A new form of limited partnership has been introduced in the UK, in a bid to modernise the law in this area. It also aims to promote the UK limited partnership as a favoured arrangement for private equity and venture capital funds.

The Legislative Reform (Private Fund Limited Partnerships) Order 2017 amends the Limited Partnerships Act 1907 (LPA 1907) to allow for the establishment of private fund limited partnerships (PFLPs).

A limited partnership can convert to PFLP status if it is subject to a written agreement and a collective investment scheme, within the meaning of Section 235 of the Financial Services and Markets Act 2000. Only UK limited partnerships that qualify and elect to be PFLPs will be within the new regime.

To gain PFLP designation, the general partner can apply to Companies House either on first registration of the partnership or afterwards. A PFLP will retain the name ending with “limited partnership” or “LP”.

Under LPA 1907, a limited partner may not take part in managing the partnership business without being liable for all debts and obligations of the limited partnership as if they were a general partner.

By contrast, PFLPs are subject to a “white list”, which outline actions that will not be considered management of the business. Examples include approving the accounts and discussing the prospects of the partnership business. Whether a limited partner can perform white list actions will depend on the terms of the partnership agreement.