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Changes to Limited Partnerships Law proposed - International Law Office

International Law Office

Company & Commercial - Guernsey

Changes to Limited Partnerships Law proposed

June 21 2010

Proposed amendments
Clarification of role of general partners
Migrations and conversions


Limited partnerships are a well-established vehicle in Guernsey and are widely used to operate investment funds. They are advantageous in respect of tax planning, allow investor liability to be limited and allow new partners to be introduced as passive investors.

Although the existing law on limited partnerships in Guernsey functions well, as part of a general review of the jurisdiction's commercial laws, the States of Guernsey has taken the opportunity to propose amendments to the law in order to increase its flexibility and certainty, thereby ensuring that Guernsey remains a frontrunner for those seeking to establish limited partnerships.

Proposed amendments

Protection for limited partners
Under the existing rules, limited partners may lose the limitation of their liability if they are in any way involved in the operation or management of the partnership. To enable limited partners to provide an effective oversight of the partnership, it is proposed that the new legislation include provisions to allow for a carve-out from this position for limited partners who participate in a committee of limited partners to oversee the investment activities of the partnership.

It is hoped that this will encourage the use of such committees in ensuring that limited partners play a more active role in the partnership, thereby improving corporate governance and accountability.

Protected cell limited partnerships
It is proposed to introduce so-called 'protected cell' limited partnerships using legislation similar to Guernsey's protected cell company legislation. This would allow a limited partnership to create multiple cells into which it can segregate rights, powers or duties with respect to specified property or obligations. This would also allow each cell to have a separate business or investment objective.

Separate legal personality
Under the existing rules, Guernsey limited partnerships can elect (irrevocably) to be formed with separate legal personality at the time of their registration. It is now proposed to allow limited partnerships to adopt a separate legal personality at any stage during their life or to convert back into an ordinary limited partnership. The liability of the limited or general partners would not be affected, with the main advantage being the ability to contract in the name of the partnership. The changes would have no effect on the rights of third parties, which would remain protected under the law.

Clarification of role of general partners

Contributions to partnership
The proposals seek to clarify the role of general partners. Hitherto, a concern has existed that if a general partner fails to make a contribution to the partnership on admittance, the limited partnership may not be considered to be a partnership under the Partnership Law. The new law will therefore include a provision expressly stating that a general partner's contribution to the limited partnership is not a prerequisite to the entity being recognized as a partnership. The proposed changes will also allow contributions made by general partners in a form other than capital.

Execution of documents
To provide counterparties with certainty in transactions, it is proposed to define the circumstances in which a general partner may execute a document on behalf of the partnership. Under the proposal, where a general partner executes a document on behalf of the limited partnership, the counterparty may assume that (i) the general partner has the authority under which it purports to act, and (ii) the document has been validly executed by the general partner.

General partners of multiple partnerships
To avoid potential uncertainty where an individual acts as a general partner for numerous limited partnerships, it is proposed to include a provision confirming that a general partner is permitted to be a general partner of more than one limited partnership. This proposal will ensure that Guernsey limited partnerships will not be troubled by concerns raised in other jurisdictions which suggest that all limited partners of one limited partnership might be found to be partners in all the limited partnerships of which their general partner is also a general partner.

Migrations and conversions

Proposed changes to the law on migrations and conversions of limited partnerships will ensure that Guernsey is at the forefront of limited partnership legislation. Guernsey would be one of the first jurisdictions to enable the migration of limited partnerships.

On a similar basis to the process governing company migrations under the Companies Law 2008, the proposals also provide for the conversion of limited partnerships into other entities and vice versa, replicating the newly introduced provisions for the conversion of companies in the Companies Law.

Other proposals include enabling limited partnerships to merge, consolidate and amalgamate with any other business entity within the island, and potentially with entities from elsewhere.


These proposed changes were put before the States of Guernsey in February 2010. If approved, legislation will be prepared and consulted on to include the proposals.

For further information on this topic please contact Wayne Atkinson at Collas Day by telephone (+44 1481 723 214), fax (+44 1481 711 880) or email (wayne.atkinson@collasday.com).

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