UK Government to scrap partnership cap

The authorities are planning to scrap the 20 partner limit to partnerships and limited partnerships soon.

In a move that will have many UK private equity and VC funds breathing a long sigh of relief, it is reported today that the UK government intends to scrap the ruling that capped the number of partners in partnerships and limited partnerships at 20.

Up to now, funds have had to wrestle with this ruling in order to accommodate more than 20 investors in a fund, using often parallel partnership structures that have added significantly to a fund document’s extent and complexity.

Anthony McWhirter, a partner at Freshfields Bruckhaus Deringer in London said that the removal of the cap would make the documents far cleaner and clearer. Besides saving time and expense this should make them far less intimidating to investors. “From an investment funds viewpoint this can only be a good thing” he said.

The ruling, which dates back to the mid-nineteenth century, had already been modified to enable firms such as solicitors and accountants to have more than 20 partners and had been roundly criticised by those who have had to engineer ways around it.

Many see the move to lift the cap as part of a deliberate effort by the authorities to make the UK an attractive domicile for investment funds and which gained valuable momentum from the publication of the Myners Report earlier this year.

The Financial Times reports that the Department of Trade and Industry put the proposal to scrap the ruling out for consultation in April this year and now intends to fast track the revised legislation so that the limit is lifted as soon as possible.