Focus on Investment Funds

New accounting rules for UK limited in force from today

After first being proposed in 2009, and having had a number of false starts, new accounting and disclosure rules come into force today which will subject many UK limited partnerships to similar accounting requirements to those which currently apply to limited .

Today’s changes Existing regulations already provide that UK “qualifying partnerships” should draw up and file accounts as if they were companies. But the drafting of the current rules has enabled many UK limited partnerships to take the view that the rules do not apply to them provided that at least one of their partners is not a limited . Today’s amendments make it clear that – in deciding whether or not a limited is a qualifying partnership – the tests are applied only to the partnership’s general partner(s). The revised rules will apply to accounting periods beginning on or after 1 October 2013. This note looks at the impact the new rules will have on UK limited partnerships in particular. Qualifying Partnerships A will be a qualifying partnership if each of its general partners is either: • A ; • An whose members are all limited companies; • A Scottish unlimited partnership each of whose members is a limited company; or • A Scottish limited partnership each of whose general partners is a limited company. Provided the limited partnership itself is established under UK law, the new rules will also apply if the general partner in question has been incorporated or formed outside of the UK but is an entity which is comparable to any of the above. Obligations of qualifying partnerships Qualifying partnerships will no longer be able to simply draw up accounts for their investors in accordance with the accounting principles set out in the partnership agreement. Instead, they must draw up their accounts as if they were a UK company which, in practice, means accounts which comply with IFRS or UK GAAP. Most qualifying partnerships will be required to have these financial statements audited. Having drawn up financial statements, these must be published. For a limited partnership with a UK corporate general partner, the partnership statements must be appended to the general partner’s own accounts and filed at Companies House. But the revised rules go further to ensure that all qualifying partnerships must make their accounts publically available. If neither the partnership itself nor any of its members has a UK head office or principal place of business, the accounts must be made available instead at a UK address nominated by the general partner. Are there solutions for existing funds? Fund managers have had time to think about the application of the amended rules to recently established investment funds, but they may want to consider the impact of the new rules on existing limited partnerships in their fund structures before the start of their next accounting period. There are a number of approaches which limited partnerships can take to the new rules and we should be delighted to discuss them with you.

Travers Smith LLP Richard Stratton Emily Clark 10 Snow Hill richard.stratton emily.clark @traverssmith.com @traverssmith.com London EC1A 2AL Tel: 020 7295 3219 Tel: 020 7295 3393 Fax: 020 7295 3500 Fax: 020 7295 3500

T: +44 20 7295 3000 Sam Kay Jeremy Elmore F: +44 20 7295 3500 sam.kay jeremy.elmore @traverssmith.com @traverssmith.com

www.traverssmith.com Tel: 020 7295 3334 Tel: 020 7295 3453 Fax: 020 7295 3500 Fax: 020 7295 3500

Travers Smith LLP is a partnership registered in England and under number OC 336962 and is regulated by the Solicitors Regulation Authority. The word "partner" is used to refer to a member of Travers Smith LLP. A list of the members of Travers Smith LLP is open to inspection at our and principal place of business: 10 Snow Hill, London, EC1A 2AL. We are not authorised under the Financial Services and Markets Act 2000 but we are able, in certain circumstances, to offer a limited range of investment services because we are members of the Law Society of and regulated by the Solicitors Regulation Authority. We can provide these investment services if they are an incidental part of the professional services we have been engaged to provide. The information in this document is intended to be of a general nature and is not a substitute for detailed legal advice.