Incorporated Limited Partnerships (Jersey) Law 201- and Separate Limited Partnerships (Jersey) Law 201-: Drafts

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A decision made on 8 April 2010 to approve the draft Incorporated Limited Partnerships (Jersey) Law 201- and the draft Separate Limited Partnerships (Jersey) Law 201-

Decision Reference: MD-E-2010-0068
Decision Summary Title :	Incorporated Limited Partnerships (Jersey) Law 201- Separate Limited Partnerships (Jersey) Law 201-		Date of Decision Summary:	6 April 2010
Decision Summary Author:	Director, Finance Industry Development		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 :	Incorporated Limited Partnerships (Jersey) Law 201- Separate Limited Partnerships (Jersey) Law 201-		Date of Written Report:	6 April 2010
Written Report Author:	Director Finance Industry Development		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Approval of the draft Incorporated Limited Partnerships (Jersey) Law 201- (“the ILP Law”) for lodging and also the approval of the draft Separate Limited Partnerships (Jersey) Law 201- (“the SLP Law”) for lodging.
Decision(s): The Minister approved the ILP Law and the SLP Law and the attached reports and in each case signed the declaration of compatibility with the European Convention on Human Rights and directed that the documents be lodged au Greffe so as to allow the ILP Law and the SLP Law to be debated by the States on 25 May 2010.
Reason(s) for Decision: These two laws are each closely modelled on the existing Limited Partnerships (Jersey) Law 1994 and seek to build on the success of that law by allowing limited partnerships with legal personality separate from that of their partners. The ILP Law will allow incorporated limited partnerships, i.e. being a body corporate and having perpetual succession. The SLP Law will allow limited partnerships having separate legal personality, but without being a body corporate. These laws have been developed working closely with the Jersey finance industry, and have received widespread support. The Jersey Financial Services Commission have approved the legislation from a regulatory view-point. The Attorney General has confirmed that the two laws are human rights compliant.
Resource Implications: These laws provide for incorporated/separate limited partnerships to pay an annual charge to the States, to be set by regulations. If such a charge is set, then the laws will be revenue positive. The Royal Court will have costs associated with dealing with various applications under the laws, but these costs will be off-set by the charging of court fees. The Commission and the registrar will have costs associated with their functions under these laws but these costs will be passed on through fees.
Action required: To approve the ILP Law and the SLP Law and the attached reports and in each case to sign the declaration of compatibility with the European Convention on Human Rights and for the documents to be lodged au Greffe so as to allow the ILP Law and the SLP Law to be debated by the States on 25 May 2010.
Signature: Senator A.J.H.Maclean		Position: Minister for Economic Development
Date Signed:		Date of Decision (If different from Date Signed):

Incorporated Limited Partnerships (Jersey) Law 201- and Separate Limited Partnerships (Jersey) Law 201-: Drafts

INCORPORATED LIMITED PARTNERSHIPS (JERSEY) LAW 201- (“THE ILP LAW”)

SEPARATE LIMITED PARTNERSHIPS (JERSEY) LAW 201- (“THE SLP LAW”)

1 THE ISSUE AND RECOMMENDATION

1.1 It is recommended that the Minister for Economic Development (“the Minister”) should approve the ILP Law and the SLP Law and the attached reports and in each case to sign the declaration of compatibility with the European Convention on Human Rights and also sign the Decision Summary and that the documents should be lodged au Greffe so as to allow the ILP Law and the SLP Law to be debated by the States as soon as possible.

1.2 These laws provide for incorporated/separate limited partnerships to pay an annual charge to the States, to be set by regulations. If such a charge is set, then the laws will be revenue positive. The Royal Court will have costs associated with dealing with various applications under the laws, but these costs will be off-set by the charging of court fees. The Commission and the registrar will have costs associated with their functions under these laws but these costs will be passed on through fees. There are no manpower implications for the States.

2 BACKGROUND

2.1 Since the passing of the Limited Partnerships (Jersey) Law 1994 (“the 1994 Law”), Jersey limited partnerships have proved increasingly popular, particularly as collective investment vehicles, and particularly among private equity investors. The 1994 Law is widely considered to be both modern and clearly drafted. We seek to build on that success with the introduction of two further limited partnership laws, introducing different possible legal statuses for limited partnerships.

2.2 A limited partnership is a form of partnership having both general and limited partners. The key feature is that the limited partners’ liability is limited to their partnership contribution, while the general partners’ liability is unlimited. In order to benefit from this limited liability, the limited partners must not involve themselves in the management of the limited partnership.

2.3 At present a Jersey limited partnership does not have a legal personality of its own. In some circumstances this can pose a problem for investors, e.g. if investing in another jurisdiction which does not recognise the concept of limited partnerships. In Scotland limited partnerships do have legal personality, while in Guernsey limited partnerships have a choice as to whether to adopt legal personality or not. It is believed that a wider range of uses of Jersey limited partnerships would be made by consumers if they had the option of creating a limited partnership with legal personality.

2.4 Following initial consultation on this topic, there was widespread support for the introduction of Jersey limited partnerships having legal personality. However, it was apparent from the consultation that there would be difficulties in following the Guernsey route of allowing a choice within the existing law, since it was considered that this route might have an adverse effect on existing Jersey limited partnerships formed upon the basis of advice given under the 1994 Law.

2.5 Two possible models were identified: the Scottish model, where partnerships (including limited partnerships) have legal personality separate from the partners, but without being a body corporate, or an incorporated model, where a limited partnership would be a body corporate, having perpetual succession in addition to separate legal personality and being somewhat more similar to a company. Following discussions with industry representatives and, through them, with key intermediaries, a demand for both models was identified.

2.6 We are therefore bringing forward two new free-standing draft laws, the ILP Law and the SLP Law, each modelled closely on the 1994 Law, but each providing for a limited partnership with a different legal status. These provide respectively for the establishment of Incorporated Limited Partnerships (“ILPs”) and Separate Limited Partnerships (“SLPs”). The SLP will have legal personality but without being a body corporate (as is already the case for a Scottish limited partnership), whereas the ILP will be a body corporate.

3 INCORPORATED LIMITED PARTNERSHIPS (JERSEY) LAW 201-

3.1 Whereas an SLP will be a limited partnership with the bare addition of legal personality (reflecting the existing position in Scotland and in Guernsey for limited partnerships that opt for legal personality) an ILP will have some features of a company, and will be a wholly new vehicle. It will be a body corporate, having perpetual succession. This may be attractive for a number of reasons. Firstly, there may be an attraction to having body corporate status for those engaging in cross-border transactions, since this gives greater certainty as a matter of international law, in particular regarding the limited liability of the limited partners. Secondly, perpetual succession means that those dealing with the ILP can be confident that it will continue to exist and be held accountable for its obligations.

3.2 While the general partner(s) will continue to be liable for the ILP’s debts, this liability will be a secondary one, only arising if the ILP itself defaults. The general partner(s) will act as an agent for the ILP rather than the partners as individuals and in some ways will be similar to a company director. Correspondingly general partners’ duties similar to directors’ duties have been included.

4 SEPARATE LIMITED PARTNERSHIPS (JERSEY) LAW 201-

4.1 This follows the Scottish model of limited partnership in having a legal personality separate from that of the partners but without being a body corporate. It will be called a ‘Separate Limited Partnership’ as a contraction of ‘Separate Legal Personality Limited Partnership’, which was considered too lengthy to be suitable as a name.

4.2 The SLP will be capable of owning property in its own name (as opposed to limited partnerships under the 1994 Law, which hold property in the name of one or more general partners as an asset of the limited partnership in accordance with the terms of the partnership agreement). The SLP will also be capable of entering into contracts in its own name. However, unlike a body corporate, it will not have perpetual succession. The existence of the separate legal personality will not affect the rights of the partners as between themselves. In many ways, SLPs will be similar to existing Scottish limited partnerships. However, while a Scottish Limited Partnership must be “between persons carrying on business with a view to profit”, Article 3(3) of the SLP Law retains the more flexible Jersey provision that an SLP may be set up for any lawful purpose. A further potential advantage of the SLP Law over the Scottish model is that the UK Partnership Act 1890 provides that, “In Scotland a firm is a legal person distinct from the partners of which it is composed...”, which leaves open the possibility that a Scottish limited partnership should not be treated as having such personality outside Scotland. Article 3(4) of the draft Law by contrast is completely unqualified in stating that an SLP is a legal person.

5 HUMAN RIGHTS IMPLICATIONS

5.1 The Law Officers’ Department have stated that in their opinion both the SLP Law and the ILP Law are human rights compliant.

6 RECOMMENDATION

6.1 It is recommended that the Minister should approve the ILP Law and the SLP Law and the attached reports and in each case to sign the declaration of compatibility with the European Convention on Human Rights and also sign the Decision Summary and that the documents should be lodged au Greffe so as to allow the ILP Law and the SLP Law to be debated by the States on 25 May 2010.

Director, Finance Industry Development

6 April 2010