According to many experts’ opinion, Brexit can truly be a fundamental and harsh change for Great Britain. Nevertheless, the UK continues to be a major European location for investment management. Moreover, it is one of the most attractive jurisdictions to launch a private equity fund.
From the long-term point of view, private equity transactions are considered supportive to the economic activity. Without investments and its’ effective management, it seems impossible for a company to achieve strategic goals and achievements neither implement development programs.
Let’s now take a closer look at the legal framework and regulations for operating private equity funds in the UK. This overlook can be useful for businessmen who are about to establish their PEF in Great Britain.
In case you would be looking for more in-depth information, our experts from COREDO will gladly provide you with a consultation.
Legal structure selection
When starting a private equity fund, it is crucial to select its legal structure at the very beginning. This choice will dictate the structuralizing of the fund’s resources and assets.
There are two legal structures of PEFs in the UK to choose from:
- English Limited Liability Partnership (ELP)
- Scottish Limited Liability Partnership (SLP).
ELPs are a more popular choice among possible options for starting private equity funds in Great Britain. It is an agreement between two businessmen who are planning to conduct joint activities aiming at making a profit. This kind of foundation is not viewed as a legal entity and is not allowed to figurate in the contracts on its own behalf or to own property.
Once an application is successfully filed and considered by Companies House, a partnership of two sides gets a certificate that includes a registration and a registration number. Right after that, a company is prepared to function.
Not too long ago, a new form of ELP (PFLP) was announced and it incorporates a private limited partnership in the UK. For this type Companies House also opens a registration procedure and grates certificates.
Conditions for PEFs
In the beginning when a PEF is registered, it can only be located whether in England or in Wales. After some time passes the foundation can invite foreign affiliates and abandon the original general partners. In case the main physical location of the business changes, it must be reported to the Registar.
When it comes to the monitoring of investment transactions in the UK, it is a responsibility of the Financial Conduct Authority (FCA).
Authorization for managers
Besides absolving a registration of the fund, you would probably need certain permits and licenses to start the business operation. In the UK, the regulation of foundations is performed through a fund manager. Such a person is responsible for the appointment of depositories, reporting, and capital adequacy. A fund manager is supposed to have an Alternative Investment Fund Manager (AIFM) license granted by FCA.
In order to obtain an AIFM license in Great Britain, it is necessary to get approval from the main regulator to show that you are truly capable of providing investment advice and compliance with the transaction registration requirements, product management, and other aspects.
The exit of Great Britain from the EU is still a dominating occasion in the political environment together with a further challenge of the UK-EU negotiations. The prognosis of the Bank of England is the economy decreasing by 14% this year. Not to forget that the whole world including Britain is currently struggling with the economic trouble caused by Covid-19. However, with the regard to all risks, the British private capital market is a key participant in the global investment arena and still attracts numerous foreign investors.
Are you planning to enter the British private equity market yourself, yet still have some uncertainties or need legal advice? Specialists from COREDO are ready to consult you on this and many other issues.