AUTH 3.22 Specific issues: applicants that are limited partnerships under the Limited Partnerships Act 1907
1Limited partnerships are formed under the Limited Partnerships Act 1907, which also governs aspects of their operation. A limited partnership differs from a normal partnership in that not all the partners will be liable for all the debts and obligations of the partnership, though there must be at least one partner (the general partner) who is. The other partners (limited partners) are not permitted to be active in managing the day-to-day business of the limited partnership but may be involved only in its constitutional affairs (see section 6(1) of the Limited Partnerships Act 1907 (Modifications of general law in case of limited partnerships)).
Applications for Part IV permission should be in the name of the partnership (see AUTH 3.11.1 G and sections 32 (Partnerships and unincorporated associations) and 40(1)(c) (Application for permission) of the Act). This permission, if granted, will then cover the business to be carried on. Authorisation of the limited partnership will, in effect, authorise the partners when conducting the business of the partnership. However, if a partner conducts regulated activities separately from the limited partnership, this may trigger a need for the partner to seek authorisation independently. Thus, if the general partner seeks to manage the assets of the limited partnership by conducting business in his name (rather than as a partner in the name of the limited partnership), the general partner will need to be authorised . This is if the activities he carries on amount to managing investments or another regulated activity. In the case of a limited partnership therefore, the authorisation of the partnership itself may not always be appropriate or sufficient. The key question is how and by whom the regulated activities will be carried on. So, the scope of the application will differ depending on which regulated activities the applicant wishes to undertake (see AUTH 3.22.3 G to AUTH 3.22.4 G).
The limited partnership may be set up to invest the funds of the partners, for example, in the way of a venture capital fund. If so, it will usually be a collective investment scheme. The partnership will not require authorisation simply for being a collective investment scheme as this is not a regulated activity. It will also often be the case that the partnership, in investing its assets, will be excluded from the regulated activity of dealing in investments as principal (see AUTH 2.8.4 G (Dealing in investments as principal)). However, it is likely that the general partner will require permission from the FSA to establish, operate or wind up a collective investment scheme (see AUTH 3.17 (Specific obligations: applicants seeking to establish a collective investment scheme or to act as manager of a regulated collective investment scheme) and COLL and CIS). If the general partner delegates responsibility for operating a limited partnership that is a collective investment scheme to another person on behalf of the partnership, that other person will require authorisation from the FSA (whether or not the general partner also requires authorisation).
Where the limited partnership intends to manage the investments of third parties rather than the capital contributions of the partners, the limited partnership itself may require permission from the FSA. This is because it is likely to be carrying on the regulated activity of managing investments and may be carrying on other regulated activities as well. A typical example of this kind of limited partnership would be a hedge fund scheme.
If the limited partnership is a collective investment scheme, neither the limited partnership itself (if authorised) nor the general partner (if authorised) will be within the scope of the ISD in respect of its management of the scheme assets. So, neither of them will be an ISD investment firm. This is because the ISD specifically excludes from its scope collective investment undertakings and their managers and depositaries. This includes operators who manage both the scheme and its assets. However, where the management of the scheme and the assets are split, the activities of the asset manager will fall under the ISD.1