Limited partnerships become popular
A flexible and convenient option, limited partnerships are an increasingly popular business structure for venture capital and private equity firms looking to enter the New Zealand market. The Limited Partnerships Act 2008 enables a form of partnership with:
- General partners (who are liable for all the debts and liabilities of the partnership) and who manage the day to day running of the business, and
- Limited partners (who are liable to the extent of their capital contribution to the partnership) and who can enjoy more of a silent investor-type role.
Some of the key advantages that a limited partnership provides include:
- Partners can be individuals, companies or partnerships that exist under the Partnerships Act 1908
- Status as a separate legal personality
- An indefinite lifespan, if desired
- Various safe harbour activities for limited partners that do not amount to management nor breach the Act, and
- Tax benefits for partners of the limited partnership.
The Act prescribes similar reporting responsibilities to other company structures, such as preparing financial statements and filing annual returns with the Companies Office. Potential partners must also meet eligibility requirements; for example, being a New Zealand resident.
Overall this internationally-recognised regime has removed previous barriers to foreign investment in New Zealand. It enables home-grown businesses to be more competitive in seeking venture capital funds and other private equity schemes.
Image courtesy of Alan Dean.