New Jersey Limited Partnership Amendment Will Meet Demand For Fund Migrations
Faced by a sea of regulatory complexity – from reporting and information sharing to substance and BEPS – alternative fund managers are increasingly looking at their structuring options, with a view to creating a stable, robust and straightforward platform.
It was with this in mind that, this month, Jersey’s government approved a new amendment to Jersey’s legislation that will make it easier for fund managers to migrate limited partnership fund structures to the jurisdiction.
The changes to the Limited Partnership (Jersey) Law 1994 introduce a new statutory basis for limited partnerships to be migrated from other jurisdictions, providing greater legal certainty for managers and investors.
Migrating a limited partnership to Jersey has been technically possible in the past, but the move brings Jersey in line with the laws of other jurisdictions.
Clean Legal Opinion
Essentially, the new regulations formalise a continuance pathway for non-Jersey limited partnerships wishing to continue into Jersey. In practice, this means that lawyers can provide a clean legal opinion that the foreign limited partnership continued as a limited partnership within Jersey.
There are a number of requirements a foreign limited partnership must fulfil to continue as a Jersey law governed limited partnership under the new rules, including:
- the foreign law under which it is currently established does not prohibit its continuance within Jersey;
- the limited partnership is solvent;
- the limited partnership is not in a state of being wound up or put into administration; and/or
- the limited partnership is not in the process of being deregistered other than in respect of its continuance to Jersey.
The general partner of the limited partnership will be required to make a declaration confirming that:
- it has applied for registration under the LP Law and for the consent of the Jersey Financial Services Commission (JFSC) under Art 10 of the Control of Borrowing (Jersey) Order 1958;
- it is solvent;
- the limited partnership will not have legal personality on its continuance.
The JFSC will also require evidence that the application to continue has been approved by the general partner; and if the law of the jurisdiction under which the eligible foreign limited partnership is or was formed requires an authorisation to continue as a limited partnership within Jersey, that the limited partnership has obtained that authorisation.
To be clear, a non-Jersey limited partnership may not continue into Jersey if it is being wound up, a receiver has been appointed in relation to its assets, it is subject to liquidation or insolvency proceedings in another jurisdiction, or it has been deregistered for a purpose other than continuing into Jersey.
The issue of the ‘certificate of continuance’ by the Jersey registrar is conclusive evidence that a foreign limited partnership has complied with the requirements of the regulations and that it has continued as a limited partnership within Jersey.
From the date of the certificate of continuance, the limited partnership will not be treated as a limited partnership formed under the laws of a foreign jurisdiction and all assets and other property (including choses in action and rights to make capital calls) previously held or acquired by or on behalf of the limited partnership are taken to be the property of the limited partnership, held in accordance with the LP Law.
Critically, pursuant to the regulations, continuance does not:
- create a new legal entity;
- affect any partnership interest; or
- affect any act or thing done before the continuance or the rights, powers, authorities, functions or obligations of the limited partnership, any partner or other person before its continuance.
If the general partner wants to migrate and is an incorporated foreign law company, then Jersey law already contains provisions for incorporated foreign law companies to continue into Jersey, meaning general partners of unincorporated foreign law limited partnerships can already apply for continuance into Jersey
In addition, if the continuing limited partnership operates as an investment fund, additional regulatory applications will need to be made and authorisations obtained before the continuance has effect.
It is expected that many continuing limited partnerships will seek approval as Jersey Private Funds (JPF) and the application process for a JPF is easy and straightforward. The Jersey administrator and Jersey lawyers advising on the continuance will be able to facilitate this application process.
The evidence we have seen over recent months would point to an appetite amongst private equity and other alternative managers for this sort of support and optionality when it comes to restructuring their funds and migrating structures in this way.
In our estimation, this amendment is a key development. From Jersey’s perspective, it introduces an express mechanism whereby limited partnerships can migrate to Jersey quickly and seamlessly; but equally as important, from a manager’s perspective, it adds to the range of options open to them. In the current climate, for managers who are exploring how they can better navigate the complex environment they operate in, having options like this at their disposal should be an attractive proposition.
Elliot Refson is Director - Funds at Jersey Finance
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