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A decision made (21/12/2006) regarding Approval of Law Drafting Instructions in relation to Limited Partnerships.

Subject:	Approval of law drafting instructions in relation to Limited Partnerships
Decision Reference:	MD-E-2006-0224		Exempt clause(s):
Type of Report: (oral or written)	Written		Person Giving Report (if oral):
Telephone or e-mail Meeting?			Report File ref:
Written report – Title	Limited Partnerships– Law Drafting Proposals
Written report – Author (name and job title)	Paul de Gruchy, Director, Finance Industry Development
Decision(s): To approve the law drafting proposals in relation to amendments to the Limited Partnerships (Jersey) Law and a new Incorporated Limited Partnerships (Jersey) Law and request that the Director, Finance Industry Development liaise with the law draftsman to bring forward draft legislation for Ministerial approval.
Reason(s) for decision: The changes proposed will provide Jersey with a limited liability partnership vehicle that has separate legal personality, while preserving the integrity of the existing limited partnership vehicles. The changes will also assist in clarifying the nature of Jersey limited partnerships and certain aspects of the registration of limited partnerships.
Action required: Paul de Gruchy to liaise with the law draftsman and revert when legislation is ready for ministerial approval.
Signature: Senator P.F.C.Ozouf (Minister)		Date of Decision: 21 December 2006

Law Drafting Instructions - Limited Partnerships.

MINISTER FOR ECONOMIC DEVELOPMENT

LIMITED PARTNERSHIPS –

LAW DRAFTING PROPOSALS

1 THE ISSUE

1.1 It is proposed to amend the Limited Partnerships (Jersey) Law and to introduce a new law, to be entitled the Incorporated Limited Partnerships (Jersey) Law.

1.2 It is recommended that the Minister approve the law drafting proposals, and instruct the Director, Finance Industry Development, to liaise with the law draftsman with a view to presenting draft legislation to the Minister for approval at the earliest opportunity.

2 BACKGROUND

2.1 Limited partnerships (LPs) were introduced into Jersey through the introduction of the Limited Partnership (Jersey) Law 1994 (the LP Law). Since that time, LPs have come to be regarded as one of the Islands principal commercial vehicles (along with companies and trusts), and have been widely used, particularly in the context of collective investment funds.

2.2 An LP is a transparent vehicle, in that it does not have its own legal personality. Instead, it acts through its general partner, who will generally take a management fee, and seeks to generate returns that are divided among its investors, the limited partners.

2.3 In a number of jurisdictions, including Guernsey and Scotland, LPs have the ability to elect to adopt separate legal personality. This has many important repercussions. Because the LP is regarded as a single legal entity, it may invest in certain vehicles that would not be open to LPs without such personality. Also, as a single legal entity, it will have a different tax treatment to the tax transparent LP without legal personality, where profits are apportioned directly between investors.

2.4 The proposals were put out to consultation. The consultation yielded few responses, largely because the changes are not contentious and are widely supported throughout the finance industry. One response did emphasise that a significant stream of business existed in relation to LPs that could not have legal personality, and that it would be unfortunate if this business was jeopardised by any change.

2.5 As a result, it is proposed that a number of fairly minor changes be made to the LP Law, in the manner set out in the law drafting instructions attached. Then, once that law drafting has been agreed, that Law should effectively form the basis for another Law, the Incorporated Limited Partnerships Law (the ILP Law). The ILP Law would mirror the LP Law, save that LPs established under the ILP Law would be incorporated and have legal personality. In this way, LPs and ILPs could be created, each under a different law, while maintaining the distinction between each vehicle. This approach will be clear and will retain all existing business flows.

3 RECOMMENDATION

3.1 It is recommended that the Minister approve the law drafting proposals in relation to amendments to the Limited Partnerships (Jersey) Law and a new Incorporated Limited Partnerships (Jersey) Law and request that the Director, Finance Industry Development liaise with the law draftsman to bring forward draft legislation for Ministerial approval.

PAUL DE GRUCHY

Director, Finance Industry Development

20 December 2006

ANNEX