Legislative Assembly for the ACT: Week 5 Hansard (14 May) . . Page.. 1928..
MR STANHOPE (continuing):
The strong incentive for an investor to invest in an incorporated limited partnership will be the benefit of limited liability it offers, about which I will explain. Incorporation ensures that the benefit of limited liability of an investor will be able to be recognised outside the jurisdiction where a partnership is incorporated. Normally the incorporation law applying to an incorporated entity will be recognised in other jurisdictions where a legal dispute arises involving the entity. This will be an additional protection to investors.
I will briefly explain some features of the bill. The bill enables persons, including companies and individuals, or partnerships, including partnerships formed in another jurisdiction, to register as an incorporated limited partnership if they want to seek registration as a VCLP or AFOF under Commonwealth law or to become a venture capital management partnership. They could also register as incorporated limited partnerships if they have already been registered as VCLPs or AFOFs or are a venture capital management partnership.
The Commissioner for Fair Trading will register incorporated limited partnerships and administer the scheme under the bill. The bill provides for the entity to have not more than 20 general partners and at least one limited partner. Any number of limited partners may be investors in an incorporated limited partnership. Partners are required to have a partnership agreement which will have effect as a contract between the incorporated limited partnership and each partner. The agreement will govern the interests, rights and duties of the partners.
As I said before I would like to explain the effect of limited liability that the bill provides for an investor. Liability of partners in a normal partnership for the partnership debts and obligations is unlimited. In an incorporated limited partnership there will be two types of partners. General partners are similar to normal partners and their liability for the liabilities of an incorporated limited partnership is not limited.
The liability of an incorporated limited partnership is also not limited; however, liability of a limited partner of an incorporated limited partnership is limited. Their liability is limited to the extent of their contribution of capital or property to the partnership or the obligation they have undertaken to contribute such capital or property. Limited liability does not prevent a limited partner's contribution of capital or property to the incorporated limited partnership being used in satisfaction of the partnership's liability or the liability of a general partner in that partnership. A limited partner's obligation to contribute capital or property could also be enforced in satisfaction of such liability.
The bill also clarifies that a general partner or the incorporated entity is not an agent of a limited partner and a limited partner is also not an agent of a general partner or the entity. This ensures that investors who enjoy the benefit of limited liability do not take part in the management of the entity's business. The bill also provides for recognising of incorporated limited partnerships formed in other jurisdictions. The bill provides for three types of winding up of an incorporated limited partnership. They are: voluntary winding up, winding up on a certificate issued by the Commissioner for Fair Trading, and winding up for insolvency.