Dalziel Lianne: Limited Partnerships Bill Taxation (Limited Partnerships) Bill — Third Readings 
Dalziel Lianne: Limited Partnerships Bill Taxation (Limited Partnerships) Bill — Third Readings 
[Volume:645;Page:14770] 
Hon LIANNE DALZIEL (Minister of Commerce) 
: 
 I move  
That the Limited Partnerships Bill and the Taxation (Limited Partnerships) Bill be now read a third time 
. The Limited Partnerships Bill repeals the special partnership provisions of the Partnership Act 1908 and establishes a modern limited partnership regime in New Zealand with the objectives of facilitating the development of the venture capital industry in New Zealand and encouraging foreign venture capital investment in New Zealand. The Taxation (Limited Partnerships) Bill provides for the taxation treatment of limited partnerships. In particular it provides that limited partnerships will have flow-through taxation status which I shall discuss further as I move through these third readings. It also clarifies and simplifies the tax rules applying to partnerships more generally. 
Attracting venture capital investment plays an important role in facilitating the Government’s economic transformation objectives particularly in relation to growing internationally competitive firms. More specifically venture capital investment plays an important role in helping new businesses to grow. It also can play a valuable role in encouraging new product research and helping firms to access new contacts and managerial and technical expertise. 
Limited partnerships are a preferred structure for investing in venture capital internationally. However international investors expect limited partnerships to have certain key features. Those include limited liability status for limited partners and separate legal personality and flow-through taxation status for the limited partnership. The existing special partnership regime that we have here in New Zealand lacks some of those key features and has consequently not been able to be effectively utilised by the venture capital industry in New Zealand. In place of the existing special partnership regime these bills provide a limited partnership structure with regulatory features and taxation treatment that will encourage venture capital investment in New Zealand and which have the key features needed in order to be both recognised and accepted by international investors. 
The limited partnership structure established by the Limited Partnerships Bill provides for two classes of partners. The first class of partners is the general partners who are jointly and severally liable with the limited partnership for the debts and liabilities of the limited partnership provided of course that the limited partnership is unable to satisfy those debts or liabilities. The second class of partners is limited partners who are not liable for the debts and liabilities of the limited partnership so long as they do not take part in the management of the limited partnership. Both general and limited partners may make capital contributions to the limited partnership. Limited partners need to know what activities they can be involved in while not taking part in the management of the limited partnership so that they can be clear that they are not potentially exposing themselves to liability. Accordingly the bill provides for “safe harbours” that have been based on international best practice and which are those activities that a limited partner may take part in without being deemed to have participated in the management of the limited partnership. 
Another important feature of the limited partnership structure established by the bill is that it will have separate legal personality. Separate legal personality is of course important in that it provides more assurance that a limited partnership will be recognised as such in other jurisdictions and of course it minimises the risk that a limited partnership may be treated as a general partnership in some other jurisdictions. 
The limited partnership model is intended to be flexible and to allow limited partnerships to structure their affairs in the way that it best suits them. At the same time the bill contains provisions to ensure the good governance of limited partnerships and the protection of creditors. Under the bill limited partnerships are formed on registration. A register of limited partnerships will be maintained by the Registrar of Companies. The registration process is modelled upon that applying to companies although there are some minor technical differences—for example in the information that must be supplied on registration. Limited partnerships are also required to provide the registrar with an annual return each year. 
The register of limited partnerships will be a public register except in one respect: the details of limited partners held on the register are to be kept confidential under the bill. Limited partnership details are not available on a public register in a number of other jurisdictions particularly in North America. Keeping the details of limited partners confidential certainly does address the risk that some international venture capital investors could choose to bypass New Zealand as an investment destination in favour of another jurisdiction where this information was not available on a public register. 
The bill also requires overseas constituted limited partnerships to register if they are carrying on business in New Zealand. The register of overseas limited partnerships established by the bill will provide clarity and certainty to third parties about the nature of the entity that they are dealing with and should facilitate the ability of creditors or other third parties to bring proceedings against overseas limited partnerships that are carrying on business here. 
The bill provides that limited partnerships may be liquidated or deregistered through broadly the same process that applies to companies and they may use the new voluntary administration process for companies as well. 
The taxation treatment of limited partnerships is a key issue in ensuring that they attract investment and I would like to take this opportunity just briefly to discuss the contents of the Taxation (Limited Partnerships) Bill. This bill provides for flow-through taxation treatment for limited partnerships which is a particularly vital issue in ensuring that the legislation fulfils its objectives around encouraging venture capital investment in New Zealand. In addition to flow-through taxation treatment the bill also establishes the tax rules that will apply to limited partnerships and clarifies and simplifies the tax rules applying to general partnerships. 
At the Committee stage changes were made to both bills by way of Supplementary Order Paper. The most significant change was to the commencement date of the Limited Partnerships Bill. This was changed to a date specified by Order in Council. The Limited Partnerships Bill cannot be brought into force until regulations are made setting out fees and forms relating to registration and those regulations are gazetted for 28 days. It is anticipated that the Limited Partnerships Bill will be brought into force on or about 1 May this year. The other changes to the Limited Partnerships Bill and Taxation (Limited Partnerships) Bill were of a minor and technical nature and largely designed to clarify or correct small issues in each bill. 
I would like to take the opportunity to commend the Commerce Committee for its work in fine-tuning these bills and also to thank all those who made submissions on the bills. I would also like to commend the officials from the Ministry of Economic Development and from the Inland Revenue Department who worked very hard on this legislation. 
These bills are an important contribution to the Labour-led Government’s economic development agenda. They provide a limited partnership structure with the regulatory and taxation features needed in order to be recognised by international investors and to meet the needs of the New Zealand venture capital industry. By increasing venture capital investment they will facilitate the growth of New Zealand businesses and encourage innovation entrepreneurialism and new product development. The Taxation (Limited Partnerships) Bill will also make the taxation law applying to partnerships simpler and easier to comply with. 
On that note I commend both the Limited Partnerships Bill and the Taxation (Limited Partnerships) Bill to the House.