Swain Paul: Limited Partnerships Bill — Second Reading 
Swain Paul: Limited Partnerships Bill — Second Reading 
[Volume:645;Page:14642] 
Hon PAUL SWAIN (Labour—Rimutaka) 
: 
 Firstly can I say that I am extremely flattered by Simon Power’s acknowledgment of my tax knowledge. I usually try to hide that under a bushel. 
Simon Power 
: A very modest bushel. 
Hon PAUL SWAIN 
: Yes a very modest bushel. It is clear that the member has identified some of my expertise and I will be going through the legislation and taking up the challenge the member has laid down. 
Mr Power at the start of his speech mentioned Trevor Mallard’s demeanour and slight paleness when there was potentially a slight legislative blip in the bill beforehand. It is probably quite fitting that Trevor Mallard had that demeanour because there has not been a legislative blip such as that since 1990 when he was a whip and it turned out to be a legislative catastrophe. That is probably why he was a little pale—it was the thought of history repeating itself on his own watch. 
Before I get into the legislation I will respond to some issues raised by Simon Power. He raised the issue of the legislation the select committee process and how there has been a number of changes. It really is a case of the glass half full and the glass half empty. I was not sure whether he was going to rave on about the constitutional outrage it was that the bill had not had much attention before it came to the Commerce Committee or whether he was going to praise the committee for doing extremely good work. Having been a Minister of Commerce my view is that these issues are always complex. 
The truth is that officials never really get it right the first time notwithstanding the discussion that goes on with the industry prior to the introduction of legislation. What happens is that good submissions come along and on a committee like that where it is quite technical the committee is very intent on listening. There were a couple of things in there that I think the chair Gerry Brownlee was keen to see moved through. I think one was the partnership share rule which he persisted with and he got some changes through which was good. 
Much has been said about the importance of this legislation. Essentially the guts of this issue is that we have an outdated system of attracting venture capital. International best practice is around some form of limited partnership arrangement and this legislation brings us into international best practice with the sole intent of ensuring that venture capital can be attracted to New Zealand. Limited partnership is a form of partnership involving two groups—general partners—who are liable for debts and liabilities of the partnership. But limited partners are liable only to the extent of the contribution in the partnership and that is the important thing—liability is related to contribution. 
As I have said the current arrangement we have goes back to 1908. The Government is trying to promote economic transformation to try to attract venture capital in an area where we need it so this measure is important. New Zealand’s venture capital market is still relatively thin compared to the rest of the world. It is important that we have venture capital particularly for those small businesses that are looking to step off and expand at a time of high risk. So this is critical. 
Simon Power raised two or three issues that are worth mentioning quickly. The first is transparency. We had a lot of discussion about that on the select committee and it is a bit of a line call. On the one hand we want to make sure that a register is transparent so that everybody can see who the limited partners are but on the other hand it has been shown overseas that if we make it too transparent and everybody knows who is in then that acts as a bit of a deterrent for people to put their money into an arrangement. On balance we have come down on the side of saying that this can be a confidential register and I think that is something that maybe we will have another look at when we come to the Committee stage. It was an issue that the select committee spent some time thinking about because it is one of those line-call decisions. In the end I think we made the right decision but I am sure there will be people who want to raise that matter later on. 
The other issue is the safe harbour arrangement. Activities that a limited partner can participate in without being held to have participated in the management of the limited partnership and potentially losing their limited liability are important too because people will want to retain their limited liability status. 
The issue about the Official Information Act linked into the transparency question and I remember having quite a long and lengthy debate about that. By and large members of the committee would be keen on transparency and on everything being under the Official Information Act. With some advice from officials it was felt that if we make this kind of area too open and transparent it means that people do not put forward their money and that means then that small businesses suffer. There are interesting parallels with other legislation that deals with transparency. In the end we made those calls. As I said Gerry Brownlee pushed for a matter that I think is around the partnership share rule. I cannot quite remember whether that was it but he beavered away on one particular issue and as I recall he had some success. 
This legislation has had a lot of attention. There are some difficult and complex things in it. It is quite technical. The New Zealand Law Society says in a leaflet it has put out which is part of an exercise to attract people to come and learn about these things that the passing of the limited partnerships legislation will be one of the most significant developments in corporate law since the Companies Act 1993. So this is important legislation. It has had a good thorough going-over at the Commerce Committee. A number of significant changes were made at the committee as a result of the good work under the chairmanship of Gerry Brownlee. I commend this bill to the House and to further consideration during the Committee stage.