Good news for private investment funds with the introduction of private fund limited partnerships

27 Feb 2017

It is anticipated that private equity investors will receive a welcome boost by the introduction of private fund limited partnerships (PFLPs) on 6 April 2017. They will be a sub-category of the current form of English limited partnerships and will have some key differences.  

Limited partnerships are a popular vehicle for private equity investment, as they are both tax transparent and provide limited liability protection for investors (limited partners), as long as they are not involved in the management of the limited partnership. Management  is carried out by the general partner(s).

The PFLP structure is being introduced for private investment funds (funds that are not authorised to be promoted to retail consumers) that are currently structured as limited partnerships; for example, private equity and venture capital funds.

How are the changes beneficial?

The PFLP structure aims to reduce some of the administrative and financial burdens that  private funds using the limited partnership structure currently have to deal with. The new approach will also provide greater certainty for limited partners by introducing a non-exhaustive list of permitted activities in which limited partners may engage, without being deemed to be involved in management.

What you need to know

A limited partnership may only be designated as a PFLP if it satisfies both of the “private fund conditions” which are:

  • it is constituted by an agreement in writing; and
  • it is a collective investment scheme (this means broadly that it falls within the definition in section 235 of the Financial Services and Markets Act 2000).

When applying for registration and designation as a PFLP, the general partner(s) will be required to confirm that the partnership meets the private fund conditions.

What are the main differences to limited partnerships?

  1. Limited partners in a PFLP are not required to contribute capital or property to the PFLP. If they do contribute capital or property, they may withdraw it without being liable for the PFLP’s debts and obligations to the amount withdrawn, as is currently the case for limited partnerships;
  2. There will be a non-exhaustive list of permitted activities that a limited partner in a PFLP may undertake, without being treated as taking part in management, so as not to forfeit its limited liability status;
  3. Fewer changes in the partnership will need to be notified to Companies House and advertised in the Gazette;
  4. Limited partners will be able to decide whether to wind up the PFLP where there is no general partner and nominate a third party to wind up the PFLP on their behalf;
  5. Limited partners will not have to comply with the duties of partners to provide information to other partners and account for profits from competing businesses, as such duties are not appropriate for their passive investor role; and
  6. An existing limited partnership will be able to apply for PFLP status if it fulfils the criteria to qualify.

If you require further information or advice about the existing regime for limited partnerships or the PFLP proposals please get in touch with your usual contact at DMH Stallard or contact either Nick Williams or Vincent O’Brien in our corporate team.

Further reading

Commercial landlords face extended restrictions

Blog, Legal Updates
Landlords take another hit as tenants’ protection mandated to last two years; Lawrence Morley takes a look
Read more Read

New Homes Quality Code – consultation under way

Blog, Legal Updates
Now is the time for housing developers to contribute to the discussion about new quality code
Read more Read

Is changing terms of employment about to become more difficult?

Employers beware. It may become more difficult to change terms of employment through the process of dismissal and re-engagement or “fire and rehire”.
Read more Read

Is the menopause really a business issue?

Abigail Maino explores the extent to which employers should be supporting employees who may be struggling with symptoms of the menopause
Read more Read
  • Brighton Office

    1 Jubilee Street


    East Sussex

    BN1 1GE

  • Gatwick Office

    Griffin House

    135 High Street


    West Sussex

    RH10 1DQ

  • Guildford Office

    Wonersh House

    The Guildway

    Old Portsmouth Road



    GU3 1LR

  • Horsham Office

    Ridgeland House

    15 Carfax


    West Sussex

    RH12 1DY

  • London Office

    6 New Street Square

    New Fetter Lane


    EC4A 3BF

  • Get in touch