British Virgin Islands: (BVI) International Limited Partnerships

Introduction

The object of this memorandum is to provide clients of Walkers with information on the formation and operation of an international limited partnership in the British Virgin Islands ("BVI").

Features of BVI limited partnerships

The BVI Partnership Act 1996 (as amended by the Financial Services Commission Act, 2001 (by implication)) (the "Partnership Act") was enacted to address many increasingly topical developments in partnership law. The main features of the Partnership Act as they relate to international limited partnerships are:

1. The Partnership Act codifies the law for general partnerships, local limited partnerships and international limited partnerships into one piece of legislation.

2. The general partner can be a corporation and need not be registered or resident in the BVI.

3. Limited partners liability is limited to the amount stated in the articles to be contributed by the limited partner.

4. International limited partnerships are given tax exempt status in the same way as BVI business companies.

5. An international limited partnership name can, on payment of the relevant fee, be reserved for up to 90 days. The name must have at its end the words "Limited Partnership" or the abbreviation "L.P.".

6. There is no limitation on the number of partners.

7. The contribution of a limited partner may be cash, property or services.

8. International limited partnerships can have fixed term and non standard dissolution events.

9. The management of an international limited partnership is conducted in accordance with the Memorandum and Articles of Limited Partnership.

10. There is a clear definition of the powers of limited partners.

11. International limited partnerships are required to be registered.

12. The identities of the limited partners are not available on the public record.

Procedure

1. Articles must be executed by two or more persons desiring to form a limited partnership.

2. The signed articles are then submitted to the BVI registered agent named in the articles.

3. A memorandum is submitted to the Financial Services Commission. The memorandum must include:

(a) the firm name;

(b) the objects and purposes for which the partnership is established;

(c) the address of the registered office of the partnership in the BVI;

(d) the name and address of registered agent of the partnership in the BVI;

(e) the full name of each of the general partners and their respective addresses;

(f) the term, if any, for which the partnership is to exist;

(g) a statement that the partnership is limited;

(h) a statement that every partner not named as a general partner in the memorandum is a limited partner;

(i) a statement that the limited partnership may not carry banking, insurance, company management or trust business nor transact business with persons in the BVI nor acquire real property in the BVI; and

(j) such other information, if any, as the registered agent shall be instructed to include in the memorandum by the provisions of the articles.

4. The Financial Services Commission registers the memorandum and issues a certificate of limited partnership.

5. The Financial Services Commission maintains a register of limited partnerships which is open to public inspection.

Note that if the limited partnership is not registered it is deemed to be a general partnership and every partner is deemed to be a general partner without the protections of limited liability afforded by the Partnership Act.

Liability of limited partners

The Partnership Act provides that a limited partner is not liable for the obligations of a limited partnership unless he is also a general partner or, in addition to the exercise of his rights and powers as a limited partner, he participates in the control of the partnership business and, if the limited partner participates in the control of partnership business, he is liable only to persons who transact business with the limited partnership reasonably believing, based upon the limited partner's conduct, that the limited partner is a general partner.

One notable exception is where a limited partner's name appears in the name of the limited partnership. In such a case, the limited partner is generally liable as a general partner to partnership creditors who extend credit to the partnership without actual knowledge that he is not a general partner.

The Partnership Act further provides that a limited partner is liable to the partnership:

1. for the difference between his contribution as actually made and as stated in the articles as having been made; and

2. any unpaid contribution which he agreed in the articles to make in the future at the time and on the conditions stated in the articles.

Register of partnership interests

A general partner must maintain a register at the partnership's registered office of all limited partnership interests including:

1. the name and address of each limited partner; and

2. the amount and date of each contribution and any returns.

All details of changes must be entered on the register within 21 business days.

Books and records

A limited partnership must keep such accounts and records as the partners consider necessary or desirable in order to reflect the financial position of the limited partnership.

Registered Agent

A limited partnership shall at all times have a registered agent in the BVI.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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