The Limited Partnerships Act 2008 (the Act) came into law in May 2008, introducing a new type of corporate structure in New Zealand. Limited partnerships offer a number of advantages, which include the benefit of having a separate legal personality, limited liability, investor anonymity, and certain tax advantages in some circumstances.
However, despite being available as an alternative corporate structure for some time there is often confusion regarding how limited partnerships can legally bind themselves. In summary:
If the obligation is required by law to be captured in the form of a deed, then the deed can be signed by either:
- the general partner of the limited partnership; or
- any other person or class of persons, to the extent that this is explicitly provided for in the limited partnership agreement and that person's signature is witnessed.
Some uncertainty has arisen over how the general partner should execute a deed on behalf of the limited partnership. Although it is arguable on a literal reading of the Act that something less is required, market practice to date (generally driven by banks entering into security arrangements with limited partnerships) has been to require the following:
- if the general partner is a natural person, that person's signature should be witnessed; and
- if the general partner is a company, the provisions in the Companies Act 1993 regarding execution of documents should be followed.
- If the obligation does not need to be in form of a deed but is required by law to be captured in writing, the rules for limited partnerships are the same as they are for companies. The Act allows agreements to be entered into on behalf of the limited partnership by any person who is acting under the limited partnership's express or implied authority.
A key point to remember is that authority to bind a limited partnership is a management function which is vested in the general partner. A limited partner has no authority to bind the limited partnership and may be personally liable for obligations of the limited partnership if it is found to be performing management activities.
These rules apply to New Zealand registered limited partnerships whether or not the obligation is entered into in New Zealand or elsewhere, or is governed by the laws of New Zealand or elsewhere. Those who deal with limited partnerships need to be aware of these special requirements for executing documents