With Simon Rodgers Senior Executive Jersey

Limited PartnershipsFocus on:

JerseyThe limited partnership provides an attractive alternative to the limited company as a vehicle for investors wishing to become involved in new business ventures. Read on.

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The limited partnership is an attractive alternative to the limited company as a vehicle for investors wishing to become involved in new business ventures. It is particularly useful where finance is required for an initial stage of research and development or where, for any other reason, profit is not expected to flow from the business during the initial stages of its operations.

A Jersey limited partnership may be formed by any number of general partners and any number of limited partners, but must have at least one general partner and one limited partner who can in either case be an individual or a company. Although Jersey law permits a person to be both a general partner and a limited partner at the same time, a limited partnership cannot be formed by a single person.

Limited partners are essentially passive investors whose liability for partnership debts is limited to the capital they have agreed to contribute to the partnership. General partners have unlimited liability for partnership debts in the same way as a partner in an ordinary partnership. It is usual, however, for a general partner to be a company. General partners have sole responsibility for managing the partnership: limited partners may not participate in management since if they do, they will lose the benefit of limited liability for the partnership debts. Notwithstanding this, a limited partner is permitted to:

• Vote on or approve the purchase, sale, lease or mortgage of partnership assets, any change in the nature of the partnership’s activities, the admission, removal or withdrawal of a general or a limited partner, the winding up of the partnership and certain other important matters;

• Discuss the activities of the limited partnership with a general partner;

• Review and approve the partnership accounts and affairs generally;

• Lend money to or borrow money from the limited partnership;

• Guarantee the obligations of the limited partnership;

• Act as the agent of the limited partnership or of a general partner;

• Be employed by the limited partnership or by a general partner;

• Be a director or officer of a general partner which is a company;

• Hold shares in a general partner which is a company;

And will not be regarded as participating in management as a result of engaging in such activities. A limited partner may assign his interest in the limited partnership either in whole or in part in accordance with the terms of the partnership agreement or with the unanimous consent of all the limited and general partners.

Establishment

In order to form a Jersey limited partnership, the partners must enter into a partnership agreement setting out the terms on which they have agreed to carry on business together, and the general partner must file a declaration with the registrar of limited partnerships together with the registration fee of £500. The limited partnership will not come into existence until the registrar has issued a certificate of registration of the declaration and the limited partnership should not commence business before this date. The declaration to be filed with the Registrar should state:-

• The proposed name of the limited partnership;

• The intended address of its registered office;

• The full name and address or registered office of the general partners);

• A statement that the limited partnership is to exist for an unlimited period for which it is to exist.

If the general partner is a company, the following further information should be submitted at the time the declaration is filed:-

• The full names and addresses of the ultimate beneficial owners of the general partner;

• If any of the beneficial owners are or have been a beneficial owner of a Jersey registered company, the names and registered numbers of such companies;

Jersey: Limited Partnerships

• Confirmation that none of the beneficial owners has been declared bankrupt in any part of the world or been a director of or otherwise concerned in the management of a company which has been subject to an insolvent liquidation or been the subject of a judicial enquiry.

Before the limited partnership may raise capital from the partners, consent pursuant to the Borrowing (Control) (Jersey) Law 1947 must be obtained. If the limited partnership is to operate as a collective investment fund by reason of the offer of limited partnership interests to the public, it will be necessary to comply with Jersey legislation regulating collective investment funds (see our client guide to Collective Investment Funds).

General Requirements

• The name of a limited partnership must end with the words “limited partnership” or the abbreviation “LP”. As a general rule, the partnership name must not include the name or a significant part of the name of a limited partner;

• A limited partnership must have a registered office in Jersey;

• A limited partnership must keep at its registered office a register showing the names and addresses of the limited partners and details of their partnership interests, a copy of the declaration of limited partnership and any amendments to it, a copy of the partnership agreement and any amendments to it, and statements showing the capital contributions received from and returned to the limited partners;

• A limited partnership must keep accounting records which are kept sufficient to show and explain its transactions and disclose with reasonable accuracy at any time the financial position of the limited partnership. The accounts need not be audited (unless this is required by the partnership agreement) or filed with any public registry;

• There is no annual registration fee payable.

Taxation

Jersey limited partnerships are “fiscally transparent”. A limited partnership is not subject to tax as a separate entity. Instead each partner is liable to tax on its share of the partnership profits or losses. Partners should therefore be able to set off against other income liable to taxation their agreed share of any partnership losses. Partners who are not resident in Jersey will be liable to Jersey income tax only if and to the extent that the income of the partnership arises in Jersey.

Dissolution

A limited partnership will be dissolved if:-

• The general partner delivers a signed statement of dissolution to the registrar;

• The sole or last remaining general partner dies, becomes bankrupt or retires or withdraws from the limited partnership (unless the limited partners elect a new general partner within 90 days);

• The Court orders the dissolution. The Court has power to do so where the limited partnership is being conducted in a manner which is likely to prejudice the partnership business or is oppressive to one or more of the limited partners, or where circumstances have arisen which render it just and equitable that the partnership be dissolved.

A limited partnership will not be dissolved by the death, bankruptcy, retirement or withdrawal of a limited partner.

Unless the partnership agreement provides otherwise, the remaining assets of the partnership, after paying third party creditors, must be applied as follows:-

• In payment of sums due to the general partner other than for capital and profits;

• In returning capital contributions to limited partners;

• In payment of profit shares to the limited partners;

• In returning capital contributions to general partner;

• In payment of profit shares due to general partner.

Jersey

Basel Trust Corporation (Channel Islands) Limited First Floor, International House, 41 The Parade, St Helier, Jersey JE2 3QQTelephone +44 (0)1534 500900 Fax +44 (0)1534 500901

Switzerland

BasTrust Corporation Limited Geneva Branch 24 Route des Acacias, 1227 Les Acacias, Geneva, SwitzerlandTelephone +41 (0)22 318 81 18 Fax +41 (0)22 318 81 19

BasTrust Fiduciary Services SARL Seefeldstrasse 15, CH - 8008, Zurich, SwitzerlandTelephone +41 (0) 44 630 7000 Fax +41 (0) 44 630 7001

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