Investment funds are set to benefit from one of the world’s most innovative limited partnership regimes following the passing of the Limited Partnership Act in the British Virgin Islands (BVI). The Act will provide all the typical benefits of limiting liability, as well as a number of unique features, marking an evolution in limited partnership law.
Over recent years, limited partnerships have become a preferred structure for investment funds and are frequently used as a vehicle for private equity funds and joint ventures. This is because it enables investors who do not want to play an active role in managing the fund to limit their liability. Instead, the fund is controlled by a general partner who takes on unlimited liability.
New limited partnerships in the BVI contain several key innovations which represent a step change in this area of law. The Act contains a number of state-of-the-art provisions, including:
- Legal personality – the ability to choose legal personality means that a new partnership will have the capacity to hold assets and enter into contracts, and have the right to start legal proceedings in the name of the partnership. This provides partners with greater legal certainty and flexibility.
- Registering charges – the new statute will allow limited partnerships to register charges, providing greater certainty for creditors, which will enable limited partnerships to borrow to fund operations.
- Forfeiture – the specific common law position on penalties will not be applied, so forfeiture provisions typical in most limited partnerships will be enforceable.
- Model agreement inclusion – enabling the rapid set up of a limited partnership if needed
M&A provisions from the BVI Business Companies Act are applied in the new law, meaning limited partnerships can merge or consolidate with other limited partnerships.
Robert Briant, Partner and Head of the Corporate Deparment in the British Virgin Islands office of Conyers, Dill & Pearman, said: “Taken together, the provisions of the Act combine to create a state of the art innovative limited partnership product. It has been drafted in the same style as our flagship BVI Business Companies Act and will bring the benefits of being flexible, easy to set up and cost effective.”
Lorna Smith, OBE, Interim Executive Director of BVI Finance added: “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. 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.
“This Act is the product of excellent collaboration between lawyers from eight firms based in the BVI, who have worked tirelessly to create this innovative statute.”
“We are particularly proud of progressing this important piece of legislation despite being devastated by two Hurricanes last September. It shows that the BVI is very much open for business and continuing to innovate to help secure its place as a leading offshore financial centre.”