Transferring limited partnership interests
A limited partner may assign its interest in a limited partnership, subject to the general partner's consent and any contrary agreement between the limited partners.
The assignment must be registered at Companies House within seven days of the assignment, and must also be advertised in the London Gazette (or the Edinburgh Gazette in the case of an assignment of interests in a Scottish limited partnership). Unless and until the assignment is advertised in this manner, the assignment will not be effective. The assignment of a limited partnership interest will often be effected by way of a deed of transfer and an accompanying sale and purchase agreement which may contain simple warranties such as those relating to ownership of the limited partnership interests. However, the documentation and the level of detail will vary depending on the nature of the transaction and sophistication of the counter-parties.
Most limited partnership agreements will stipulate detailed provisions for both the admission of new limited partners and for the assignment of limited partnership interests and it would be expected to see a requirement of the general partner's consent, such consent not to be unreasonably withheld, to any assignment of a limited partnership interest (except for certain exceptions such as a transfer to an associate of the limited partner). Most limited partnership agreements will contain restrictions on the transfer of limited partnership interests to transferees that do not meet the ‘KYC’ requirements of the general partner.
Subject to any agreement expressed or implied between the partners, further limited partners may be admitted to the limited partnership, and the general partner has discretion to appoint the new limited partner without the consent of the current limited partners. Any incoming partner does not assume any liability for anything done before their admission, although the limited partnership agreement (LPA) may stipulate otherwise. A new limited partner will be expected to enter into a deed of adherence to the terms of the LPA.
Any retirement by a limited partner must also be registered with Companies House and advertised in the Gazette.
Private fund limited partnerships
The introduction of the private fund limited partnership (PFLP) pursuant to the Legislative Reform (Private Fund Limited Partnerships) Order 2017, SI 2017/514 is an attempt to modernise the assignment of limited partnership interests.
As with limited partnerships which are not PFLPs, a transfer of a PFLP interest will be effected by way of a deed of transfer and usually a sale and purchase agreement. The general partner of a PFLP must notify the transfer or assignment to the registrar within seven days of the change occurring. However an advertisement in the London Gazette (or the Edinburgh Gazette in the case of an assignment of interests in a Scottish limited partnership) is no longer required and a Gazette notice is only required for a PFLP where a general partner ceases to be the general partner of the PFLP.
This is a welcome change, not only because it removes the requirement for a Gazette notice which is an administrative burden and an additional cost from PFLPs, but also as it removes the uncertainty caused by a Gazette notice over when a transfer is effective. Limited partnerships which are not PFLPs have to advertise any assignment in the Gazette, and until this notice is so advertised the transaction has no effect.
In addition to lower costs and a quicker process of assigning PFLP interests, PFLPs will benefit from greater certainty of when the transfer of a limited partnership interest has become effective.
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