The Limited Partnerships Act 2008 (“the Act”) came into force on 2 May 2008 and replaces the „Special Partnerships‟ regime that existed under Part 2 of the Partnerships Act 1908. The Act establishes a new regulatory and tax regime in New Zealand for limited partnerships which removes barriers to foreign investment capital and promotes growth in New Zealand venture capital and private equity industries. May 2008 – July 2008 Page 4 of 4 © 2008 There are several key features of Limited Partnerships under the Act. They are a separate legal entity. A limited partnership must have at least one general partner and one limited partner and they cannot be the same person. A partner may be a person, a partnership or a body corporate. They have two types of partners – „general partners‟ who are liable for all the debts and liabilities of the partnership and „limited partners‟ whose liability is limited to the extent of their investment or capital contribution to the partnership. The limited liability is retained only so long as the limited partner does not engage in the day to day management of the partnership. The limited partner is only allowed to participate in what is referred to as „safe harbour activities‟ such as key decisions on how the partnership is run but not day to day management. A complete list of „safe harbour activities‟ can be found in the Act. Limited Partnerships will have „flow-through‟ tax status, meaning that each partner will be taxed individually at that partner‟s personal tax rate rather than the partnership being taxed as a whole. Limited Partnerships will be required to have a written partnership agreement that will cover such areas as entry to and exit from the limited partnership, entitlement to distributions and assignment of interests, and Limited Partnerships will continue indefinitely rather than having a set life span. The Companies Office will administer the Limited Partnerships Act and will provide a searchable register of New Zealand Limited Partnerships, and Overseas Limited Partnerships that are conducting business or are engaged in business activities in New Zealand. The Ministry of Economic Development states that the register will go live on the internet in May 2008 and will be available 24 hours a day, seven days a week. In recognition of the fact that a limited partner may not wish to have their interest in a Partnership disclosed to the public, information on limited partners will be treated as confidential on the register and will not be available to the public. The register must be kept up to date and there are strict time requirements regarding updating some information. Each year an annual return must be filed. Limited partnership regimes can be found in countries such as Australia, the United Kingdom, Canada, Singapore and the United States and are a preferred structure for investing in venture capital. It is anticipated that the new Act will allow New Zealand businesses to compete internationally for these funds, which are often required for new companies and for early stage expansion.