if any, security is necessary.
One possibility would be to allow LLPs a choice as to whether or not to retain the £5 million bond, with those who do not being subject to some other requirement such as filing accounts. This would allow investment LLPs, who would have no difficulty with a £5 million bond requirement but who might not wish to disclose financial information, to retain this scheme, while removing what may be a onerous requirement from small and medium trading LLPs.
Comments are invited as to whether the requirement for the £5 million bond should be maintained. If it were not to be maintained as a universal requirement, would it be useful to retain it as an option?
3.5 Disclosure and accounting requirements
As has been mentioned at 3.3 above, the names and addresses of the initial partners of the LLP have to be provided to the registrar at the time of registration.29 If there are any changes in the membership (or any of the other information declared at registration) then the registrar must be notified within 28 days.30 There is also a requirement for an annual declaration stating the names and addresses of all the partners as at 1 January each year.31
In the UK and Qatar there are similar requirements for registering changes of partners and providing annual returns, but in Dubai and Singapore only registration of changes is required and there is no requirement for annual returns. There does appear to be some duplication in having both requirements.
A Jersey LLP has to keep 10 years of accounting records, but is under no obligation to audit or file its accounts.32 This is a different accounting requirement from other jurisdictions. In the UK the company account and audit provisions apply to LLPs,33 so there is a requirement to file annual audited accounts with the registrar. Similar requirements apply in Dubai34 and Qatar.35 In Singapore, by contrast, there are no audit or filing requirements, but the registrar may inspect the LLP’s accounts36 and there is a requirement for the LLP to make an annual declaration of solvency or insolvency.37
Therefore in other jurisdictions, LLPs are required to disclose a greater amount of financial information than in Jersey, including at least their solvency status. This may be seen as an alternative creditor protection measure in place of the £5 million bond required in Jersey. One point which arises here is whether the requirement to file accounts does in fact provide significant creditor protection, since creditors probably do not usually consult the filed accounts before advancing money. However, it may be that the accounts requirement is of benefit to creditors who are trying to enforce a debt, possibly through insolvency proceedings.
A question may be raised as to whether the comparison with LLPs in other jurisdictions is the best way of approaching this question, or whether the comparison might better be made to other Jersey based entities.
There are no accounting requirements in relation to general partnerships. A limited partnership must keep accounts but need not audit or file them.38 A public company must file audited accounts,39 but a private company need only prepare annual accounts in accordance with generally accepted accounting principles.40 A trustee must account for his trusteeship in accordance with Article 21(5) of the Trusts Law, but there are no filing or audit requirements.
The name and addresses of the general, but not limited, partners of a limited partnership must be disclosed to the registrar. In the case of a public, but not a private, company, the name and addresses of the directors must be disclosed.41 For any company, the name and addresses of the shareholders must be disclosed (where the holding is over 1% of the relevant class).42 There are of course no disclosure requirements in relation to a trust.
One possibility which has been raised by the Working Group is that there could be a distinction between public and private LLPs similar to the distinction between public and private companies, with different disclosure and accounting requirements applying. A company may choose whether to have public or private status, save that a company with more than 30 members requires permission from the Commission to operate as a private company, which permission will be given where the company’s affairs may properly be regarded as a domestic concern of its members.43
Comments are sought as to what information an LLP should be required to disclose. If the £5 million bond requirement were to be removed, would it be appropriate to require LLPs to make additional financial disclosure? If so, what form should any such additional disclosure take? In these circumstances, would it be useful to keep the £5 million bond available as an alternative option?
Comments are invited as to whether greater disclosure requirements should apply in the case of LLPs than in the case of private companies and trusts and, if so, as to the relevant difference between these entities.
Comments are also invited as to whether it would be useful to distinguish between private and public LLPs and, if so, as to whether the distinction should be the same as for companies or whether some other criteria should apply.
3.6 Tax treatment
The Income Tax Office states that LLPs are treated for tax purposes in the same way as general partnerships. Under Art 74 of the IT Law a partnership has to make a tax return of its own and pay tax accordingly. This is treated separately from the partners’ own income for administrative purposes although the taxation of partnerships is still categorised as transparent as explained at 2.1 above.
However, it is a consequence of Article 74 and 76 that where a partnership (including an LLP) has its control and management in Jersey, the partners are subject to Jersey income tax, even though the partners may not be Jersey resident and its trading operations may be elsewhere. This might conceivably be a disincentive to establishing a Jersey LLP for investment purposes, though it might be that it is a marginal point, because it would be fairly easy to transfer the control and management off-Island.
It might be thought that taxation on the Article 76A basis (which applies to limited partnerships) was preferable, as this excludes non-Jersey partners of Jersey partnerships from taxation in respect of income from international activities. This might also have the advantage of allowing Jersey to retain the control and management aspects of the business. However, the Comptroller of Income Tax has indicated that he is concerned that application of Article 76A to Jersey trading LLPs with overseas partners would result in a loss in tax revenue.
One possibility might be to make a distinction between LLPs trading in Jersey and those engaged in international business, although this might raise issues of unfair tax competition.
Another issue which arises is the likely tax treatment of any revised Jersey LLP in other jurisdictions, particularly having regard to the UK’s treatment of existing Jersey LLPs as tax opaque.
Finally, it has been suggested by the Steering Group that there would be advantages in allowing LLPs the option of tax opacity.
Comments are invited as to how LLPs should be taxed and as to the possibility of allowing them the option of tax opacity.
Comments are invited as to the likely tax treatment of Jersey LLPs overseas and as to whether any steps can be taken to optimise this position.
3.7 Insolvency treatment
The Jersey LLP has its own winding up and insolvency regime set out in Part 5 of the 1997 Law.44 In the event of an insolvent winding up, a creditors’ meeting must be called45 and an insolvency manager appointed.46 There may also be an insolvency committee.47 The £5 million bond is, of course, available for the creditors.48
This winding procedure has never been used and therefore it is not known how well it works in practice. In the UK, the winding up provisions for LLPs have been substantially adopted by applying the relevant provisions of company law with the necessary amendments.49 Adopting the same route in Jersey would have the advantage of using winding up procedures which have been tested through their use by practitioners.
It is noted that the existing Jersey provisions include the ability to recover assets in cases of wrongful or fraudulent trading in relation to Jersey LLPs.50
Comments are invited as to whether the existing winding up and insolvency provisions are satisfactory and how they could be improved.
3.8 Migration and conversion
It has been suggested by the Steering Group that there should be suitable provisions for the migration of LLPs to and from Jersey and for the conversion of companies and other partnerships into LLPs. There is no real difficulty with respect to partnerships: it is simply a matter of the partnership registering as an LLP. In the case of companies there would need to be some special provision for the conversion to take place if, say, the members agreed by special resolution to do so.51 Similarly there would need to be some provision for the conversion to happen in reverse.
Migration may raise some trickier issues. There is no problem, from a Jersey point of view, with allowing a foreign entity to register as a Jersey LLP, but there may be some difficulty with the foreign jurisdiction recognising the emigration. There also seem to be some practical problems with allowing Jersey LLPs to relocate overseas, particularly if they were to relocate to a jurisdiction where Jersey based creditors would find it difficult to enforce judgment.
Comments are invited as to what, if any, provision should be made for the conversion of LLPs from and to other structures and for the migration of LLPs from and to other jurisdictions.
3.9 Additional changes
Comments are also invited as to any other changes to the Jersey LLP which might be desirable.
4. Legislative form of any suggested change
If the consensus as a result of this consultation is in favour of change in the existing Jersey LLP regime, then the question will arise whether this should be achieved by amending the 1997 Law or by replacing it with a new law.
If the agreed changes are minor or cosmetic, then it would appear to be simplest to amend the existing law. However, if more substantial changes are proposed, for example, if it were considered desirable to bring the Jersey LLP regime more into line with LLPs in other jurisdictions, then it may be most efficient to draft a new law. There is no body of expertise or jurisprudence which interprets the existing law which would factor against this approach.
Comments are invited on the most appropriate and efficient method to make any proposed changes.
1 Article 76, IT Law
2 See Walker, Jonathan, Limited Liability Partnerships: True Partnerships? Jersey Law Review (Feb 1998)
3 Article 5, 1997 Law
4 Article 2(4), 1997 Law
5 Article 48, 1997 Law
6 Article 6, 1997 Law
7 As amended, in the case of insolvent LLPs only, by the Limited Liability Partnerships (Insolvent Partnerships) Regulations 1998
8 Art 3(1) of the IT Law defines “partnership” as including “a partnership established under the Limited Liability Partnerships (Jersey) Law 1997”
9 Art 71(1), Companies (Jersey) Law 1991
10 Art 104, Companies (Jersey) Law 1991
11 Article 48, 1997 Law
12 s1(5) of the UK Act; s6 of the Singapore Act
13 s4 UK Partnership Act 1890
14 s1(2) of the UK Act, Art 16(1) of the Dubai Law, s4(1) of the Singapore Act
15 Article 21, 1997 Law
16 Article 22, 1997 Law
17 Article 25(4), 1997 Law
18 Article 2(1) and (3), 1997 Law
19 Article 31, 1997 Law
20 Under article 29 of the 1997 Law
21 s84 of the UK Insolvency Act 1986 as amended by the UK LLP Regulations 2001
22 s122, UK Insolvency Act 1986 as amended
23 Note however that while the UK court has power to order the compulsory winding up of an LLP when the number of members falls below two, it is not obliged to do so. Also, it will only consider the possibility if an application is made by the LLP, a member or a creditor under s124 or (in certain limited circumstances) by the Secretary of State under s124A of the Insolvency Act. The effect of this would seem to be that LLPs with fewer than two members will not normally be subject to compulsory winding up in the UK. However, if a UK LLP has only member for more than six months the sole member becomes liable for the LLP’s debts (s24 UK Companies Act 1985). This is therefore a practical difference from the situation in Jersey, but perhaps one of small significance.
24 s4 of the UK Act, Article 18 of the Dubai Law
25 s2(1) of the Singapore Act
26 Art 2(2), 1997 Law
27 Art 16(3), 1997 Law
28 Art 4, LP Law
29 Article 16, 1997 Law
30 Article 17, 1997 Law
31 Article 18, 1997 Law
32 Article 9, 1997 Law
33 Part VII of the UK Companies Act 1985, as amended by the UK LLP Regulations 2001
34 Part 7 of the Dubai Law
35 Article 34, QFC Limited Liability Partnerships Regulations
36 s25 of the Singapore Act
37 s24 of the Singapore Act
38 Art 9, LP Law
39 Art 106, Companies Law
40 Art 104, Companies Law
41 Art 71(1)(e), Companies Law
42 Art 71(1), Companies Law
43 Art 16(2), Companies Law
44 As amended, in the case of insolvent LLPs only, by the Limited Liability Partnerships (Insolvent Partnerships) (Jersey) Regulations 1998
45 Article 25A(1)(b), 1997 Law
46 Article 25C, 1997 Law
47 Article 25D, 1997 Law
48 Article 27, 1997 Law
49 UK LLP Regulations, regs 4(2), 5 and 10
50 Articles 31F and 31G, 1997 Law
51 Cf s21 and Schedule 3 of the Singapore Act
Public submissions - Please note that responses submitted to all States public consultations may be made public (sent to other interested parties on request, sent to the Scrutiny Office, quoted in a final published report, reported in the media, published on a States of Jersey website, listed on a consultation summary etc). If a respondent has a particular wish for confidentiality, such as where the response may concern an individual’s private life, or matters of commercial confidentiality, please indicate this clearly when submitting a response.
Page of 16
Livelink ® Version 9.2.0, Copyright © 1995-2003 Open Text Inc. All rights reserved. |
| | |
gov.je