Harneys recently had the pleasure of announcing that our British Virgin Islands office had re-registered itself under the Limited Partnership Act 2017 to take advantage of a number of the provisions in the new legislation. In that announcement we referred to some of the advantages of registration under the new legislation (apart from the obvious benefit of limited liability structures).
The Limited Partnership Act 2017 is the culmination of many years of effort by the British Virgin Islands legal community to fundamentally reform the law relating to limited partnerships in the Territory. Although reform efforts were directed towards investment funds, the structures also provide a number of advantages for other types of business – including the law firms themselves.
Although limited partnerships under the 2017 Act retain a number of the key features of partnerships, in many other respects they closely resemble limited liability companies, including the ability to opt for separate legal personality for the partnership.
Many of the most attractive features of limited partnerships under the 2017 Act are provisions which consciously replicate concepts of company law. A lot of these are simple and basic, like the ability to obtain a certificate of good standing for the partnership and setting out clear provisions for execution of documents. But others are more complex and detailed, including:
- a new registration regime for security interests created by the partnership to protect priority and give constructive notice to third parties;
- the ability to enter into plans and schemes of arrangement between the partners and/or creditors of the partnership;
- the ability to continue limited partnerships into and out of the British Virgin Islands;
- the ability to merge or consolidate limited partnerships by statutory process; and
- minority squeeze out provisions.
Whilst most of these concepts draw heavily upon equivalent provisions of BVI company law, there are subtle changes of emphasis and degree.
But other parts of the legislation simply seek to refine and improve on the predecessor legislation relating to limited partnerships, clearing away old problems and filling in gaps. Notable improvements include provisions for transfer of partnership interests, and accession to the limited partnership agreement. No longer will parties have to grant general powers of attorney to the general partner to sign accession agreements every time a new investor invests into a fund structured as a limited partnership. The long standing lacuna in BVI partnership law in relation to struck-off partnerships has finally been resolved.
Insolvency practitioners will also be heartened to see express provision made for dealing with insolvent partnerships. The Insolvency Act 2003 required subsidiary legislation to deal with partnership generally, but much like the theatrical play, Waiting for Godot, these regulations seemed destined never to arrive. Now – for limited partnerships at least – there are sensible provisions for dealing with financially distressed partnerships.
When the partners decided to re-register under the 2017 Act there was some hope that Harney Westwood & Riegels LP would be the first limited partnership to be registered under the 2017 Act. Sadly that did not happen – our investment funds team were too busy with forming new PE structures and managed to register 13 of them before we managed to register our own firm. But we were very pleased to complete our registration nonetheless, and look forward to joining our clients in enjoying the benefits of the new legislation.