Economic Crime and Corporate Transparency Act 2023 (“ECCTA”) - impact on UK limited partnerships in fund structures

Why should general partners and managers of limited partnerships read this?

Part 2 of ECCTA relates to UK limited partnerships, including private fund limited partnerships and any UK limited partnerships used as carry and co-investment vehicles or holding and conduit structures. The new rules were put in place to tackle perceived abuses of limited partnerships in contexts other than the use of limited partnerships by private funds structures, but nevertheless have impact on limited partnerships used in fund structures.

What are the new rules?

All UK limited partnerships to create and maintain a connection with the UK

All UK limited partnerships must have:

• A monitored email address
• A monitored registered office in the UK
  • An address for service of legal documents
  • Even if their principal place of business is not in the UK

Additional registration requirements

Applications for registrations of limited partnerships at Companies House must provide various information including the following in relation to limited partners and general partners, whether proposed or already:

Disclosure requirements:

To Companies House:

• Annual statement confirming the information on the Companies House register is correct
• Notify the Registrar of Companies within 14 days of any change to the information provided in relation to:
  • the general partner
  • the limited partners, including:
    • for a non-private fund limited partnership, any change to the limited partner’s contribution
    • for a private fund limited partnership that was registered as a limited partnership before 6th April 2017, a limited partner withdrawing an amount of their contribution such that the amount of their contribution is less than it was on the date on which the limited partnership was designated as a private fund limited partnership
  • the limited partnership, including any dissolution

To HMRC:

• Audited accounts must be provided to HMRC upon request

Registrar of Companies’ power to deregister limited partnerships

The Registrar of Companies will have power to deregister limited partnerships which are:

• dissolved
• no longer carrying on business
• if a court orders that it is in the public interest to do so

A limited partnership will be deemed dissolved if:

• it ceases to have a general partner
• its general partner is insolvent or disqualified
• it ceases to have any limited partners

What should general partners and managers do to prepare?

General partners and mangers should:

• identify all UK limited partnerships and confirm that they have required information available
• consider if they need to amend limited partnership agreements to ensure that limited partners notify the general partner when their information changes
• consider whether they need to update their KYC processes to ensure that the required information on limited partners will be captured at investment
• check that each limited partnership has fulfilled the email address and postal address requirements
• monitor the ECCTA implementation dates
• be prepared to comply with the rules as they come into effect

When will the new rules come into force?

During 2024 or 2025. Most of the relevant provisions will be subject to further guidance and implementation timescales will emerge in due course.

For most of the new rules, existing limited partnerships will benefit from 6 month transition periods as they come into force.

General partners should be aware that , the Companies Registrar can take failure to comply with the new rules within the transition period, including the failure to provide the required information, as reasonable cause that the relevant limited partnership has been dissolved. After sending warning notices to the general partner(s) and the Gazette, the Companies Registrar will have the power to remove the limited partnership from the register. Non-compliance also carries criminal liability, generally punishable by a fine, but non-compliance with a HMRC request for audited accounts or knowingly providing a false statement may carry a custodial sentence.

Other parts of ECCTA relevant to fund managers

These include:

• changes to the UK’s Register of Overseas Entities requiring additional information to be provided to Companies House, including further information on beneficial owners if nominees or trusts are used to hold real estate
• introduction of new corporate offence for failure to prevent fraud

How Eversheds Sutherland can help

The team advises fund managers and GPs on the establishment and ongoing management of investment vehicles. In particular, we advise GPs on structuring funds, co-investment vehicles, carried interest vehicles, parallel vehicles and segregated mandates. We assist from the structuring stage, through preparation of the
fund documents to negotiating side letter terms with investors, assisting with closing and advising throughout the life cycle of the fund and its restructuring and winding-up.

We also advise institutional investors including large public and private pension schemes, development finance institutions (DFIs), sovereigns, family offices, funds of funds, multi-managers and insurance companies on the full range of their investments. Where we act for investors, this includes running the legal and tax due diligence on their proposed fund investments, through to negotiating fund terms in side letters, reviewing legal and tax opinions and assisting with closing mechanics and subscription documentation.

Our industry leading experience means we understand sticking points in negotiations and can resolve them efficiently and effectively, achieving the best possible outcome for our clients while limiting protracted negotiations. Our expert knowledge in this field, backed up by hard data, gives our clients the confidence to push for certain points while also not wasting valuable time and resources on points which are off market.

Further reading on ECCTA

See our previous client briefings:

• Putting a stop to fraud: UK failure to prevent fraud offence passed into law