Blog: Is time up for Scottish Limited Partnerships?
Bonar Mercer looks at a fresh consultation on proposed reforms to the limited partnerships regime.
Scottish Limited Partnership (SLPs) (as well as English Limited Partnerships) are a type of business structure formed under the Limited Partnership Act 1907. Unlike English Limited Partnership, SLPs have separate legal personality meaning they can, among other things, enter into contracts and own property in their own name. It was partly this distinction that resulted in the Persons of Significant Control regime (designed to improve transparency of UK corporate entities) being extended in 2017 to apply to SLPs (but not English Limited Partnerships).
Negative publicity surrounding the use of SLPs is nothing new. The government department for Business, Energy, and Industrial Strategy (BEIS) published a consultation and call for evidence in January 2017. It was concluded from the responses to that consultation that there was a continuing need for limited partnerships to facilitate legitimate commercial transactions but that concerns remained about the prevalence of limited partnerships (and particularly SLPs) in large scale international money laundering schemes.
BEIS reported that according to the National Crime Agency SLPs played a part in a disproportionately high number of suspected criminal activities. They also said that five individuals were responsible for registering over 50 per cent of all SLPs registered between January 2016 and May 2017. BEIS have therefore launched a further call for evidence on proposed reform to limited partnerships which closes on 23 July 2018.
The latest consultation sets out several proposed reforms that would apply to limited partnerships, including SLPs. These can be summarised as follows:
- It’s proposed that applications for registration of limited partnerships (which are submitted to Companies House) only be accepted from persons or bodies that can demonstrate they are registered with an anti-money laundering regulatory body (in the way that Scottish law firms are regulated by the Law Society of Scotland for instance).
- There is a concern that current rules around registering the principal place of business of a limited partnership are being frequently breached. In an effort to ensure that limited partnerships have or maintain a real and legitimate connection to the UK, it’s therefore proposed to either (on which options views are sought):
- Require limited partnerships to maintain a ‘principal place of business’ in the UK and to confirm this is up to date via annual statements; or
- Permit the ‘principal place of business’ to be or be moved outside the UK, but require a service address to be maintained in the UK which could be used for the service of legal documents and such like.
- Consideration is being given whether a form of annual reporting should be introduced requiring all limited partnerships to make annual confirmatory statements to Companies House (similar to those required to be filed by limited companies), perhaps also including the filing of annual accounts.
- View are sought on whether Companies House should be given powers to strike limited partnerships off the register in specified circumstances, such as the failure to deliver confirmatory statements. Companies House has similar powers already in respect of limited companies.
The negative publicity surrounding SLPs has to some extent driven greater scrutiny over their use in corporate transactions much more quickly that any reform of the law has. Some may say that the proposed reforms on the whole are not exactly ground breaking, particularly when compared against the comparatively extensive reporting and transparency obligations on UK limited companies. However given the commercial importance of limited partnerships to UK private equity structures identified by BEIS, a balance clearly needs to be struck between driving out illegitimate use of limited partnerships to protect the integrity and reputation of doing business in the UK and maintaining a legal framework which makes the UK an attractive place to do business. It’s for that reason that SLPs are here to stay and that whatever reforms are ultimately implemented will be unlikely to require disclosure and/or reporting to the same extent as applies to UK limited companies.
Bonar Mercer is a solicitor at MacRoberts