PART 2

December 2011

LIMITED PARTNERSHIPS 

53.37 Limited partnerships - definition

A limited partnership is where one or more of the partners is a limited partner who is only liable to the extent of his/her investment (see also paragraph 53.40).

This should not be confused with a limited liability partnership (LLP) (see Chapter 53A), which has more in common with a limited company.

 

53.38 Limited partnerships – general

A limited partnership is, in almost all other respects the same as an ‘ordinary’ (or ‘general’) partnership discussed within this chapter.

 

53.39 Legislation

The provisions for the creation of limited partnerships were introduced by the Limited Partnerships Act 1907, which legislates on those matters peculiar to limited partnerships.  Limited partnerships are, otherwise, governed by the general partnership legislation, being the Partnership Act 1890 (see paragraph 53.3).

 

53.40 Differences between a limited partnership and a ‘general’ partnership

The key differences between a limited partnership and a general partnership are: 

• A limited partnership will have at least one general partner (who has unlimited liability for the debts and liabilities of the partnership (although a general partner will often be a limited company).  The remaining partners’ liability for the debts and obligations of the partnership is limited to the amount of their original contribution [note 1] but they are excluded from the management of the partnership, and cannot bind the firm (see paragraph 53.71) without express permission [note 2].  
• There is a requirement that a limited partnership is registered at the Registrar of Companies (Companies House) and the partnership will be deemed a general partnership until so registered [note 3].  See paragraph 53.132 regarding the service on notice on the Registrar.

 

53.41 The Registrar of Companies

The Registrar of Companies must keep a register and index of all registered limited partnerships and of all the statements registered in relation to them [note 4].

 

53.42 Statement in support of registration

The partners must provide the Registrar with a signed statement containing the following particulars of the partnership [note 5]: 

• the firm name;
• the general nature of the business;
• the principal place of business;
• the full name of each of the partners;
• the term, if any, for which the partnership is entered into, and the date of its commencement;
• a statement that the partnership is limited, and the description of every limited partner as such; and
• the sum contributed by each limited partner, and whether paid in cash or how otherwise.

 

53.43 Inspection of register

Any person may inspect the register of files statements and may request a copy of the certificate of registration of any limited partnership or a certified copy of any registered statement [note 6].

 

53.44 False information provided to the Registrar

A person who knowingly and wilfully makes a statement for registration false on a material particular is guilty of an offence [note 7].

 

53.45 Limited partnership not a separate legal entity

As with a ‘general’ partnership, a limited partnership does not have a legal identity separate from that of its partners [note 8].

 

53.46 The winding-up of a limited partnership

Limited partnerships are dealt with as general partnerships so far as their winding-up is concerned (see Part 6) except where there is a creditor’s petition for the winding-up of the partnership with concurrent petitions against one or more members (see paragraph 53.100B) or a member’s petition with concurrent petitions against all members (see paragraph 53.100D).  In those cases, the court may dismiss the petition against a limited partner if the partner satisfies the court that they are no longer under any liability in respect if the debts and obligations of the partnership) [note 9].

 

53.47 Dealing with the winding-up of a limited partnership

Other than the need to investigate the extent to which the limited partner may have been involved in the management of the partnership (see paragraph 53.52), and the need to file notice of the winding up order at Companies House (see paragraph 53.132), the case can be dealt with as a partnership, following the guidance and advice elsewhere in Parts 6 and 7.

 

53.48 Bankruptcy order made against a limited partner of a limited partnership

Where a bankruptcy order is made against a limited partner, the official receiver should seek to establish if the bankrupt limited partner took any active part in the management of the partnership and, if so, the creditors of the partnership should be offered the opportunity to prove in the proceedings.

The bankruptcy of a limited partner does not, unlike the bankruptcy of a general partner (see paragraph 53.88), have the default result of the dissolution of the partnership [note 10].

 

53.49 Bankruptcy or death of sole general partner

A limited partnership by its very nature cannot continue in the absence of a general partner (see paragraph 53.40). The bankruptcy or death of the sole general partner will result in the dissolution of the partnership and would result in the limited partner(s) having to seek the winding-up of the partnership.

Where the partnership is insolvent and there are assets to be dealt with, or where the general partner was a corporate entity of which the official receiver is liquidator (see paragraph 53.50); the official receiver should consider applying to the court [note 11] for the court to make an order regarding the administration of the limited partnership’s estate. Notice of the application should be served on any limited partner with a short covering letter explaining that the purpose of the application is to regularise the administration of the insolvent partnership estate.  Putting the limited partner on notice will give him/her the opportunity to step in and make an application to the court [note 12] for the court to consider whether the limited partner should deal with the partnership estate.

 

53.50 Winding-up of sole general partner

The winding-up of the sole general partner will not, automatically, lead to the dissolution of the partnership but it is unlikely that the general partner (acting through the liquidator) will be willing or able to continue to perform the functions of the general partner. The official receiver should seek first to establish whether there is another general partner, or a limited partner who wishes to accept the role of general partner, and arrange for the insolvent to retire from the partnership. Otherwise it will be necessary for the official receiver to seek an order of the court as described above to initiate the dissolution of the partnership.

 

53.51 Qualification as a partner and change of status of partners

Any person who can be a general member has equal capacity to be a limited partner.

Provided that the partnership at all times has at least one general partner and at least one limited partner, the partners are free to change status from general partner to limited partner or vice versa [note 13] [note 14].

 

53.52 Forfeiture of limited liability

There are three circumstances in which a limited partner will lose his/her limited liability (and in the first two cases will have unlimited liability for the debts of the partnership): 

• If the firm is not registered correctly (see paragraph 53.40) 
• If the limited partner takes part, directly or indirectly, in the management of the partnership he/she will be liable for all the debts and obligations of the partnership incurred whilst he/she takes part in the same way as a general partner [note 15].  
• If the limited partner receives back part of his/her contribution – in which case he/she will be liable for the debts and obligation of the partnership up to the amount so received. [note 16]. 

See paragraph 53.161 for guidance on seeking recovery from limited partners in these circumstances.

 

53.53 Position of limited partners following winding-up

Limited partners are considered to be officers (see paragraph 53.114) of the partnership [note 17] and all relevant provisions under the Act (see paragraph 53.158 for example) would apply.

The official receiver should establish the amount and terms of the investment by the limited partner(s) (see paragraph 53.40) and record this on the list of contributories. 

 

 

[Back to Part 1 – Partnerships – general and formation] [On to Part 3 – The partnership agreement]