Seychelles Limited Partnership Information
Seychelles Limited Partnerships are formed pursuant to the Limited Partnerships Act 2003, as amended. They are ideally suited for joint ventures and investment funds and are particularly well suited for use as a private equity fund vehicle.
A traditional partnership consists of two or more parties who come together to carry out a joint activity pursuant to an agreed framework with a view to making a profit. However, unlike a company the partnership is not a separate legal body with distinct status from its partners. As such one of the major disadvantages and risks of such a partnership lies in the fact that each of the partners is equally liable for the debts and obligations of the partnership with unlimited liability.
Whereas a “traditional” partnership has two or more general partners, a Limited Partnership has at least one “general” partner with unlimited liability along with one or more “limited” partners who, like shareholders of a company, have limited liability up to the amount of capital contributed to the Limited Partnership.
Other variations of limited partnerships have also been developed including a Limited Liability Partnership (LLP) which is popular for professional services firms such as legal, accounting and tax firms and even a Limited Liability Limited Partnership (LLLP) which is like a Limited Partnership but provides for the general partner to be afforded a degree of liability protection.
THE LIMITED AND GENERAL PARTNERS
Similar to the shareholder of a company, the limited partner contributes capital to the partnership but does not engage in the operating of the partnership. The limited partner will generally contribute cash, property or services to the partnership and is thereafter entitled to receive a share of the profits or other compensation pursuant to the provisions of the terms of the partnership agreement. As the name denotes, the limited partner enjoys limited liability in respect of the operations, debts and obligations of the partnership with the maximum liability being the amount of capital contributed.
A limited partner may be a general partner as well but in that case at least one additional limited partner who is not also a general partner would be required. Section 7(5) of the Seychelles Limited Partnerships Act lays out specific activities that a limited partner may carry out without being deemed to be a general partner:
- being a contractor or an agent or employee of the limited partnership or of a general partner or acting as a director, officer or shareholder of a corporate general partner;
- consulting with and advising a general partner with respect to the business of the limited partnership;
- investigating, reviewing, approving or being advised as to the accounts or business affairs of the limited partnership or exercising any right conferred under the Act;
- acting as a surety or guarantor for the limited partnership either generally or in respect of specific obligations;
- approving or disapproving an amendment to the partnership agreement; or
- voting as a limited partner on any matter
If a limited partner conducts any business on behalf of the Seychelles Limited Partnership with a third party who is not a partner, then in the event of insolvency that limited partner shall be liable as a general partner for that period for which he was conducting such business as if he was a general partner.
The Seychelles Limited Partnership Act prescribes that at least one of the partners must be a “general partner”.
The general partner is responsible for the control, administration and management of the limited partnership’s business. As such the general partner is responsible for the signing of any letters, contracts, deeds or other documents on behalf of the limited partnership (Section 7(1)). A general partner has the rights and powers as well as the liabilities of a partner in a traditional general partnership.
A general partner must conduct itself in accordance with the terms regulating the conduct of general partners as set out in the partnership agreement in force from time to time. A general partner is also required to at all times act in good faith and in the best interests of the partnership. This is particularly important given that any debt or obligation incurred by the general partner in the conduct of business on behalf of the limited partnership is regarded as a debt or obligation of the limited partnership.
Pursuant to Section 4(2) of the Seychelles Limited Partnerships Act, each general partner is liable in the event of insolvency of the limited partnership for the debts and obligations of the limited partnership.
FORMATION OF A SEYCHELLES LIMITED PARTNERSHIP
CONSTITUTION OF THE LIMITED PARTNERSHIP
A Limited Partnership may be formed under the Seychelles Limited Partnership Act for any lawful purpose, provided that a limited partnership may not carry out business in Seychelles except so far as may be necessary for the carrying on of the business of that limited partnership outside Seychelles (Section 4(1)).
Every limited partnership shall have a name which shall include the words “Limited Partnership” or the abbreviation L.P or LP and may include the name of a general partner or limited partner or any derivation thereof (Section 6(1)).
Every limited partnership must maintain a registered office in Seychelles for the services of process and delivery of notices and communications (Section 6(2)).
A limited partnership shall be established by one or more general partners and one or more limited partners (Section 4(2)).
Any general partners may also be a limited partner provided that in such cases there are at least two separate and distinct persons that are partners of the limited partnership (Section 4(2)).
Any one or more partners of a limited Partnership may be resident, domiciled, established, incorporated or registered pursuant to Seychelles laws or of any other country provided that at least one general partner is a Seychelles body corporate incorporated either under
- the International Business Companies Act 1994; or
- the Companies (Special Licenses) Act, 2003
Applications for the registration of a Limited Partnership must be made to the Registrar of Limited Partnership (FSA). This shall be done by filing to the Registrar a statement signed by or on behalf of the general partner containing the following particulars:
(a) The name of the Limited Partnership; (b) The general nature of the business of the Limited Partnership; (c) The address in Seychelles of the registered office of the Limited Partnership; (d) The full name and address of the designated general partner, and of any other general partner and in the case of a corporate general partner, the certificate of registration and a certificate of good standing (or any similar document under the laws of the jurisdiction of incorporation) must be annexed to the statement or, where applicable, a certificate of good standing and a certificate of registration under Part VII of Companies Act, 1972; (e) A declaration stating that the Limited Partnership shall not carry on business in Seychelles except so far as may be necessary for the carrying on of the business of that Limited Partnership outside Seychelles
Any application for registration must be accompanied by the prescribed registration fee of US$200
The terms of a Seychelles Limited Partnership will usually be set out in a partnership agreement as prescribed under the Seychelles Limited Partnership Act.
When the governing law of a partnership is Seychelles, a partnership agreement between the partners will be deemed the governing agreement by and between the parties establishing the regulation of the affairs of the partnership, the conduct of its business and the rights and obligations of the partners. Except to the extent that it is inconsistent with the Seychelles Limited Partnerships Act the Seychelles Commercial Code Act shall also apply to limited partnerships.
A Limited Partnership must file annual returns certifying compliance with the Act.
In the event that during the continuance of a Limited Partnership, changes are made to the filed statement, the general partner must file the stated changes with the Registrar within 60 days of the said change.
In the event that a general partner ceases to be a general partner, a statement signed by another general partner in respect of the arrangement or transaction must be filed with the Registrar within 15 days of the arrangement or transaction. Unless such statement is filed, the arrangement or transaction, and the partnership agreement will be of no effect. Anything which seeks to relieve a general partner of his obligations shall have no effect unless written consent is given by those who will be affected by the change.
Amendments to Registered Particulars
Any amendments to the registered particulars must be carried out in accordance with the provisions of Section 10(1) of the Act.
If any particulars contained in the statement filed under Section 9(1) are to be amended, the general partner shall have 60 days to file that change with the Registrar of Limited Partnerships (FSA). However, if there is a change to the particulars affecting the general partner, then that change will have to be filed with the Registrar of Limited Partnerships (FSA_ within 15 days of such arrangement. The name of the limited partnership can be changed and will be subject to the same procedures as set out above. However, the change in name must not contravene Section 6(1) of the Limited Partnerships Act.
Books and Records
In accordance with Section 11(A) of the Limited Partnerships Act, the general partner of a limited partnership shall keep or cause to be kept proper accounting records that —
(a) are sufficient to show and explain the limited partnership's transactions;
(b) enable the financial position of the limited partnership to be determined with reasonable accuracy at any time; and
(c) allow for accounts of the limited partnership to be prepared.
(2) For the purpose of subsection (1), the accounting records shall not be deemed to be kept with respect to a limited partnership if they do not give a true and fair view of the affairs of the limited partnership and explain its transactions.
(3) The accounting records shall be kept at the registered office of the limited partnership or such other place as the general partners think fit.
(4) Where the accounting records of a limited partnership are kept at a place other than the registered office, the general partner shall at all times keep at the registered office a written record of the physical address of the place at which the accounting records are kept.
(5) A general partner shall retain all accounting records for seven years, from the date of completion of the transactions to which they relate.
(6) A general partner who fails to comply with the provisions of this section is liable to a penalty of twenty-five US dollars for each day that such default continues, and the penalty shall be a debt due to the Registrar.
A limited partnership shall, on or before the 31st day of January in every year after the year in which it is registered under this Act, file with the Registrar a return signed by or on behalf of a general partner certifying that the limited partnership has during the prior calendar year complied with the provisions of this Act and pay to the Registrar an annual fee of such amount as is specified in the Schedule.
(2) If default is made in complying with the requirements of subsection (1), the limited partnership shall be liable to a penalty of twenty-five US dollars for each day that such default continues and the penalty shall be a debt due to the Registrar.
(3) The Registrar may for good cause waive all or part of the penalty imposed under subsection (2).
A Seychelles Limited Partnership is transparent for tax purposes meaning any tax liability passes to the partners according to their respective interests.