The new legislation will provide a new statutory framework for the establishment and operation of limited partnerships in Gibraltar
Significant new changes to the jurisdiction’s Limited Partnership Law have been published by Her Majesty’s Government of Gibraltar (HMGoG), as the jurisdiction commits to the future of its funds industry. As it did regarding blockchain, Gibraltar is again leading in finance and industry regulation.
The new Limited Partnerships Act 2020, is the product of a joint effort between HMGoG, the Gibraltar Financial Services Commission (GFSC) and the Gibraltar Funds and Investments Association (GFIA) and resulted from a survey of multi-strategy credit structuring solutions requested by HMGoG and undertaken by Paul Hastings LLP in London. The Act will repeal the existing Limited Partnerships Act 1927, paving the way for significant modernisation, as well as restating previous rules for the sector.
Jonathan Garcia, Partner at ISOLAS LLP led the process in his capacity as Head of Technical at GFIA, and was personally thanked by HMGoG for his work on the legislative changes.
In one of the most significant changes, Limited Partnerships will no longer be required to have legal personality. The Act will allow general partners, upon registering a limited partnership or re-registering a company as a Limited Partnership, to choose whether or not a Limited Partnership has legal personality.
Limited Partnerships registered under the former Act will continue to have legal personality unless the general partners, within three months, elect to cease the limited partnership’s legal personality and make appropriate declarations. This would allow a Limited Partnership to be able to show that the limited partnership does not constitute a legal person separate from its partners.
In further changes, the legislation will also define certain actions that a Limited Partner may undertake which will not amount to taking part in the management of the limited partnership. This would allow a Limited Partner to maintain limited liability, for example, an investor could actively participate in advisory committees to discuss the portfolio and individual assets without piercing its limited liability status.
The Act will also ensure voting rights of each partner will be in proportion to their partnership interest unless otherwise varied by agreement between or the consent of the partners, enshrining a fairer system of management.
The Act allows for partnership interests of Limited Partnerships that are authorised as an Experienced Investor Fund authorised under the Financial Services Act 2019 to be represented by shares, bonds, notes, loans or other debt securities or instruments which can be issued by the limited partnership.
In further legislative modernisation, the Protected Cell Limited Partnerships Act 2020 has also been introduced. The act enables Limited Partnerships that are authorised as an Experienced Investor Fund to create one or more cells to protect and segregate cellular assets from non-cellular assets and keep each cell separate and separately identifiable from other cells.
Protected Cells will be able to be used to create multi-cell funds or “umbrella funds”. Protected Cell Company legislation was first introduced in 2001, and Gibraltar was the first EU jurisdiction to offer this.
Jonathan Garcia, Partner at ISOLAS LLP, said: “This new legislation is an important step forward for “Gibraltar PLC”; it showcases our commitment to the future of the funds industry by bringing the legislation up to date with the modern uses of Limited Partnerships, showcasing our regulatory dynamism.
“It was a pleasure to work alongside the Government and be part of bringing this all together. HMGoG understands the need to work with local industry and their representative bodies in order to enact meaningful changes to legislation, in dramatically lower timescales than our competitors. I am proud to have played a part in bringing about these important changes.
“The legislation is in keeping with ‘right touch, not light touch’ regulation, as the regulator will not be required to sign off small changes. Coupled with our favourable tax system, the new legislation serves as another reason for many global entities to consider Gibraltar as the perfect location the investment funds industry.”