The Department for Business, Energy & Industrial Strategy (BEIS) has issued a new consultation looking at the misuse of limited partnerships and reforming the law in this area.
BEIS are looking into the use of limited partnerships, areas of misuse, difficulties with striking off limited partnerships from the register, whether there should be a requirement to maintain a connection with the UK, and what the reporting requirements should be.
Misuse
There is a concern that the growth in the numbers of Scottish Limited Partnerships (SLPs) in recent years is, to some extent due to them being used for illicit purposes.
- SLPs have a separate legal personality to the partners, whereas other UK LPs or LLPs do not.
- There are fewer reporting and transparency obligations in SLPs.
Registrations
The majority of LPs and SLPs are registered by formation agents. The government are proposing that anyone completing an application for formation of a new LP or SLP (presenters) will need to be supervised under the Money Laundering Regulations and adhere to ‘Know your client’ rules.
- When registering the presenter of the application will need to evidence this supervision.
- If evidence is not provided, the registration will be refused.
- The government will consider whether non-UK presenters will be able to form these partnerships.
Place of business
Evidence suggests that a number of SLPs move their principal place of business (PPoB) without informing the Registrar as required. A large number of SLPs have operations or management outside of the UK.
The government is considering two new alternative options:
- The PPoB would have to remain in jurisdiction of registration, e.g. an SLP’s PPoB would have to remain in Scotland.
- This address would then be used for all communication between authorities and the LP.
- An annual confirmation statement confirming or updating the PPoB would be required and evidence that it is the genuine PPoB not just a service address would be required.
- Retain the current rules on PPoB but require a UK service address. This would act in the same way as a UK registered office for companies:
- Legislation would be clarified to allow PPoB’s to move abroad.
- The service address would be an additional requirement and would have to remain in the jurisdiction of registration.
- Both addresses would have to be confirmed on an annual confirmation statement.
Reporting and transparency
- SLPs are required to register Persons of significant control (PSCs) and an annual confirmation statement.
- LPs are only required to inform the Registrar of a change in partners or relocation of PPoB. There is no requirement to file accounts.
The government are proposing:
- Annual confirmation statements for all LPs, detailing PPoB, service address, general and limited partner’s details and sums contributed by each limited partner.
They are also considering requiring LPs to file accounts.
Striking off
- The Registrar has no power to remove LPs from the register.
- No can the partners remove the LP from the registrar by request.
- LPs still show on the register as active even though they may have dissolved.
The government propose that the LPs would remain on the register, but would be clearly shown as dissolved by enabling them to complete a voluntary strike off or a non-operating strike off.
The rules would mirror the company Striking off rules.
The deadline for responses is 23 July 2018.
Summary of questions
Question 1: Can you provide any additional evidence to help explain the trends in registrations of limited partnerships across the UK in recent years?
Question 2: Do you agree that presenters should be required to demonstrate they are registered with an AML supervisory body? Please explain your answer, and provide evidence on its potential impacts.
Question 3: How should this measure be applied to registrations from overseas?
Question 4: Would it be better to require a limited partnership’s principal place of business (PPoB) to remain in the UK, or alternatively to allow the PPoB to be based anywhere but require a UK based service address? Please evidence your answer, including if possible, an assessment of the likely costs of compliance.
Question 5: If a new requirement of a UK-based service address were introduced, but existing operation of the PPoB retained, what if any, transparency requirements should be put in place relevant to the PPoB?
Question 6: Should all limited partnerships be required to file an annual confirmation statement?
Question 7: If you are in favour of an annual confirmation statement, what information should be included and who should file it? Please consider whether that should be for the whole partnership or the difference in requirements for general partners against limited partners – including corporate partners.
Question 8: Is there a case for limited partnerships to have to prepare accounts and reports in line with the requirements for private companies, as is already the case for qualifying partnerships?
Question 9: Do you agree with the proposal to give the Registrar a power to strike off partnerships from the register of companies?
Question 10: Are there any other factors or criteria that the Registrar could consider in order to conclude that the partnership is not carrying on a business or in operation?
Question 11: What operational and legislative procedures could be put in place to mitigate concerns of strike off done in error?
Links
Money Laundering Checks: know your client
Register of Persons with Significant Control (freeview)
Register of Persons with Significant Control (client briefing)
Register of Persons with Significant Control (subscriber version)
