On 10 December 2018 the Government released its response to a consultation on proposed reforms to limited partnership law in the wake of growing concerns about potential criminal misuse.
In 2017 the Department for Business, Energy and Industrial Strategy (BEIS) sought and received evidence in response to reports that UK limited partnerships (LPs) were being misused as a vehicle for criminal activity. The concerns arose particularly in relation to Scottish Limited Partnerships (SLPs). The National Crime Agency identified a disproportionate volume of suspected criminal activity in relation to SLPs connecting them with a number of cross-border money laundering schemes. A consultation was published on 30 April 2018 which set out a range of proposals to reform LP law. On 10 December 2018 the Government responded to that consultation, highlighting the value of LPs when used for legitimate business purposes (particularly investment vehicles) but explaining the need to balance this with concerns about the use of LPs for criminal purposes.
The Government has stated an intention to legislate to give effect to the following key changes when parliamentary time allows:
- Reform of Registration Process: Anyone seeking to register an LP will need to be registered with a designated AML supervisory body or an overseas equivalent. This is to address the potential risk posed by formation agents, who are responsible for establishing the vast majority of LPs.
- Principle Place of Business: LPs will need to demonstrate an ongoing connection to the UK by either:
- retaining their principal place of business in the UK;
- demonstrating that they are continuing some legitimate business activity at an address in the UK; or
- demonstrating that they continue to engage the services of an agent that is registered with a UK AML supervisory body and which has agreed to provide it's address as a service address for the LP.
Even though an LP is currently obliged to notify the Registrar of any change to its principle place of business, the hope is that this requirement will ensure more meaningful contact between relevant UK authorities (such as HMRC) and the LP.
- Reporting and Transparency: In addition to existing information requirements, going forward LPs will be required to provide the following additional information: contact information for all limited and general partners; the date of birth and nationality of all limited and general partners that are natural persons; and a standard industrial classification code that identifies the nature of the LPs business.
Further, LPs in England, Wales and Northern Ireland will have to file a confirmation statement at least every 12 months (this requirement already applies in Scotland) that confirms that the information on the register is up to date.
Power to Strike Off: The Registrar will be given the power to strike off LPs that are dissolved or which the Registrar concludes are not carrying on business or in operation.
For further information please contact Jo Rickards in White Collar Crime and Investigations and Charlotte Wilson in Funds and Financial Services.