New limited partnership regime to help ventures

A new limited partnership regime designed to help encourage the flow of venture capital investment into New Zealand was announced today by Commerce Minister Pete Hodgson.

"The limited partnership is the preferred business structure internationally for investing in venture capital", said Mr Hodgson.

A limited partnership is composed of general and limited partners. While a general partner in a limited partnership is personally liable for the debts of the firm, a limited partner is an investor whose liability is limited to the size of the investment they make and who can only be involved in the firm's management in certain prescribed circumstances.

Standard features for limited partnerships include: flow-through tax status; limited liability for investing partners and separate legal personality.

"The new regime is part of the government's ongoing effort to remove tax and regulatory barriers to venture capital investment," said Mr Hodgson.

"This well-established model, reflecting international best practice, will provide greater clarity and certainty for investors when they look to invest in New Zealand.

"This is about creating opportunities for Kiwi businesses to get the capital they need to grow. We are committed to working with the venture capital industry to develop a well-functioning, successful venture capital market in New Zealand", he said. 

The new limited partnership regime will complement the venture capital tax reforms enacted last year to remove tax barriers to New Zealand companies attracting private equity and venture capital from institutional investors in specific countries.

Legislation will need to be passed to bring the new regime into effect. A Bill is expected to be introduced in 2006.

Tax changes will be required to ensure that the limited partnership provides flow-through tax treatment.

Pete Hodgson says the government will issue a discussion document on the taxation of limited partnerships later this year, and the tax changes will accompany the limited partnership legislation.