LIMITED PARTNERSHIP ACT – Real Talk

By Kerry Anderson Partner, Funds, Investment, Regulatory O’Neal Webster

The British Virgin Islands has long been a leader in company incorporation. It is also the jurisdiction of choice for many whose needs include investment funds, banking, trust services and more. Not content to rest on its past achievements, the BVI government and industry have embarked on a course to continually review and update its products. It is this process that has led to the passing into law of the new Limited Partnership Act, 2017 (the LPA).

The LPA modernizes former BVI partnership law introducing several key new features for limited partnerships.

KEY FEATURES

One of these new features is the concept of “legal personality.” The legal personality of the LPA gives limited partnerships the right to enter into contracts (domestic and international) and to sue or be sued in the name of the limited partnership. In addition, a limited partnership may create a charge over assets of the partnership and register such charge against the name of limited partnership as opposed to in the name of the general partner. With legal personality a limited partnership may be able to participate in structures where members are required to be a legal person. Legal personality means that the limited partnership has the ability to continue to exist despite the withdrawal or admittance of its partners.

Legal personality will apply by default to new limited partnerships under the LPA and the partners may, on formation decline legal personality; but once this election is made it cannot be changed.

OTHER BENEFITS

Among the commercial benefits the LPA incorporates is an extensive list of safe harbor activities that limited partners may engage in without forfeiting their limited liability. This includes the limited partnership’s ability to manage its service providers or investments, own assets, and hold property in its name.

In addition, the LPA applies several corporate concepts to limited partnership, including: • Ability of a foreign limited partnership to continue into the British Virgin Islands.

• Ability to continue to another jurisdiction.

• Ability to merge or consolidate with another limited partnership, including a foreign limited partnership where the foreign law permits mergers and consolidations of limited partnerships.

• Ability to redeem minority partnership interests (subject to the limited partnership agreement).

• The right of a limited partner to dissent on a merger, consolidation, or mandatory redemption (subject to the limited partnership agreement).

• Ability of a limited partnership to enter into a plan of arrangement or a scheme of arrangement.

FORMATION

Formation is simple. The limited partnership is required to have a registered agent in the BVI who will submit an application signed by or on behalf of each general partner, setting out certain basic information on the partnership. The limited partnership is also required to have a partnership agreement. Under the LPA, a model partnership agreement is available and is deemed to be the partnership agreement for the limited partnership unless and until it is modified or excluded by a customized limited partnership agreement. The availability of the model agreement means limited partnerships can be formed quickly and begin operating even while a limited partnership agreement is being finalized and signed by all general partners.

Among the commercial benefits the LPA incorporates is an extensive list of safe harbour activities that limited partners may engage in without forfeiting their limited liability.

GOOD TO KNOW

Existing limited partnerships registered in the BVI will continue under the old Partnership Act, 1996 until they voluntarily re-register under the LPA. However, after ten years, all limited partnerships remaining under the old Partnership Act will be automatically re-registered under the LPA and will have two additional years to adopt a compliant limited partnership agreement.

For more information on how you can take advantage of the full provisions offered under the LPA, please contact O’Neal Webster partners Kerry Anderson, Vanessa King, or Christopher Simpson. Mr. Anderson can be reached at kanderson@onealwebster.com, Ms. King at vking@onealwebster.com and Mr. Simpson at csimpson@onealwebster.com. Or call directly at +1 (284) 393 5800.