Blog - 26/06/2017
The new private fund limited partnership: a flexible and simplified real estate investment vehicle
The Government’s introduction of Private Fund Limited Partnerships (PFLPs) this year is a welcome progression in modernising the rather antiquated English limited partnership regime. Largely precipitated by tax efficient investment vehicles by offshore jurisdictions (for example, Cayman Islands, British Virgin Islands, Delaware, Jersey and, most recently, the Abu Dhabi Global Market), the reform allows UK limited partnerships to remain just as attractive to investors/developers.
The principle changes introduced by the PFLP are broadly in relation to:
- A “white list” of permitted actions which limited partners in the PFLP can take without being regarded as participating in the management of the limited partnership and so losing their limited liability. For example, voting on amendments to the limited partnership agreement, appointing representatives on a limited partner advisory committee, and approving action proposed by the general partner to be taken on investments.
- Limited partners in a PFLP are not required to contribute any capital to the partnership.
- A PFLP is exempt from a host of administrative burdens such as the requirement to advertise assignments of limited partnership interests in the London Gazette.
- A PFLP can appoint a person to wind up the partnership if the general partner is unable to do so.
- There are some exemptions to statutory duties imposed on limited partners.
The PFLP qualification process is fairly simple and straightforward too; the limited partnership must have a written limited partnership agreement and must also be a collective investment scheme. The majority of private funds already operate in this way so it should not be difficult to satisfy. However, once a UK limited partnership becomes a PFLP, it will not be able to return to its ordinary limited partnership entity.
The UK limited partnership regime is a solid and a universally recognised trusted vehicle for real estate investors; these changes simply improve the system – so, expect to see more PFLP structures featuring in contracts.
For further information regarding this topic or any other property and construction matter, please contact Joanne McIvor – Partner, Hayley Cloherty – Associate, or any member of the Edwin Coe Property or Construction teams.
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