Jersey set to offer two new partnership vehicles

Jersey is poised to provide private equity fund managers two new forms of the limited partnership arrangement.

Expected sometime in the second quarter, the island will offer GPs a separate limited partnership (SLP) and incorporated limited partnership (ILP), both of which will have its own distinct legal personality, whereas the latter goes one step further in being structured entirely as a corporate body.

Importantly, it is expected by UK tax practitioners that both the SLP and the ILP will be UK tax transparent.

The advantage of a distinct legal personality is the partnership being “able to contract, hold property, sue and be sued purely in their own name”, which is in contrast to traditional LPs which are only able to do so through their GP, according to Channel Islands law firm Carey Olsen.

Aside from the benefit of legal personality, the SLP will work much like a traditional limited partnership.

The ILP, a hybrid structure mixing the elements of a partnership and corporation, is in essence a company which still retains the essential features of a partnership. For instance in the event an ILP had to be wound up, the partnership would be governed by the more familiar and detailed insolvency provisions provided by Jersey company law.

Further, as a body corporate, the ILP is a more robust fund vehicle, says James Mulholland, a London-based Jersey funds partner at Carey Olsen. “One benefit is that banks may prefer lending to a fund that is an ILP for capital call financing since it is a discrete body corporate as the contracting party, which ultimately gives the banks greater security.”

For in-depth analysis on private equity’s growing appetite for Channel Islands’ funds see this year’s Fund Structures supplement in the April edition of Private Equity International.