A limited partnership is a partnership with two kinds of partners:
1 Limited partners, who provide financial backing and have little, role in management and no personal liability, and
2 General partners, who are responsible for managing the entity, and have unlimited personal liability for its debts
Limited Partnerships are permissible in South Australia under Part 3 Partnership Act 1891 (‘Act’). Section 49 of the Act states that a limited partnership will consist of at least one general partner and one limited partner, and a body corporate can be either general or limited partners. South Australian limited partnerships may have any number of limited partners, but there are restrictions on the number of general partners (s 50).
A limited partnership must be registered (s 51-54), and the fees for registration are found in the Partnership (Limited Partnerships) Regulations 1997.
The liability of a limited partner
to contribute to the debts or obligations of the limited partnership is not to exceed the amount shown in relation to the limited partner
recorded in the Register
of Limited Partnerships (s58(1)).
The limitation on the liability of a limited partner
extends to any debt or obligation incurred in connection with the conduct of the partnership's business
outside the State (s 61)). Any limitation under a corresponding law of another State, Territory or country that pertains to limited partnerships that is recognized by South Australia, extends to any debt or obligation incurred with the conduct of the partnership in South Australia (s 62(2)). The provisions of this part of the Act about the limitation of liability of a limited partner
cannot be varied by the partnership agreement even with the consent of the partners (s 64).
However, under section 65(3), a limited partner is not regarded as taking part in the management of the business of the limited partnership merely because the limited partner is:
1 An employee of the business (or if the partnership is a company, an officer of the company), or
2 A professional adviser or a guarantor to a general partner of the business;
if the limited partner takes any action to enforce or safeguard the rights of limited partners, participates in meetings, inspects the books of the partnership, examines the state and prospects of the business or consults with other partners in relation to such matters. The provisions of this section may not
be varied by the partnership agreement or consent of the partners (s65 (5)).
A person may be admitted as a partner in a limited partnership
without the necessity to obtain the consent of any limited partner
(s 67 (2)), and the provisions of this section may be varied by the partnership agreement or the consent of the partners (s67 (3)).
A limited partner is not entitled to dissolve the partnership by notice (s 68(1) (a)), and the other partners cannot dissolve the partnership because a limited partner has allowed the partner’s share of the partnership property to be charged for the partner’s separate debts or obligations (s 68(1) (b)). Moreover, the death, insolvency or retirement of a limited partner, or the dissolution of a corporate limited partner, does not dissolve the partnership (s 68(1) (c)). The permanent mental incapacity of a limited partner in managing his partnership affairs is not a ground for dissolution of the partnership by a court unless the share and interest of the partner cannot be otherwise realised (s 68 (2)).
A partnership ceases to be a limited partnership if none of the partners is a limited partner (s 69 (1)). The general partners must then lodge with the Corporate Affairs Commission a notice specifying the date the dissolution or cessation took effect (s 70 (1)).
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