Limited partnerships: removal of 20 partner limit

United Kingdom

With effect from 22 March 2002, the Government has removed the "20 partner limit" in relation to UK limited partnerships which are collective investment schemes (within the meaning of the Financial Services and Markets Act 2000), and are operated or managed by an authorised person. This removes an outdated quirk of the law which has been frustrating for funds constituted as UK limited partnerships. The change should avoid the need in future to establish parallel partnerships, as all investors can become limited partners in the same partnership. It should also reduce the need to use, for example, Scottish limited partnerships as "feeder funds".

In principle, the change is applicable to both existing and future partnerships. Existing funds wishing to take advantage of the relaxation of the limit should review the terms of their partnership agreement(s). Depending upon how these are drafted, it may be necessary to make an amendment to obtain the benefit of the change. For example, the wording of the partnership agreement may itself prohibit the partnership having more than 20 partners (reflecting the prior legal position), in which case an amendment in accordance with the terms of the partnership agreement would be required. Any proposal to merge two or more existing parallel partnerships would inevitably be complex.

The change falls short of a complete abolition of the 20 partner limit, and therefore will not be available in circumstances where, for example, the limited partnership does not constitute a collective investment scheme because it falls within one of the available exemptions.

Consequently, where a limited partnership has been formed without an operator because the participants are participating as part of their existing business activities, the limit will still apply - but (by definition) this is unlikely to be a problem, because such partnerships typically have only a small number of partners.

The full text of the regulations can be found at the following location:

For further information, please contact:
Barney Hearnden, Corporate partner, London
Phone: +44 (0)20 7367 2878
Email: [email protected]