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PARTNERSHIP (VENTURE CAPITAL FUNDS) AMENDMENT ACT 2005 (NO 15 OF 2005) - SECT 59

59—Insertion of sections 65A and 65B

After section 65 insert:

65A—Limited partner not to take part in management of incorporated limited partnership

        (1)         A limited partner in an incorporated limited partnership must not take part in the management of the business of the partnership.

        (2)         If—

            (a)         as a direct result of any wrongful act or omission of a limited partner in taking part in the management of the business of an incorporated limited partnership, the limited partner causes any loss or injury to any person other than a partner in the partnership (a "third party"); and

            (b)         at the time of the act or omission, the third party had reasonable grounds to believe that the limited partner was a general partner in the partnership,

the limited partner is liable for the loss or injury to the same extent that the limited partner would have been liable if the limited partner were in fact a general partner in the partnership.

        (3)         A limited partner in an incorporated limited partnership is not to be regarded as taking part in the management of the business of the incorporated limited partnership merely because the limited partner or a person acting on behalf of the limited partner

            (a)         is an employee or an independent contractor of the partnership or of a general partner in the partnership or of an associate of the general partner, or is an officer of a general partner that is a body corporate or of an associate of a general partner that is a body corporate; or

            (b)         gives advice to, or on behalf of, the partnership or a general partner in the partnership or an associate of the general partner in the proper exercise of functions arising from the engagement of the limited partner, or a person acting on behalf of the limited partner, in a professional capacity or arising from business dealings between the limited partner, or a person acting on behalf of the limited partner, and the partnership or a general partner or an associate of the general partner; or

            (c)         gives a guarantee or indemnity in respect of any liability of the partnership or of a general partner or an associate of the general partner; or

            (d)         takes any action, or participates in any action taken by any other limited partner in the partnership, for the purpose of enforcing the rights, or safeguarding the interests, of the limited partner as a limited partner; or

            (e)         if permitted by the partnership agreement—

                  (i)         calls, requisitions, convenes, chairs, participates in, postpones, adjourns or makes a record of a meeting of the partners or of the limited partners or of any of them; or

                  (ii)         requisitions, signs or otherwise passes, approves, disapproves or amends any resolution (whether at a meeting, in writing or otherwise) of the partners or of the limited partners or of any of them, including without limitation by formulating, moving, proposing, supporting, opposing, speaking to or voting on any such resolution; or

            (f)         exercises a power conferred on the limited partner by subsection (4) or has, or exercises, any right to—

                  (i)         have access to and inspect the books or records of the partnership or copy any of them; or

                  (ii)         examine the state or prospects of the business of the partnership or advise, or consult with, other partners in relation to such matters; or

            (g)         gives advice to, or consults with, or is or acts as an officer, director, security holder, partner, agent, representative, employee of or independent contractor engaged by, an associate of the partnership; or

            (h)         is or acts as a lender to, or fiduciary for, an associate of the partnership; or

                  (i)         to the extent authorised by the partnership agreement, participates on, or has or exercises any right to appoint one or more persons to, or remove one or more persons from, or to nominate one or more persons for such appointment to or removal from, a committee which considers, approves of, consents to or disapproves of any one or more of the following proposals from a general partner:

                  (i)         a proposal involving a material change in the nature of the business of the partnership (including a change in, or departure from, any investment guidelines, policies or conditions relating to the business of the partnership);

                  (ii)         a proposal for the adoption of a method for valuing some or all of the assets of the partnership (including a change to, replacement of or variation from such a method);

                  (iii)         a proposal for an extension or reduction in the period in which, under the partnership agreement, investments (or certain types of investments) can be made by the partnership, or for any approval or disapproval of investments that the partnership does not otherwise have a right to make;

                  (iv)         a proposal relating to any actual or potential transaction or other matter involving any actual or potential conflict of interest;

                  (v)         a proposal relating to any actual or potential transaction, contract, arrangement or understanding between one or more of the partners, or their associates, and the general partner, the partnership or any associate of the general partner or of the partnership;

                  (vi)         a proposal for the delegation, waiver, release or variation of an authority, right, duty or obligation of the general partner;

                  (vii)         a proposal for the appointment or approval under the partnership agreement of any person as a senior executive of the general partner or of an associate of the general partner; or

            (j)         nominates, selects, investigates, evaluates or negotiates with any person in connection with the removal or replacement of a general partner, or participates on a committee which proposes, considers, approves of, consents to or disapproves of any nomination, selection, appointment, change in control or ownership, suspension, replacement or removal of a general partner or an associate of a general partner; or

            (k)         takes any action, or participates in any action taken by any other limited partner, for the purpose of registering or maintaining the registration of the partnership or a general partner in the partnership under Part 2 of the Venture Capital Act 2002 of the Commonwealth as a VCLP or AFOF within the meaning of that Act.

        (4)         A limited partner in an incorporated partnership or a person authorised by the limited partner may, if and to the extent the partner or person is so authorised by the partnership agreement as in force from time to time—

            (a)         have access to and inspect the books or records of the partnership or copy any of them; and

            (b)         examine the state or prospects of the business of the partnership and advise, or consult with, other partners in relation to such matters.

        (5)         The provisions of this section (other than subsection (4)) may not be varied by the partnership agreement or with the consent of the partners, whether given by or under the partnership agreement or otherwise.

        (6)         No implication is to be taken as arising from subsection (3) that a limited partner in an incorporated limited partnership is to be regarded as taking part in the management of the business of the partnership merely because the limited partner or a person acting on behalf of the partner does any thing in connection with the conduct of that business that is not referred to in that subsection.

        (7)         For the purposes of this section, a limited partner in an incorporated limited partnership that is a venture capital management partnership (within the meaning of section 94D(3) of the Income Tax Assessment Act 1936 of the Commonwealth) is not to be regarded as taking part in the management of the business of the incorporated limited partnership merely because of any act the limited partner takes in respect of the incorporated limited partnership in the capacity of a partner or associate of a partner in the venture capital management partnership.

65B—Definitions etc applicable to section 65A

        (1)         In section 65A—

            (a)         a reference to an "associate of a general partner" includes a reference to—

                  (i)         if the general partner is a partnership, a partner in that partnership (a "partner in the general partner"); and

                  (ii)         any person who has an interest in the general partner or in any partner in the general partner, whether as security holder, trustee, responsible entity, manager, custodian, sub-custodian, nominee, administrator, executor, legal personal representative, beneficiary or otherwise; and

                  (iii)         any person to whom the general partner or any partner in the general partner has delegated any power, authority, right, duty or obligation of the general partner in relation to the partnership or any other partnership in which the general partner is a general partner; and

                  (iv)         if the general partner or a partner in the general partner or a person covered by subparagraph (ii) or (iii) is a body corporate, a related body corporate of that body corporate; and

                  (v)         a director, officer, employee, agent, representative or security holder of the general partner or of any partner in the general partner or of a person covered by subparagraph (ii), (iii) or (iv); and

            (b)         a reference to an "associate of a limited partner" includes a reference to—

                  (i)         if the limited partner is a partnership, a partner in that partnership (a "partner in the limited partner"); and

                  (ii)         any person who has an interest in the limited partner or in any partner in the limited partner, whether as security holder, trustee, responsible entity, manager, custodian, sub-custodian, nominee, administrator, executor, legal personal representative, beneficiary or otherwise; and

                  (iii)         if the limited partner or a partner in the limited partner or a person covered by subparagraph (ii) is a body corporate, a related body corporate of that body corporate; and

                  (iv)         a director, officer, employee, agent, representative or security holder of the limited partner or of any partner in the limited partner or of a person covered by subparagraph (ii) or (iii); and

            (c)         a reference to an "associate of an incorporated limited partnership includes a reference to—

                  (i)         any person or partnership in which the incorporated limited partnership has an interest, whether as security holder or otherwise; and

                  (ii)         if a person or partnership covered by subparagraph (i) is a body corporate, a related body corporate of that body corporate.

        (2)         In section 65A and this section, a reference to a "general partner in an incorporated limited partnership includes, if the general partner is a partnership, a reference to a partner in that partnership.

        (3)         In section 65A and this section—

"related body corporate" has the same meaning given by section 9 of the Corporations Act 2001 of the Commonwealth;

"security holder", in relation to a body (whether corporate or unincorporated) includes a holder of securities (within the meaning given by section 92(3) of the Corporations Act 2001 of the Commonwealth) in or of the body.



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