New legislation will be published in 2019 requiring limited partnerships to be registered by an "official supervised agent", maintain "a link to the UK" and update information held about them by Companies House annually, according to a report in the Financial Times (registration required).
The government consulted on reforming the law on limited partnerships, particularly Scottish limited partnerships, last year. That consultation received a significant number of responses from private equity firms and other financial services businesses raising concerns about the proposals, according to the FT.
Limited partnerships, which have been available to businesses in the UK since 1907, are frequently used by alternative investment funds due to their perceived flexible nature and tax characteristics. They are considered to be an efficient method of investing by the investment funds industry for UK and overseas investors.
The government carried out a call for evidence on the role of limited partnerships in 2017, in response to a significant increase in registrations of limited partnerships in Scotland and allegations that Scottish limited partnerships in particular were being used for illicit purposes. The evidence provided showed a continuing need to offer limited partnerships as a business entity, but also a need to reform the law to address the potential for misuse.
Although the final requirements remain unclear, investment funds expert David Young of Pinsent Masons, the law firm behind Out-Law.com, said that fund managers "will need to monitor developments as the use of these types of vehicle is prevalent across the alternatives industry and there may be real operational and cost implications".
Investment funds expert Oliver Crowley of Pinsent Masons said "This applies to investors which invest in alternative assets through limited partnerships as they may need to consider updating their investment processes to cater for any changes in structure required as a consequence of this reform".