Formation

Principal Type

The only general form of limited partnership available in Ireland for trading purposes is that under the Limited Partnership Act 1907.  A limited partner may not take part in the management of the firm.  He may not bind the firm. In return, and provided that the relevant conditions are complied with, he has limited liability for the partnership debts in a winding up of the partnership.

A limited partner under the legislation is, in effect, an investor. A limited partnership may be useful in relation to the investment of venture capital.  It allows the dormant partner, the investor, to invest in a partnership while retaining limited liability.

An advantage of a limited partnership is that there is one layer only of tax for the partner/ investor.  An investor in a company may be effectively subject to two layers of tax on the company’s trade.  The company itself is taxed, and the investor is taxed on distributions and dividends and on winding up.


Less Common Types

Ireland has not introduced a  modern form of limited liability partnership. In other jurisdictions, limited partnerships are prominent vehicles for investment and undertaking business. Many other jurisdictions including Northern Ireland, England and Wales and the United States jurisdictions have provided for a flexible form of limited liability partnership.

General limited liability partnership legislation has been introduced in the United Kingdom. The Limited Liability Partnership entities have a separate legal identity and bear many of hallmarks of companies.  However, from some points of view, including taxation they are “looked through,” so that there is no second layer of tax.

Provision has been made in Ireland for investment limited partnerships. This form of limited partnership is a passive investment vehicle, which cannot trade. They are highly regulated.   The legislation was designed to accord with investment structures commonly used in North America.

They are primarily intended for use in international financial services. n practice, the majority of funds in Ireland do not operate as limited partnerships but use other structures which are more akin to companies.

Provision has been made for limited liability partnerships of legal professionals.


Registration

Unlike the case with general partnerships, limited partnerships must be registered.  If they are not registered, every limited partner is deemed a general partner.

The limited partner may be a company.  A company may also be a general partner. A limited partnership may not consist of more than 20 members.  There are certain exceptions.

The term of the limited partnership must be stated on formation and registration. Any alteration of the term must be registered.  Where the term is uncertain, it may be stated in terms or condition rather than a period.

Upon registration, a certificate of registration of the partnership issues.  This does not entail the creation of the partnership as such. The limited partnership must otherwise satisfy the conditions of the Partnership Act.  Unlike the position with a company, the certificate of registration is not conclusive.


Registration Statement

Limited partners must file a registration statement with the CRO. The registration statement must be signed by all partners. Failure to register or register properly may lead to denial of the status of a limited partnership. The making of a false statement in the registration particulars is an offence.

The registration statement must include the following:
  • Firm name;
  • General nature of business;
  • Name of each partner;
  • Place of business;
  • Term of partnership;
  • Statement that the partnership is limited;
  • Description of every limited partner as such;
  • Capital contribution of limited partner whether cash or in kind.

Registering Changes

Limited liability partners must register their business name in the same way as an ordinary partner.  Both the limited and general partners’ names must be listed.

The following changes must be registered:

  • changes in name;
  • changes in nature of business;
  • changes in place of business;
  • changes in partners, term or character of the partnership;
  • the contribution of the limited partner;
  • change in the status of a  partner from limited to general or vice versa.

A failure to register the changes may lead to the loss of limited liability status.  The changes may take place without a conscious decision on the party to the partnership so that care is required to ensure that if and when one of the above circumstances applies, that registration is effected.

A limited partnership, all of whose general partners or limited liability companies must file accounts in the CRO in the same manner as a company.


Assignment

The limited partner may withdraw his funds with the consent of the other partners.  In this event, his share is repaid.  Alternatively, he may be permitted to assign his interest to a third-party.The matter of assignment may be the subject to express or implied agreement.

A limited partner may assign his interest in the partnership with the consent of the general partners or under the terms of the agreement. The assignee will become a limited partner in his place if permitted. The assignment does not cause dissolution of the general partnership.   The change must be registered and published in the Official Gazette.

Although the assignment assigns his share,  the assigning partner remains liable for pre-assignment debts limited to the extent of his capital contribution. The assignee becomes liable on future debts limited in the same manner.

The default position is that persons may be introduced as partners without the consent of the limited partner.


Dissolution

The rules on dissolution and winding up of limited partnerships are broadly similar to those applicable to ordinary partners.

A limited partnership is not, however, dissolved by the death or bankruptcy of the limited partner. A limited liability partnership is dissolved upon the death or bankruptcy of a sole general partner.

A limited partner may not dissolve a limited partnership by notice, under the default rules.  He or she may have a contractual right to do under a partnership agreement.The general partners may terminate the partnership by notice.

Although the limited partners of a limited partnership may not terminate the partnership by notice, a limited partner can be given a right to terminate where a fixed-term partnership expires. The limited partnership may be converted into a partnership at will, losing limited partnership status, unless notice is given to the CRO.

A limited partnership must have at least one general partner.  The death of the last surviving general partner leads to dissolution.


Winding Up

Upon dissolution of the limited partnership, its affairs must be wound up unless the partnership agreement provided otherwise or an alternative course is agreed.

The rules on the winding up of a limited partnership are broadly similar to those applicable to ordinary partners. The general partners are obliged to wind it up on dissolution.

The court has the power to dissolve a limited partnership in the same manner as an ordinary partnership.  Where a limited partnership is wound up, the winding up is undertaken by the general partners.

A court may wind up a limited partnership in much the same way as a general partnership.  A limited partnership may be wound up under the Companies Act, as a non-registered company.


References and Sources

Irish Sources

Partnership Act, 1890

Partnership Law 2000 Twomey M. Butterworths

 

UK Sources

Lindley & Banks on Partnership: (19th Revised edition) 2016  Banks, Roderick I’Anson

Partnership & Llp Law (8th edition) 2015  Morse, G.

Partnership Law (5th Revised edition) 2015  Blackett-Ord, Mark; Haren, Sarah;


Limited Partnership Act 

CHAPTER XXIV.

An Act to establish Limited Partnerships. [28th August 1907.]

Be it enacted by the King’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:

Short title.

1. This Act may be cited for all purposes as the Limited Partnerships Act, 1907.

Commencement of Act.

2. This Act shall come into operation on the first day of January one thousand nine hundred and eight.


Interpretation of terms.

53 & 54 Vict. c. 39.

3. In the construction of this Act the following words and expressions shall have the meanings respectively assigned to them in this section, unless there be something in the subject or context repugnant to such construction:—

“Firm,” “firm name,” and “business” have the same meanings as in the Partnership Act, 1890:

“General partner” shall mean any partner who is not a limited partner as defined by this Act.


Definition and constitution of limited partnership.

4.—(1) From and after the commencement of this Act limited partnerships may be formed in the manner and subject to the conditions by this Act provided.

(2) A limited partnership shall not consist, in the case of a partnership carrying on the business of banking, of more than ten persons, and, in the case of any other partnership, of more than twenty persons, and must consist of one or more persons called general partners, who shall be liable for all debts and obligations of the firm, and one or more persons to be called limited partners, who shall at the time of entering into such partnership contribute thereto a sum or sums as capital or property valued at a stated amount, and who shall not be liable for the debts or obligations of the firm beyond the amount so contributed.

(3) A limited partner shall not during the continuance of the partnership, either directly or indirectly, draw out or receive back any part of his contribution, and if he does so draw out or receive back any such part shall be liable for the debts and obligations of the firm up to the amount so drawn out or received back.

(4) A body corporate may be a limited partner.


Registration of limited partnership required.

5. Every limited partnership must be registered as such in accordance with the provisions of this Act, or in default thereof it shall be deemed to be a general partnership, and every limited partner shall be deemed to be a general partner.


Modifications of general law in case of limited partnerships.

6.—(1) A limited partner shall not take part in the management of the partnership business, and shall not have power to bind the firm:

Provided that a limited partner may by himself or his agent at any time inspect the books of the firm and examine into the state and prospects of the partnership business, and may advise with the partners thereon.

If a limited partner takes part in the management of the partnership business he shall be liable for all debts and obligations of the firm incurred while he so takes part in the management as though he were a general partner.

(2) A limited partnership shall not be dissolved by the death or bankruptcy of a limited partner, and the lunacy of a limited partner shall not be a ground for dissolution of the partnership by the court unless the lunatic’s share cannot be otherwise ascertained and realised.

(3) In the event of the dissolution of a limited partnership its affairs shall be wound up by the general partners unless the court otherwise orders.

(4) Applications to the court to wind up a limited partnership shall be by petition under the Companies Acts, 1862 to 1900, and the provisions of those Acts relating to the winding-up of companies by the court and of the rules made thereunder (including provisions as to fees) shall, subject to such modifications (if any) as the Lord Chancellor, with the concurrence of the President of the Board of Trade, may by rules provide, apply to the winding-up by the court of limited partnerships, with the substitution of general partners for directors.

(5) 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.


Law as to private partnerships to apply where not excluded by this Act.

53 & 54 Vict. c. 39.

7. Subject to the provisions of this Act, the Partnership Act, 1890, and the rules of equity and of common law applicable to partnerships, except so far as they are inconsistent with the express provisions of the last-mentioned Act, shall apply to limited partnerships.


Manner and particulars of registration.

8. The registration of a limited partnership shall be effected by sending by post or delivering to the registrar at the register office in that part of the United Kingdom in which the principal place of business of the limited partnership is situated or proposed to be situated a statement signed by the partners containing the following particulars:—

(a) The firm name;

(b) The general nature of the business;

(c) The principal place of business;

(d) The full name of each of the partners;

(e) The term, if any, for which the partnership is entered into, and the date of its commencement;

(f) A statement that the partnership is limited, and the description of every limited partner as such;

(g) The sum contributed by each limited partner, and whether paid in cash or how otherwise.


Registration of changes in partnerships.

9.—(1) If during the continuance of a limited partnership any change is made or occurs in—

(a) the firm name,

(b) the general nature of the business,

(c) the principal place of business,

(d) the partners or the name of any partner,

(e) the term or character of the partnership,

(f) the sum contributed by any limited partner,

(g) the liability of any partner by reason of his becoming a limited instead of a general partner or a general instead of a limited partner,

a statement, signed by the firm, specifying the nature of the change shall within seven days be sent by post or delivered to the registrar at the register office in that part of the United Kingdom in which the partnership is registered.

(2) If default is made in compliance with the requirements of this section each of the general partners shall, on conviction under the Summary Jurisdiction Acts, be liable to a fine not exceeding one pound for each day during which the default continues.


Advertisement in Gazette of statement of general partner becoming a limited partner and assignment

10.—(1) Notice of any arrangement or transaction under which any person will cease to be a general partner in any firm, and will become a limited partner in that firm, or under which the share of a limited partner in a firm will be assigned to any person, shall be forthwith advertised in the Gazette, and until notice of the arrangement or transaction is so advertised the arrangement or transaction shall, for the purposes of this Act, be deemed to be of no effect.

(2) For the purposes of this section, the expression “the Gazette” means—

In the case of a limited partnership registered in England, the London Gazette;

In the case of a limited partnership registered in Scotland, the Edinburgh Gazette;

In the case of a limited partnership registered in Ireland, the Dublin Gazette.


Ad valorem stamp duty on contributions by limited partners.

11. The statement of the amount contributed by a limited partner, and a statement of any increase in that amount, sent to the registrar for registration under this Act, shall be charged with an ad valorem stamp duty of five shillings for every one hundred pounds, and any fraction of one hundred pounds over any multiple of one hundred pounds, of the amount so contributed, or of the increase of that amount, as the case may be; and, in default of payment of stamp duty thereon as herein required, the duty with interest thereon at the rate of five per cent. per annum from the date of delivery of such statement shall be a joint and several debt to His Majesty, recoverable from the partners, or any of them, in the said statements named, or, in the case of an increase, from all or any of the said partners whose discontinuance in the firm shall not, before the date of delivery of such statement of increase, have been duly notified to the registrar.


Making false returns to be misdemeanor.

12. Every one commits a misdemeanor, and shall be liable to imprisonment with hard labour for a term not exceeding two years, who makes, signs, sends, or delivers for the purpose of registration under this Act any false statement known by him to be false.


Registrar to file statement and issue certificate of registration.

13. On receiving any statement made in pursuance of this Act the registrar shall cause the same to be filed, and he shall send by post to the firm from whom such statement shall have been received a certificate of the registration thereof.


Register and index to be kept.

14. At each of the register offices herein-after referred to the registrar shall keep, in proper books to be provided for the purpose, a register and an index of all the limited partnerships registered as aforesaid, and of all the statements registered in relation to such partnerships.


Registrar of joint stock companies to be registrar under Act.

15. The registrar of joint stock companies shall be the registrar of limited partnerships, and the several offices for the registration of joint stock companies in London, Edinburgh, and Dublin shall be the offices for the registration of limited partnerships carrying on business within those parts of the United Kingdom in which they are respectively situated.


Inspection of statements registered.

16.—(1) Any person may inspect the statements filed by the registrar in the register offices aforesaid, and there shall be paid for such inspection such fees as may be appointed by the Board of Trade, not exceeding one shilling for each inspection; and any person may require a certificate of the registration of any limited partnership, or a copy of or extract from any registered statement, to be certified by the registrar, and there shall be paid for such certificate of registration, certified copy, or extract such fees as the Board of Trade may appoint, not exceeding two shillings for the certificate of registration, and not exceeding sixpence for each folio of seventy-two words, or in Scotland for each sheet of two hundred words.

(2) A certificate of registration, or a copy of or extract from any statement registered under this Act, if duly certified to be a true copy under the hand of the registrar or one of the assistant registrars (whom it shall not be necessary to prove to be the registrar or assistant registrar) shall, in all legal proceedings, civil or criminal, and in all cases whatsoever be received in evidence.


Power to Board of Trade to make rules.

17. The Board of Trade may make rules (but as to fees with the concurrence of the Treasury) concerning any of the following matters:—

(a) The fees to be paid to the registrar under this Act, so that they do not exceed in the case of the original registration of a limited partnership the sum of two pounds, and in any other case the sum of five shillings;

(b) The duties or additional duties to be performed by the registrar for the purposes of this Act;

(c) The performance by assistant registrars and other officers of acts by this Act required to be done by the registrar;

(d) The forms to be used for the purposes of this Act;

(e) Generally the conduct and regulation of registration under this Act and any matters incidental thereto.


Case Law

MacCarthaigh v. D.

[1985] 1 I.R. 79

O’Hanlon J.        

“This claim is contested by the appellant on a number of grounds. The limited partnership contemplated by the Agreement of the 23rd December, 1977, was not registered until the 16th February, 1978, whereas transactions involving the supply of plant and equipment to the hotel company commenced in the month of December, 1977. Section 4 of the Limited Partnerships Act, 1907, requires that the limited partners shall “at the time of entering into such partnership contribute thereto a sum or sums as capital or property valued at a stated amount.” The stated amount in the present case was a sum of £50 in respect of each of the limited partners but this sum was not contributed by them or any of them until the 14th July, 1978. Consequently, it was contended on behalf of the appellant that notwithstanding the registration of the limited partnership on the 16th February, 1978, the requirements of the Act of 1907 had not been complied with and no limited partnership known as “Metropole I” came into existence until the requirements of s. 4, sub-s. 2, of the Act were complied with some months after the relevant tax year had expired (if at all). I am of opinion that this submission is correct, and it was not seriously contested by the tax-payer in the proceedings on the Case Stated.

 The tax-payer suggests, however, that this apparent break-down in the scheme which had been devised by the hotel company’s accountants was not really material; that monies were advanced, in any event, to the named persons, and plant and equipment were acquired therewith, and were subsequently leased to the hotel company in accordance with the provisions of the Master Leasing Agreement.

 Section 8 of the Limited Partnerships Act, 1907, deals with the registration of a limited partnership and provides that there must be furnished to the registrar a statement signed by the partners containing certain particulars, including, inter alia, –

 “(g) The sum contributed by each limited partner, and whether paid in cash or how otherwise.”

 It must be assumed that registration of the limited partnership in the present case was achieved by submitting to the registrar, prior to the 16th February, 1978, a statement which omitted, or stated incorrectly, the amount contributed by each limited partner, as, by some oversight, their contributions were not made for some months after registration. Section 5 of the Act provides as follows:

 “5. Every limited partnership must be registered as such in accordance with the provisions of this Act, or in default thereof it shall be deemed to be a general partnership, and every limited partner shall be deemed to be a general partner.”

 As the registration effected in the present case does not appear to have been effected in accordance with the provisions of the Act, having regard to the irregularity already referred to, it appears to me that the transactions carried out by the parties to the so-called Partnership Agreement during the tax year 1977/78 must, prima facie, be regarded as having been carried out by them as general partners.

 I would have some reservations, however, in coming to a conclusion that the arrangement entered into between them should properly be regarded as a partnership at all, since the Partnership Act, 1890, which was largely declaratory of the common law, commenced by defining partnership in s. 1 of the Act as “the relation which subsists between persons carrying on a business in common with a view of profit.” The business of the group (to use a neutral term) involved borrowing from the hotel company, at an undisclosed rate of interest, the funds necessary to purchase plant and equipment of a perishable character, for leasing to the hotel company at an annual rent equal to 10% of the cost price of the plant and equipment, the lessor to be responsible for all fair wear and tear to the plant and equipment. It was fairly conceded in the course of the hearing before the Appeal Commissioner that an important reason behind the scheme was to achieve a tax benefit for the participants.