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OCTOBER 2013
Legal Focus
77 Corporate Law
Gibraltar Limited Partnerships By Richard Buttigieg, Hassans
Richard Buttigieg
A vehicle which is ever more frequently being used in Gibraltar is the Limited Partnership. Limited Partnerships established in Gibraltar are regulated by the Gibraltar Limited Partnerships Act 1927.Under Gibraltar law, a limited partnership must consist of (a) one or more general persons or "General Partners" who are liable for all debts and obligations of the firm; and (b) one or more persons called "Limited
Partners". The limited partners must at the time of entering such a partnership contribute either a sum or sums as capital or property valued at a stated amount. The limited partners’ liability to creditors is limited to the capital which he has introduced. It also follows logically that since limited liability is the quid pro quo for the provision of capital, the limited liability of the partner should not be reduced by subsequent withdrawal of the amount of capital that he has provided.
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n general terms, the rules governing the duration of ordinary partnerships also apply to limited partnerships. However, limited partners have no power to determine the partnership by notice, with the result that, if the partnership is not for a fixed term, it may
be determined at any time by notice given by one or other of the general partners, but not from the limited partners.
The position of the limited partner in principle is that he is a partner by reason of his provision of capital, and this is his sole function. Consequently, a limited partner must not take part in the management of the partnership business and has no power to bind the firm, though he may inspect the books of the firm and examine the state and prospects of the partnership business, and advise the partners thereon. If, in breach of this restriction, a limited partner takes part in the management of a partnership business, he is liable for all debts and obligations of the firm incurred while he does so, as though he were a general partner.
The loss of limited liability by the limited partner who participates in the management is temporary. It subsists only so long as he continues to act in the management of the firm. There are two other circumstances in which a limited partner will lose his limited liability, in whole or part. He will to the extent that he receives back the whole or any part
of his capital contribution, and also if the partnership is not properly registered.
Subject to any agreement expressed or implied between the partners: (a) any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the general partners;
(b) a limited partner may, with the consent of the general partners, assign his share in the partnership, and upon such an assignment the assignee shall become a limited partner with all the rights of the assignor;
(c) the other partners shall not be entitled to dissolve the partnership by reason of any limited partner suffering his share to be charged for his separate debt;
(d) a person may be introduced as a partner without the consent of the existing limited partners;
(e) a limited partner shall not be entitled to dissolve the partnership by notice.
A limited partnership is not dissolved by the death or bankruptcy of a limited partner. However the death of a general partner does mean the dissolution of the partnership unless the partners have agreed otherwise beforehand.
partner(s), the limited partners do not become liable for the individual responsibilities of the insolvent general partner(s).
In terms of accounting requirements, if all the partners of a limited partnership are corporate bodies, then the partnership will need to file annual accounts with the Companies Registry. A solution to this potential problem is to retain an individual as a general partner.
The administration of the Limited Partnership can be undertaken by our corporate arm, Line Management Services Limited. Initially, a person seeking to establish such an entity would be required to pay the Limited Partnership incorporation fee, the incorporation fees for any private companies forming part of the Limited Partnership, as well as secretarial and or corporate directorship fees for each entity (if required). LM
Limited partnerships may,
nevertheless, be wound up by the court under the Companies Act. As regards the position in the event of the bankruptcy of general