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BVI eyes PE funds with limited partnership overhaul

The reforms include greater flexibility for GPs and LPs to define their roles, liabilities and limitations and the ability to borrow capital to finance operations.

British Virgin Islands has passed a bill reforming the limited partnership structure in a bid to attract investment funds to register in the country.

New limited partnerships in the BVI will now have the ability to register charges, meaning funds will be able to borrow to finance operations, according to a statement from BVI Finance, the finance promotional agency. The Limited Partnership Act also grants these entities the reorganisation and reconstruction tools once confined to companies, including the ability to merge or consolidate limited partnerships and migrate existing limited partnerships to and from the BVI, according to a December statement from BVI law firm Ogier.

Other changes include greater flexibility for GPs and LPs to define their roles, liabilities and limitations in the partnership. The act provides a “safe harbour” list of activities that limited partners may engage in without being considered as participants in the management of the limited partnership, the Ogier statement noted.

“The BVI is committed to ensuring that our business legislation is modern and fits market needs, reflecting the actual commercial landscape in which companies operate,” Lorna Smith, interim executive director of BVI Finance, said in a statement. “That is why we have created new provisions for limited partnerships in the BVI that will be highly attractive to funds, particularly private equity funds.”

Limited partnerships will also be able to choose ‘legal personality’, granting them the capacity to hold assets and enter into contracts, as well the right to start legal proceedings in the name of the partnership. The specific common law position on penalties will not be applied, so forfeiture provisions typical in most limited partnerships will be enforceable.

There were 1,614 regulated investment funds representing a total net asset value of $250 billion in BVI as of December 2016, according to a June statement from BVI Finance.

BVI was ranked the 37th most competitive fund domicile in the world as of September 2017, up from 51st in May, according to the Global Financial Centres Index. The organisation judges the competitiveness of the world’s major financial centres on a scale of 1,000 points, considering factors such as the availability of skilled personnel, the regulatory regime and the ICT infrastructure.