This section looks at the position where a partnership or LLP wishes to raise external finance and chooses to do so by setting up a company which issues shares that external investors can buy and sell on a stock exchange.
In some cases the individual partners will have no interest in the corporate member, in which case the mixed membership partnership legislation will not apply.
Example looking at where external investors invest through a corporate vehicle floated on a stock market.
LMN LLP has set up a corporate member, LMN Ltd, which is floated on the AIM market. None of the individual members of LMN LLP are shareholders in LMN Ltd.
This is a mixed membership partnership but the legislation does not apply as the individual members do not benefit from the sums allocated to the company.
If the individual partners hold shares in the corporate partner then it is a question whether on the facts of that case the mixed membership partnership legislation applies.
In cases where the shares are traded on a stock exchange, the question is likely to be whether on the facts of that case Condition Y applies. For further guidance on this, see PM219000.
If an individual partner purchased shares as part of the Initial Public Offering or on the stock market and had no priority in buying those shares then Condition Y is unlikely to be satisfied as it is not reasonable to suppose that a part of the corporate partner’s profits come from that member’s power to enjoy.
If an individual partner has invested in a collective investment scheme and that scheme buys shares in the corporate partner as part of its ordinary investment portfolio then Condition Y is unlikely to be satisfied as it is not reasonable to suppose that a part of the corporate partner’s profits come from that member’s power to enjoy.