Following the release of the Panama Papers in 2016, the mis-use of partnership structures by certain individuals is still an on-going subject. A consultation paper, published in April 2018 by the Department for Business, Energy and Industrial Strategy (“BEIS”), reported that there was a significant increase in the formation of LLPs and SLPs between 2011 and 2016. The marked increase seems to only be partially explained under the heading of ‘legitimate business purposes’, the other explanation possibly being that the use of these vehicles was being marketed by individuals for inappropriate uses.
In the same consultation paper mentioned above, the government reassuringly acknowledged the wide usage and context in which limited partnerships are used in the fund industry. The government is looking to tighten the transparency requirements on LLPs and SLPs and to add more of a focus on financial crime aspects. They propose to do so in the following ways;
- Any people registering a limited partnership must confirm that they are subject to AML supervision by an appropriate body;
- There will be a requirement for limited partnerships to maintain a permanent principal place of business in the UK, with a permanent UK address for service of documents. This information will need to be confirmed annually by way of a confirmation statement sent to the Company Registrar. The government is also considering requiring a limited partnership to maintain a permanent UK address for service of documents with this address and the principle place of business being confirmed annually.
These proposed rules would mean that funds, traditionally structured as limited partnerships, would need to have a registered office or their principal place of business in the UK which would bring the fund under AIFMD, causing a duplication of regulation with the regime. In response to the proposed plans by the Government, the venture capital and private equity industry have outlined these points hoping the government will alter these plans.
The consultation closes on 23 July 2018. Once closed, it is expected that the government will seek to introduce primary legislation to implement the changes as soon as parliamentary time allows.