Britain's departure from the EU as a fundamental change is going to be painful, many experts say. However, the United Kingdom has been and remains the largest European centre for investment management. It is one of the most prestigious jurisdictions for establishing a UK private equity fund.
Private equity transactions support economic activity in the long run. Achievement of the company's strategic goals and objectives, implementation of development programs seem impossible without investments, and, accordingly, without its effective management.
This blog post provides a brief overview of the legal forms and regulatory framework under which private equity funds are created and operated in the UK. If you have a PE fund set up in the UK on your mind, you might find this material interesting. More detailed information on the topic can be obtained when consulting with our experienced legal professionals.
Choice of legal structure
Of all the choices you make when starting a private equity fund, one of the most important is the type of legal structure you select for it. This is a crucial decision with implications for how your fund will structure its resources and assets.
Private equity funds in the United Kingdom can be launched in one of two legal structures:
- establishment of an English limited liability partnership (ELP);
- launching a Scottish Limited Liability Partnership (SLP).
ELPs predominate when establishing private equity funds in the UK.
It is defined as a partnership between persons who have agreed to conduct a joint business for making a profit. Such a foundation structure is not a legal entity and cannot enter into contracts on its own behalf, or own any property.
After filing an application and consideration by Companies House, the partnership receives a certificate of registration with the designation of the name and registration number and is ready to start operations.
More recently, a sub-type of the ELP has emerged, in which a private limited partnership (PFLP) can be incorporated in the UK. This form can also be registered with Companies House, where you will receive a certification of PFLP status.
Investment transactions in the UK are monitored by the Financial Conduct Authority (FCA).
PE Fund obligations
Initially, on the ELP registration stage, you can not choose the location for your fund other than England or Wales. In a while, the foundation can abandon its original English general partners and invite foreign ones if you are willing to.
Please note that any changes regarding the main physical location of the business of the foundation must be communicated to the Registrar.
In addition to legally registering your fund, you may need specific licenses and permits to operate.
Foundations in the UK are regulated through a fund manager. This person bears obligations for capital adequacy, reporting, appointment of depositories. This person in charge must obtain an Alternative Investment Fund Manager (AIFM) license from the FCA.
To obtain a UK AIFM license to be able to provide investment advice you need to seek additional approval from the main regulator and you must show the compliance with the requirements related to transaction registration, product management, etc.
The problem of the UK's exit from the EU continues to dominate the political environment, with an additional problem of the UK-EU negotiations in the second half of the year. The Bank of England reported recently that the economy could shrink by 14% this year. But we all understand that the whole world is now in recession because of the coronavirus, and Britain is no exception. Nevertheless, while risks remain, the UK private capital market remains attractive to foreign investors and continues to play a key role in the global investment market.
If you are interested in advice on entering the UK private equity market, please contact our legal experts. To do this, you can use the feedback form on the site or contact us in any other way convenient for you.