Reform of Limited Partnership Law
Comments from ACCA
November 2008
ACCA is pleased to comment on the consultation document on the above. ACCA is a professional accountancy body representing over 120,000 qualified members who work in business, financial services, public practice and the public sector.
We believe that the fact that there are currently over 14,000 limited partnerships (LPs) in existence demonstrates a continuing demand for this vehicle. We believe it is a useful exercise for the Department to review how the rules governing the LP might be revised so as to enhance its appeal as long as the key characteristics which have proved so successful over the years are not disturbed.
Before setting out our responses to the specific consultation questions, I address the various preconditions for resorting to a legislative reform order (LRO):
- Non-legislative solutions - the desired outcome could be achieved other than by changing the law
- Proportionality - we believe the proposed action is proportionate to the policy aim.
- Fair balance - we do not think that the net effect of this legislation will be to adversely affect the interests of any party.
- Necessary protection - in a small number of cases we think the proposals might need to be re-considered.
- Rights and freedoms - No effect.
- Constitutional significance - No effect.
Q1 Do you support the proposals as explained in Chapter 4?
The individual proposals appear to be sensible. We fully support the proposals in paragraph 64 to apply the new power in the Companies Act 2006 for Companies House to rectify information on the firm's file. The only provision which is proposed to be removed and which we would query is the reference to the term for which the partnership is being formed: unless there is evidence to the effect that such finite terms are no longer appropriate, we would suggest that this would constitute relevant information. One continuing requirement that we would query concerns the requirement to provide Companies House with the addresses of all of the firm's partners. In the light of the corresponding change being made in company law on this same matter, it might be considered whether addresses should be filed by the partnership itself but not placed on the public record.
Q2 Do you have any comments on the burdens being imposed, removed or reduced?
We do not consider that the changes set out in Chapter 4 would make any material difference to the burdens currently in effect.
Q3 Can you identify any protections which would be reduced or lost as a result of the proposals?
In theory at least, the proposal to dispense with the requirement to identify the general nature of the firm's business could amount to a reduction of stakeholder protection. While removal of this requirement would be consistent with the change to company law there is no reason why the law on companies and partnerships should be similar in this respect.
Q9 What are your views on the proposal to enable a limited partnership to keep a register of partners itself, with a requirement to send an update to Companies House periodically?
The defining characteristic of the limited partnership is that some at least of its members benefit from limited liability. We think that it is a proportionate response to this fact to expect the firm to provide basic information about its partners and the particular situation of its limited partners. Accordingly, our view is that the information should be sent to Companies House directly without third parties having to ask for it.
Q10 Do you agree with the list of permissible actions of the limited partner as drafted?
Certainty about which activities are permissible and which are not is definitely desirable. The list, however, seems rather generous and includes a number of matters that, we suspect, most observers would regard as amounting to involvement in management activity: for example, involvement in decisions regarding the approval or veto of a type of investment and the approval of the firm's accounts, and advising a general partner about the firm's activities and its accounts. Actions such as these in relation to a company would be very likely to make a person a ‘shadow director'. We would also query specifically the reference to the ‘general nature' of the business: if the requirement for an LP to identify this is to be repealed even for existing LPs, there would appear to be no reason to refer to this matter in the list.
But we agree it is a good idea to review any initial list in due course.
Q11 Do you agree with the proposal on withdrawing capital?
We consider that the Department's proposal would create additional burdens for wither the limited partner concerned or the firm. The interests of certainty and simplicity would be better served, in our view, by continuing with the current provision on this matter.