2.10 There are a number of different types of partnership which can be formed under English Law.
2.11 Broadly, in an "unlimited" partnership the liability of each partner is unlimited and each is liable to third parties for the liabilities incurred by the partnership. In a "limited" partnership the liability of some partners is limited but the liability of at least one partner must be unlimited.
2.12 An unlimited partnership is unlikely to be a suitable model for a public sector JV and is not considered further in this Guidance. There are also potential limitations on the use of partnership structures in the public sector, particularly on local authorities (see Chapter 3).
2.13 In England and Wales14 a limited partnership created under the Limited Partnerships Act 1907 is not a separate corporate entity. In a limited partnership, the liability of some partners (called the "limited partner(s)") is limited but the liability of at least one partner (called the "general partner") must be unlimited. The general partner (with unlimited liability) will be the partner with the responsibility for the conduct and management of the limited partnership's activities. Limited partners cannot participate in the management of the partnership without losing limited liability status.
2.14 In many cases the general partner (with unlimited liability) is a newly formed limited liability company (SPV) in which the JV partners are shareholders. These shareholders effectively use this SPV as the general partner to enable them to indirectly participate in the management of the partnership whilst retaining limited liability status. It is vital that the SPV (and not the shareholders in it) manage the limited partnership's activities. This creates a 'two-tier' arrangement which is more complicated than other corporate entities as two agreements are needed, one JV agreement for the limited partnership and a second for the SPV limited company to manage the partnership.
2.15 Limited partnerships have been structured in this "two-tier" way in many urban regeneration and other property development arrangements. This choice of vehicle is often driven by the tax advantages available for certain types of property investor; tax exempt funds generally obtain preferential tax treatment where they enter into a limited partnership (such advantages not being available with a limited liability partnership, despite tax transparency, or limited company).
| Example 2: 'NorwePP' limited partnership property JV In December 2006, NorwePP, a public private partnership, was launched by the North West Regional Development Agency (NWDA) and Ashtenne Industrial Fund (AIF) to manage and develop theAgency's portfolio of commercial property. AIF was selected as preferred bidder in September 2006 and the 50-50 limited partnership JV gives AIF an equal stake in the portfolio. NorwePP holds 42 commercial properties situated across the Northwest region, but mostly in Merseyside and West Cumbria. The use of private sector expertise and finance is intended to improve the performance of the portfolio, particularly in respect of providing accommodation for companies to create employment within the region. NWDA-allocated resources for managing these properties will be channelled into the strategic development of sites, to meet the regeneration objectives set out in the Regional Economic Strategy (RES). Source: Northwest RDA website |
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14 In Scotland a limited partnership is treated as a separate corporate entity.