British Virgin Islands (BVI) is well known for its fabulous natural beauty, opulent mountain ridges, jewel-colored waters, and soft sandy beaches. Moreover, it also outshines its peers in the industry of global financial services.
Remarkably, this territory is perpetual in its pursuit of refining and advancing its financial services and legal structures, complying with worldwide regulatory regimes. The BVI provides flexibility in a stable legal environment to those who chose the jurisdiction for company formation, investment funds, banking and many more.
The most recent development from the BVI legislature is the new Limited Partnership Act. This new update represents a key addition to the commercial laws of the BVI and substitutes the limited partnership provisions listed in the Partnership Act, 1996. The update will be implemented to new BVI limited partnerships and the existing ones who chose to re-register under the new Act. In this way, new Limited Partnership Act, 2017 streamlines the former partnership law.
New limited partnerships in the BVI has quite a few key innovations which represent a revolution in this area of law. The Act has a number of advanced provisions, that includes:
Legal personality – The ability to choose legal personality means that any new enforcing partnership will have the capacity to hold assets, enter into contracts and the right to start legal proceedings in the name of partnership. This provides partners with greater legal flexibility.
Registering charges – The new statute will permit limited partnerships to register charges which leads to providing a greater assurance for creditors and enable limited partnerships to fund operations by borrowing.
Forfeiture – The specific common law placed on fines will not be applied due to which forfeiture provisions in most limited partnerships will be enforceable.
Model agreement inclusion – It enables a rapid set up of a limited partnership if needed.
Continuations, Mergers, Compulsory Redemption of Minorities and Schemes – It provides an ability to continue the foreign partnership in BVI and vice versa. Also, it certifies to enter into a plan or scheme of arrangement. The new update in the same way allows merger or consolidation with another limited partnership, including a foreign limited partnership where the foreign law permits mergers and consolidations of limited partnerships.
Winding-up, liquidation and strike off – A limited partnership can be first ‘terminated’ by the partners. Secondly, if it has no assets or liabilities, it may apply for ‘deregistered’. Lastly, for insolvency, partners may liquidate by the application of ‘strike off”.
Now, after the new update, here are the key features of the new BVI Limited Partnerships Act, 2017:
- Simple, quick, cost effective registration of limited partnerships;
- Ability to have a limited partnership with or without legal personality;
- No requirement for a BVI based local partner;
- Flexible terms of the partnership agreement including specifically tailoring to furnish for a default by limited partners;
- Ability to register a charge against a limited partnership with legal personality on the public register in the BVI;
- An extensive safe harbor list of activities that limited partners may engage in without risking their limited liability (including involvement in the management of service providers to the limited partnership or investments held by it);
- New statutory arrangements for capital calls and commitments, which both facilitate an investor’s ability to finance capital calls and also grant general partners and management a broad flexibility for dealing with limited partners who default on calls;
- Provisions allowing for general partner fiduciary and conflicts rules to be relaxed by agreement. These are specifically aimed at situations where a single general partner acts in relation to multiple limited partnerships and thus will enhance the ability of managers to manage a range of structures through a single general partner;
- General partners and limited partner investors are given much greater flexibility to define their roles, liabilities and limitations in respect of the limited partnership and its activities.
- Inclusion of various corporate law concepts for limited partnerships including merger (with rights for dissenting limited partners), consolidation, plans and schemes of arrangements, redemption of minority partnership interests and continuations;
- Detailed and specific provisions for the termination, deregistration, winding up and striking off of solvent limited partnerships and also for winding up insolvent limited partnerships to maximize efficiency.
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Consultant – Corporate Services and Compliance