- the "Separate Limited Partnership" ("SLP"), having separate legal personality, without being incorporated; and
- the "Incorporated Limited Partnership" ("ILP"), being incorporated as a body corporate with perpetual succession.
Since the passing of the Limited Partnerships (Jersey) Law 1994 (the "Partnerships Law"), Jersey limited partnerships have proved increasingly popular, particularly as collective investment vehicles. The SLP and the ILP are each modelled on the limited partnerships available under the Partnerships Law and are therefore familiar.
However, as described below, each introduced a different legal status of limited partnership, thereby offering investors and business and professional undertakings maximum flexibility in choosing a limited partnership structure which matches their needs.
Separate Limited Partnerships
SLPs were introduced by the Separate Limited Partnerships (Jersey) Law 2011. The key feature of an SLP is that it has a legal personality separate from that of its partners but without being incorporated. This means that an SLP has the flexibility to own property, enter into contracts, and litigate and be litigated against in its own name (in contrast to a limited partnership formed under the Partnerships Law).
Separate legal personality is of particular use where the SLP will be investing in, or contracting with entities from, a jurisdiction which does not recognise the concept of limited partnerships, as the concept of separate legal personality is generally recognised in most jurisdictions.
Other key features of an SLP are as follows:
- Unlimited SLP legal capacity – an SLP has unlimited legal capacity, subject to any restrictions contained in the SLP’s partnership agreement;
- Liability of SLP limited partners – an SLP’s limited partners are not liable for the debts or obligations of the SLP (subject to certain conditions set out in the law governing SLPs including, of course, any unpaid capital commitment);
- Liability of SLP general partner – an SLP requires a general partner, which is the only entity with unlimited liability in the dealings of the SLP with third parties, although the property of the SLP may be held in the SLP’s own name or in the name of the general partner;
- Winding up and dissolution – an SLP can be wound up and dissolved either by (a) the general partner, (b) a limited partner or creditor if there is no general partner left, or (c) a Royal Court ordered winding up. When winding up is completed, a request for cancellation of the SLP's registration must be submitted to the Jersey registrar of separate limited partnerships and the SLP will be dissolved once its registration is cancelled;
- Flexibility of purpose – whilst similar in many respects to a Scottish limited partnership, an SLP may be formed for any lawful purpose. This flexibility contrasts with a Scottish limited partnership which is required to be formed "between persons carrying on business with a view to profit"; and
- Naming convention – the name of an SLP must end with the words "Separate Limited Partnership" in full or either of the abbreviations "S.L.P." or "SLP".
Incorporated Limited Partnerships
ILPs were introduced by the Incorporated Limited Partnerships (Jersey) Law 2011. The key distinction between an ILP and an SLP is that an ILP is a body corporate with perpetual succession.
One advantage of having body corporate status and thus perpetual succession is that persons dealing with an ILP can be confident that it will continue to exist and be held accountable for its debts and obligations.
A further advantage is that most jurisdictions generally accept that a body corporate is governed by the law of the jurisdiction in which it is incorporated. This might be particularly important if there were perceived to be any risk that a limited partner might otherwise be treated by a non-Jersey court as having unlimited liability.
Other key features of an ILP are as follows:
- Unlimited ILP legal capacity – as in the case of an SLP, an ILP is able to own property, enter into contracts, and litigate and be litigated against in its own name, and will have unlimited legal capacity, subject to any restrictions contained in the ILP’s partnership agreement;
- Liability of ILP limited partner – as in the case of an SLP, an ILP’s limited partners are not liable for the debts or obligations of the ILP (subject to certain conditions set out in the law governing ILPs, including any unpaid capital commitment);
- Liability of ILP general partner – as in the case of an SLP, an ILP requires a general partner, which will be the only entity with unlimited liability in the dealings of the ILP with third parties. However, the general partner is only liable for the debts and obligations of the ILP if the ILP has failed to discharge any of its debts or obligations as they fall due;
- Winding up and dissolution – the procedures for winding up and dissolution of solvent and insolvent ILPs are set out in the Incorporated Limited Partnerships (Jersey) Regulations 2011. An ILP can be wound up and dissolved either (a) by agreement of the partners, (b) upon there ceasing to be two or more partners, (c) by any act of a partner, or by any occurrence in accordance with the partnership agreement, or (d) by a Royal Court ordered winding up. When winding up is completed, a request for cancellation of the ILP's registration must be submitted to the Jersey registrar of incorporated limited partnerships and the ILP will be dissolved once its registration is cancelled;
- Flexibility of purpose – as in the case of an SLP, an ILP may be formed for any lawful purpose (ie it is not required to be formed "between persons carrying on business with a view to profit", as in the case of a Scottish limited partnership);
- Duties of ILP general partner - the general partner of an ILP is an agent of the ILP. The law governing ILPs imposes certain obligations upon the general partner of an ILP similar to those applicable to directors of a Jersey company (eg the duty to act honestly and in good faith with a view to the best interests of the ILP and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances); and
- Naming convention – the name of an ILP must end with the words "Incorporated Limited Partnership" in full or any of the abbreviations "I.L.P.", "ILP", "Inc. L.P." or "Inc LP".
Other Jersey legislation
Appropriate amendments have been made to the legislation in Jersey relating to the establishment and regulation of investment funds to ensure that SLPs and ILPs may be used in fund structures.
Taxation
SLPs and ILPs will be treated in the same manner as ordinary Jersey limited partnerships for Jersey tax purposes (ie SLPs and ILPs will be tax transparent). However, the tax treatment of Jersey limited partnerships, including SLPs and ILPs, and their partners may differ in other jurisdictions.
The information contained in this guide is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.