Limited Partnerships

The primary objective of the introduction of the Limited Partnerships regime is to facilitate sustainable growth in New Zealand's venture capital and private equity industries.

Limited Partnerships are a form of partnership involving General Partners, (who are liable for all the debts and liabilities of the partnership) and Limited Partners (who are liable to the extent of their capital contribution to the partnership).  The Limited Partnerships Act will replace Special Partnerships that exist under Part 2 of the Partnership Act 1908.  Special partnerships are considered obsolete as they do not provide the appropriate structure preferred by foreign venture capital investors.

The introduction of an internationally recognised Limited Partnerships regime will remove barriers to foreign capital investment which provides a valuable source of funding for new companies and early stage expansion capital.  The Act will enable New Zealand businesses to compete internationally on a level playing field for venture capital funds.

Features of Limited Partnerships include:

• separate legal personality
• an indefinite lifespan if desired
• a list of activities that the limited partners can be involved in while not participating in the management of the Limited Partnership (safe harbour activities)
• tax treatment for Limited Partnerships.

The registers of Limited Partnerships and Overseas Limited Partnerships are administered by the New Zealand  Companies Office. Registration, maintenance and annual return filing for Limited Partnerships and Overseas Limited Partnerships is conducted through manual forms. The registers are able to be searched online from 2 May 2008.  More information on Limited Partnerships administration can be found at www.limitedpartnerships.govt.nz.

FAQs

To help explain Limited Partnerships, we have collated a series of frequently asked questions.

What is the difference between a Limited Partnership and an Overseas Limited Partnership?

A Limited Partnership is formed by registration in New Zealand. An Overseas Limited Partnership is a partnership that has been formed in a country other than New Zealand but because it is engaged in business activities in New Zealand, it must register as an Overseas Limited Partnership.

Overseas Limited Partnerships that are carrying out business in New Zealand must register on the register of Overseas Limited Partnerships as a form of creditor protection. This ensures that a record of these partnerships can be easily accessed by the general public.

What is a safe harbour mechanism and what activities are Limited Partners allowed to engage in?

A Limited Partner is prevented from being involved in the day to day management of the Limited Partnership. To enable Limited Partners to become involved in the key decision making activities of a Limited Partnership, the Limited Partnerships Act 2008 includes a safe harbour mechanism to ensure Limited Partners maintain their limited liability.

Safe harbour activities include but are not limited to:

• Taking part in the decision about the variation or replacement of the partnership agreement
• Taking part in the decision about whether to approve or veto an investment proposal (under certain conditions set out in the Act)
• Taking part in the decision about whether the Limited Partnership should be terminated or not
• Taking part in the decision about whether the general nature of the Limited Partnership should change.

A complete list of safe harbour activities can be found in the Act including the Schedule.

What is a partnership agreement?

A partnership agreement is an agreement between partners that establishes a Limited Partnership and governs the terms and conditions of the partnership relationship. On registration, the General Partner or their agent must certify that the proposed partners of the Limited Partnership have entered into a partnership agreement that complies with the Limited Partnership Act 2008, before it can be registered.

How is my privacy as a limited partner protected?

The Limited Partnerships regime recognises that limited partners may not wish to publicly disclose their interest in a Limited Partnership. As a result, the Registrar must treat limited partner information as confidential, and details relating to limited partners will not be available for viewing by the public.