How to Form a Private Equity Fund in the UK
Explanation
How to Form a Private Equity Fund Vehicle in the UK
In the UK, many private equity fund structures are established using an English Limited Partnership (ELP). This structure is governed by the Limited Partnerships Act 1907 (the “1907 Act”) and the Partnership Act 1890 (the “1890 Act”). Below is an overview of the key steps and legal considerations involved in setting up an ELP for a private equity fund.
1. General Structure and Participants
An ELP must consist of at least one General Partner (GP) and one Limited Partner (LP). The GP manages the fund, while the LP is the passive investor. The GP may be a natural person, corporate entity, or partnership with legal personality.
To avoid falling within the Companies and Partnerships (Accounts and Audit) Regulations 2013 (which would require public filings), GPs are typically structured as Limited Liability Partnerships (LLPs) rather than limited companies.
2. Capital Contributions
While GPs are not required to contribute capital, LPs must do so to obtain limited liability status—though this can be a nominal amount. In Private Fund Limited Partnerships (PFLPs), this requirement is waived for LPs.
3. Limited Partnership Agreement (LPA)
The rights and obligations of GPs and LPs are governed by the Limited Partnership Agreement. This agreement outlines the fund’s terms, governance, investment policy, and distribution waterfall. The LPA is a private document and does not need to be filed with Companies House.
4. Name and Registration
The name of the partnership must end with “Limited Partnership” or “LP”. Registration is done by submitting:
- Form LP5 – for standard ELPs
- Form LP7 – for PFLPs
Key information required includes:
- Name of the partnership
- Principal place of business
- Nature of business
- Names of the GP and LPs
- Capital contributed by each LP
- Duration of the partnership
Each form must be signed by all GPs and LPs. The registration fee is £20 (standard) or £100 (same-day service, if submitted before 3pm).
5. Filing and Gazette Notices
Applications must currently be submitted in paper form—there is no online submission portal. Since COVID-19, same-day registration services have been suspended.
Subsequent changes (e.g., GP/LP information, capital amounts) must be reported to Companies House using Form LP6 within seven days. Late filings incur a fine of £1 per day.
Additionally:
- If a GP resigns or becomes an LP, a notice must be published in the London Gazette
- If an LP transfers its interest (standard ELPs only), it must also be gazetted
The Gazette publication fee is currently £109.20 + VAT.
6. Certificate of Registration
Once successfully registered, Companies House issues a Certificate of Registration. This confirms the legal formation of the ELP and, where applicable, its designation as a PFLP. This certificate is the official legal record that the fund exists as a limited partnership from the date of registration.
View More Definitions & Explanations
The Origins and Evolution of Private Equity
Private equity (PE) has grown into a global financial powerhouse, but its beginnings can be traced back to the post-World War II era. The formation of the American Research and Development Corporation (ARDC) in 1946 marked one of the earliest institutional private equity efforts.
ARDC’s mission was to fund companies that could repurpose wartime technologies for commercial use. One of its landmark investments was in Digital Equipment Corporation (DEC). A modest $70,000 investment in DEC eventually turned into $355 million, delivering a return of over 5,000 times the original amount. This staggering success demonstrated the potential of private equity to fuel innovation and drive extraordinary financial outcomes.
The Rise of Leveraged Buyouts in the 1980s
The 1980s became a transformative decade for private equity, largely due to the emergence of leveraged buyouts (LBOs). Pioneering firms such as Kohlberg Kravis Roberts (KKR) led this movement, acquiring companies primarily through borrowed capital, implementing operational improvements, and exiting through strategic sales or IPOs. These deals often resulted in significant returns and played a key role in legitimizing private equity as a powerful tool for value creation.
Private Equity Today: A Global Asset Class
Fast-forward to today, and private equity has evolved into a multi-trillion-dollar global industry. PE firms are actively involved in reshaping key sectors, including technology, healthcare, financial services, energy, and consumer goods. The United States continues to dominate the market, but institutional investors are increasingly turning their attention to opportunities in Europe and Asia where valuations are more attractive and growth potential remains robust.
In recent years, PE has also embraced thematic and impact investing. Many funds are aligning their strategies with ESG (Environmental, Social, and Governance) principles or specific global trends, such as digital transformation, renewable energy, and health innovation. This not only broadens investor appeal but also enhances the sector’s influence on global progress.
The Dominance of Private Companies
One compelling statistic underscores the importance of private markets: approximately 83% of U.S. companies with over $100 million in revenue remain privately held. This highlights the vital role of private equity in financing, developing, and scaling enterprises outside the public markets.
In summary, private equity has evolved from a niche investment strategy to a dominant force in global finance. With its origins in innovation and a future driven by strategic investment, operational excellence, and global diversification, PE is positioned to remain a key player in shaping tomorrow’s economy.
