GP financials may be made public in UK

GPs in the UK will have to make their financial statements public if they fall foul of the updated qualifying partnership rule.

UK-based GPs will be required to file financial statements with Companies House, in effect making them publicly available, if they are deemed a “qualifying partnership” under an accounting rule change.

Changes to a definition under the Partnerships (Accounting) Regulations 2008 will mean that private equity firms that structure their general partner as a limited company will be caught by the rule for the first time.

Private equity structures often consist of a limited partnership fund managed by a general partner. At the moment, many of these general partners are limited liability companies.

Previously, the UK defined a qualifying partnership when every partner (both limited and general) is either: a limited liability company; an unlimited liability company each of whose members is a limited liability company; a Scottish partnership which is not an LP and each of whose members is a limited liability company; or a Scottish LP each of whose partners is a limited liability company.

Usually, at least one (if not all) limited partners in a private equity limited partnership will not fall into one of the above categories, meaning the LLP is not a qualifying partnership. 

But the UK has changed the definition so that a qualifying partnership is one where each general partner falls into one of the above categories. This means that if a private equity structure involves a GP that is a limited company then the limited partnership fund will be a qualifying partnership and so must comply with all associated regulations – mainly the requirements of Companies Act 2006.

One possible workaround to the rule change would be to introduce a second GP that is an LLP [limited liability partnership] rather than a limited company, said Tim West, partner at audit firm Moore Stephens. 

“For new private equity structures I suspect we will see cases where LLPs are used rather than limited companies.”