Dilmun Leach
Partner, Walkers (CI) LP
Jersey
KEY TAKEAWAYS
Jersey is the premier offshore jurisdiction of choice for many global corporations and financial institutions, and lead onshore counsels. Its enviable position owes much to the excellent quality of its service providers and its flexible and well-developed legal and regulatory framework. The provision of corporate and finance advice and related services represents the core business of Walkers globally and is the primary focus of the Jersey office.
Under the Partnerships Law, a Jersey limited partnership must be registered in Jersey by delivering to the registrar of limited partnerships in Jersey (the "LP Registrar") a declaration in respect of the partnership signed by each person who will be a general partner on its formation. The declaration will include the following details for submission to the LP Registrar:
It is common to appoint a corporate services provider in Jersey to establish a Jersey limited partnership and its general partner, provide a registered office (which the limited partnership must have in Jersey), fulfil the role of a nominated person and to attend to the ongoing Jersey filings (such as tax return filings with Revenue Jersey and statutory filings with the Jersey Registry) on behalf of the Jersey limited partnership and its general partner.
A limited partnership does not have its own legal personality separate from its partners. The general partner, in its capacity as general partner of the limited partnership, acts and contracts on behalf of the limited partnership. A limited partnership will automatically dissolve in the absence of a general partner.
The general partner of the limited partnership is responsible for the management and administration of the limited partnership in accordance with the terms of the partnership agreement. Partnership property acquired or held in the name of the limited partnership or by or on behalf of any one or more of the general partners must be held or deemed to be held by the general partner(s) as an asset of the limited partnership in accordance with the terms of the limited partnership agreement.
The debts or obligations incurred by a general partner in conducting the activities of a limited partnership are debts or obligations of the limited partnership. A general partner is liable for the debts and obligations of the limited partnership if the assets of the limited partnership are insufficient to discharge the debts and obligations of the limited partnership.
A limited partner in the limited partnership has no authority or power to bind the limited partnership. Subject to the terms of the limited partnership agreement, the liability of a limited partner for the debts of the limited partnership is limited to the difference (if any) between the value of the money or other property contributed by them to the limited partnership and the value of the money or other property that they have agreed to contribute to the limited partnership.
A limited partner may lose its limited liability where such limited partner participates in the management of the limited partnership in its dealings with third parties who reasonably believe, based on the limited partner's conduct, the limited partner to be the general partner of the limited partnership. Helpfully, however, there are extensive safe harbour provisions in the Partnerships Law comprising a non- exhaustive list of activities which a limited partner may participate in or carry out and which do not constitute participating in the management of the limited partnership.
Limited partners can only be admitted to a limited partnership to the extent allowed by the limited partnership agreement. Admission must be made by way of entry in the partnership's register of limited partners.
A limited partner's contribution to the limited partnership can be in the form of money, any property or services. The Partnerships Law does not prescribe how contributions are made, drawn down or returned to limited partners during the life of the limited partnership and the partners are free to agree such terms, as well as those relating to distributions from the limited partnership within the partnership agreement (as long as the limited partnership is solvent when approving a distribution).
A limited partner can only transfer their partnership interest or any part of it, if permitted to do so by the limited partnership agreement, or if all the partners consent to the assignment and the assignment is made in accordance with the terms of the limited partnership agreement or the consent, as the case may be.
A limited partnership is required to keep accounting records sufficient to show and explain its transactions and disclose with reasonable accuracy its financial position at any time but its accounts do not have to be audited unless required by the terms of the limited partnership agreement or any other applicable legislation or regulations.
The general partner must file an annual confirmation statement in respect of the limited partnership before the end of February in each year confirming that the details held by the Registry are accurate (in particular, in respect of the partnership's registered office, its general partner and the limited partnership status (eg continuing or in wind up). The general partner must notify the LP Registry of changes to the beneficial owner, controller or significant person information within 21 days.
The economic substance regime for Jersey limited partnerships is captured in the Taxation (Partnerships – Economic Substance) (Jersey) Law 2021 (which came into force with effect from 30 June 2021, bringing partnerships into scope) (the "Partnerships Substance Law") (together the "Substance Laws").
A partnership will be caught within the scope of the economic substance regime if it is a "resident partnership" which carries on one or more "relevant activities" and receives gross income from the relevant activity. The relevant activities falling within the scope of the economic substance regime include:
A company or limited partnership which carries on fund management business, is one which provides fund management services to a fund (including a collective investment fund or a Jersey Private Fund), with respect to its investments and risk decisions. It does not include the provision of other services to a fund, such as administration or registered office services. Limited partnerships which act as fund vehicles are exempt from the Partnerships Substance Law. Accordingly it is the functionary acting as the decision- maker of the fund (such as a general partner, managing trustee or investment manager) to which the substance laws normally apply.
A limited partnership will be a "resident partnership" if certain conditions are met, but being "resident" for substance purposes does not cause the partnership in question to be taxable person in Jersey – limited partnerships continue to be transparent for Jersey tax purposes. A Jersey law governed partnership will generally be treated as resident in Jersey unless its "place of effective management" ("POEM") is in a jurisdiction where the limited partnership is subject to a substantially similar economic substance regime or the highest rate of income tax of any person is at least 10%. A limited partnership's POEM is where the key management and commercial decisions necessary for the conduct of its business are taken. A non- Jersey partnership is resident in Jersey if its POEM is in Jersey.
By way of overview, a limited partnership may be dissolved by:
The dissolution of a limited partnership takes effect upon the cancellation of registration of the declaration of the limited partnership being registered by the LP Registrar.
The Walkers Investment Funds & Corporate teams in Jersey are experienced in all aspects of the establishment and use of Jersey limited partnerships and have strong links with onshore counsel and tax advisers.
Key Contacts
Partner, Walkers (CI) LP
Jersey
Managing Partner
Jersey