In recent months we have noticed an increase in the number of Limited Partnerships being placed into liquidation and/or Receivership.
Limited Partnerships are entities developed in accordance with the Limited Partnerships Act 2008. In reality they are an entity that allows individuals / corporate entities to claim tax losses while retaining the ability to limit their exposure to creditors.
All Limited Partnerships are managed by what is known as a General Partner. The General Partner signs all documentation on behalf of a Limited Partnership, and is liable for all debts. The remaining partners are known as Limited Partners who have no general exposure to the liabilities of the Limited Partnership.
A number of PPSR charges are being registered against the General Partner and not the Limited Partnership itself, which results in the PPSR charge having no effect. One lawyer describes registering a charge over the general partner as being an equivalent to that of registering a financing statement over a director in relation to security granted by a company.
The Limited Liability Partnership and the general partner are separate legal entities.
Creditors therefore must register on the PPSR against the Limited Partnership.
To place a Limited Partnership into liquidation care needs to be taken to ensure that Section 88(1) of the Limited Partnerships Act 2008 is complied with. Before a liquidation can occur, there must be a terminating event Pursuant to Section 86 1(b) of the Limited Partnerships Act 2008.
It is therefore recommended that the first step in the liquidation process is for the Limited Partnership to be terminated Pursuant to its Partnership Agreement. Once this has occurred a simple resolution needs to be passed Pursuant to Section 88 1 appointing a named person as liquidator.
For further information please contact Tom Rodewald on 021 2277408