Limited Partnerships in the BVI
On 1st January 1997, the Partnership Act 1996 (the Act) came into force in the BVI. It features two types of partnerships, the Limited Partnership and the General Partnership. The Limited Partnership is the most common one.
In the Act, the Limited Partnership is defined as partnership formed by two or more persons with one or more General Partners and one or more Limited Partners. It must always consist of at least two distinct persons, the Limited Partner and the General Partner. A Limited Partner contributes to the business capital but is not liable for the debts and obligations of the Limited Partnership unless he is also a General Partner. Moreover, he does not take part in the control of the partnership business either.
A General Partner has all the rights and powers of the partnership. Despite this fact, he is not authorised to do certain matters in a Limited Partnership without the written consent or specific ratification of all Limited Partners unless he has specific power under the articles. For example, he cannot admit another partner to the partnership without the consent of the other partners. The BVI Business Companies Act, 2004, facilitates the use of BVI Business Companies as Limited or General Partners.
The formation of a Limited Partnership is similar to the formation of a BVI Business Company insofar as it must have a registered agent. The constitution of a Limited Partnership contains a memorandum and articles. The articles consist mostly of the Partnership Agreement and do not have to be filed with the Registry of Corporate Affairs as it may contain sensitive information. However, the memorandum has to be submitted to the Registry.
The memorandum must include the following matters:
• Name: The name of a Limited Partnership must end either with the words “Limited Partnership” or the abbreviation “L.P.” and may be changed by amending its memorandum.
• Objects and Purposes: A Limited Partnership may have a wide objects clause. It may also be established for any object or purpose not prohibited under the Act or under any law for the time being in force in the British Virgin Islands. The objects and purposes of the partnership may be limited by conditions or limitations in the memorandum or articles. Section 50 (1) of the Act contains these limitations.
• Registered Office: At all times, a Limited Partnership must have a registered office in the British Virgin Islands.
• Registered Agent: A Limited Partnership must have a licensed registered agent in the British Virgin Islands. The name and address of the registered agent must be set out in the memorandum.
• General Partners: The full name and address of each General Partner is necessary.
• Term of Partnership: The term that the partnership is intended to exist for.
• Limited Liability: A statement that the partnership is limited.
• Limited Partners: The memorandum must state that any partner not named as a General Partner is a Limited Partner.
• Other Information: The memorandum should contain any other information that the registered agent is instructed to include by the provisions of the partnership’s articles.
Essentially, the articles consist of the partnership agreement and contain the terms by which the partners agree to be bound. Furthermore, the following points have to be kept in mind:
• The articles must contain the name of the registered agent of the Limited Partnership.
• Since the Act only provides for the payment of share of profits or compensation as set out in the articles, they should state the share of profits or compensation by way of income, if any, due to the Limited Partners.
• Since the Act provides that the memorandum and articles may be amended in the manner set out in the articles, they must state the manner in which amendments are to be made.
• The names and addresses of all, General and Limited Partners, should be set out in the subscription clause.
The General Partners of a Limited Partnership are required to maintain a register of Limited Partnership interests. The register must contain:
• Names and addresses of the Limited Partners
• Amounts and dates of their contributions
• Amount and date of any payment representing a return of any part of a Limited Partner’s contribution
The register constitutes prima facie evidence of the matters it contains. Intentional failure to maintain a register of Limited Partnership interests may result in the imposition of a daily fine for the period in which the breach continues. The partnership is only required to keep such books and records to make the financial position of the partnership ascertainable.
There is an incorporation fee of USD 500; afterwards, an annual fee of the same amount has to be paid by 30th April of each year.