Regulation of Undertakings and Development (Jersey) Law, 1973, as amended, Practice Note: Treatment of General Partners of Limited Partnerships.

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A decision made (11/03/2009) regarding: Regulation of Undertakings and Development (Jersey) Law, 1973, as amended, Practice Note: Treatment of General Partners of Limited Partnerships.

Decision Reference: MD-E-2009-0040
Decision Summary Title :	Regulation of Undertakings and Development (Jersey) Law, 1973, as amended, Practice Note: Treatment of General Partners of Limited Partnerships		Date of Decision Summary:	05/03/09
Decision Summary Author:	Senior Manager, Business Assessment and Licensing		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Practice Note: Treatment of General Partners of Limited Partnerships		Date of Written Report:	05/03/09
Written Report Author:	Director, Population Office		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Proposal for a Practice Note in relation to the treatment of General Partners.
Decision(s): The below proposed practice note was approved by the Assistant Minister: Practice Note: Treatment of General Partners of Limited Partnerships Where a general partner of a limited partnership does not directly employ any staff in Jersey and does not exclusively occupy any floor space in Jersey, and benefits from the staff and/or premises of its administrator, being a person licensed to provide administration services pursuant to the Financial Services (Jersey) Law 1998, it will be treated as exempt for the purposes of the Regulation of Undertakings and Development Law (Jersey) 1973 (the “Law”) under exemptions specified in the Regulation of Undertakings and Development (Jersey) Regulations, 1978. For the avoidance of doubt, such treatment shall not be dependent upon where the business of the limited partnership is being conducted by the general partner. Nothing in this Practice Note shall be taken to revoke any licence issued under the Law prior to the date of this Practice Note.
Reason(s) for Decision: To improve the efficiency of the administration of the Regulation of Undertakings and Development (Jersey) Law, 1973, as amended, without any decrease in managing demand on the Island’s resources and protecting the financial and commercially integrity of the Island, and to improve clarity over the applications of exemptions under the Law.
Resource Implications: None.
Action required: RUD officers to publish practice note.
Signature:		Position:
Date Signed:		Date of Decision (If different from Date Signed):

Regulation of Undertakings and Development (Jersey) Law, 1973, as amended, Practice Note: Treatment of General Partners of Limited Partnerships.

Proposal for a Practice Note in relation to the treatment of General Partners

The Population Office processes between 100 – 200 licence applications per year for General Partners undertaking the role of managing partner to limited partners – investors whose liability for debts and obligations is limited to the amount of their contribution.

These structures are principally established for investment purposes and are a favoured structure for use in venture capital situations, management buy-outs and real property developments.

This treatment creates additional work and costs for new applicants and the Population Office, and does not add additional control or management of risk - as the issuing of a Regulation of Undertakings Licence is dependent wholly upon the required permissions of the Jersey Financial Services Commission being obtained, or upon the Control of Borrowing Order being issued, and evidenced to the Population Office.

This licensing treatment extends to requiring applications for changes in the ultimate beneficial ownership of the General Partner - being a general condition of most Regulation of Undertakings licences in Jersey. This is despite the fact that in many instances General Partners are created expressly for investment purposes and are generally owned by changing compositions of non-Jersey resident investors, and as such, frequent changes of ownership are common - meaning additional work, or General Partner breaching RUDL conditions. Again, full reliance in approving changes in ownership is placed on the requirements and procedures of the Jersey Financial Services Commission being satisfied, who are the more expert body in this area, and since their objectives around protecting the financial and commercial integrity of the Island are sufficiently similar to those of the Regulation of Undertakings Law so as to not require the additional confirmation of the Population Office. Having noted this reliance, it is further reasonable to consider it as highly ambiguous as to whether a General Partner is indeed an undertaking (defined) in the Law as a “business, trade, or profession”; or more persuasively, it is reasonable to consider these undertaking as exempt from the Law, on the basis they are administered as opposed to trading in Jersey, and as they occupy no floor space nor engaging any employees. 1

Bearing in mind all of the above, in the interests of increased efficiency,

without any decrease in the control environment, henceforth the Population

Office will not require licences from General Partners.

It will do this as reasonable assurance exists around the regulation of such entities, as they fall within the ambit of the Jersey Financial Services Commission, where the Commission considers this appropriate. The treatment has been noted by the Jersey Financial Services Commission. This treatment has also been noted by Jersey Finance, who have assisted in the canvassing of their members.

Should this exempt treatment be able to be extended to other structures, this will take place, with any proposed treatments consulted upon and thereon published. This will be done in the continued interests of clarity, and the effective administration of the Regulation of Undertakings Law in managing demand on the Island’s resources and protecting the financial and commercially integrity of the Island in an approach which places reliance on the Jersey Financial Services Commission where appropriate.

Practice Note: Treatment of General Partners of Limited Partnerships

Where a general partner of a limited partnership does not directly employ any staff in Jersey and does not exclusively occupy any floor space in Jersey, and benefits from the staff and/or premises of its administrator, being a person licensed to provide administration services pursuant to the Financial Services (Jersey) Law 1998, it will be treated as exempt for the purposes of the Regulation of Undertakings and Development Law (Jersey) 1973 (the “ Law ”) under exemptions specified in the Regulation of Undertakings and Development (Jersey) Regulations, 1978. For the avoidance of doubt, such treatment shall not be dependent upon where the business of the limited partnership is being conducted by the general partner.

Nothing in this Practice Note shall be taken to revoke any licence issued under the Law prior to the date of this Practice Note.

1 Under the Regulation of Undertakings and Development (Jersey) Regulations, 1978, Article 1 (1) (b) “any undertaking administered in Jersey whose trading activities are carried on outside Jersey and which, in Jersey, does not occupy any floor space or have any employees” is exempt from the requirement to obtain a licence.

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