Partnership Act 1963

A limited partner in an incorporated limited partnership must not take part in the management of the incorporated limited partnership’s business.

Subsection (3) applies if—

as a direct result of any wrongful act or omission of a limited partner in an incorporated limited partnership in taking part in the management of the partnership’s business, the limited partner causes any loss or injury to someone who is not a partner in the partnership (a third party); and

at the time of the act or omission the third party had reasonable grounds to believe that the limited partner was a general partner in the partnership.

The limited partner is liable for the loss or injury to the same extent that the limited partner would have been liable if the limited partner were a general partner in the partnership.

Note A limited partner is not an agent of the incorporated limited partnership, and the acts of a limited partner do not bind a general partner, another limited partner or the partnership itself (see s 66 (1)).

A limited partner in an incorporated limited partnership is not to be regarded as taking part in the management of the partnership’s business only because the limited partner or a person acting on behalf of the limited partner—

is an employee of, or an independent contractor engaged by, the partnership, a general partner in the partnership or an associate of the general partner, or is an officer of a general partner that is a corporation or of an associate of a general partner that is a corporation; or

gives advice to, or on behalf of, the partnership, a general partner in the partnership or an associate of a general partner in the proper exercise of functions arising from the engagement of the limited partner, or a person acting on behalf of the limited partner, in a professional capacity or arising from business dealings between the limited partner, or a person acting on behalf of the limited partner, and the partnership or a general partner or an associate of the general partner; or

gives a guarantee or indemnity in relation to any liability of the partnership, a general partner in the partnership or an associate of the general partner; or

takes any action, or participates in any action taken by any other limited partner in the partnership, for the purpose of enforcing the rights, or safeguarding the interests, of the limited partner as a limited partner; or

if permitted by the partnership agreement—

calls, requisitions, convenes, chairs, participates in, postpones, adjourns or makes a record of a meeting of the partners, the limited partners or any of them; or

requisitions, signs, or otherwise passes, approves, disapproves or amends any resolution (whether or not at a meeting or in writing) of the partners, the limited partners or any of them, including by formulating, moving, proposing, supporting, opposing, speaking to or voting on the resolution; or

exercises a power of the limited partner under subsection (5) or has, or exercises, a right to—

have access to and inspect the books or records of the partnership or copy any of them; or

examine the state or prospects of the business of the partnership or advise, or consult with, other partners in relation to them; or

gives advice to, consults with, or is or acts as an officer, director, security holder, partner, agent, representative, employee of, or independent contractor engaged by, an associate of the partnership; or

is or acts as a lender to, or fiduciary for, an associate of the partnership; or

to the extent authorised by the partnership agreement, participates on, or has or exercises any right to appoint 1 or more people to, remove 1 or more people from, or to nominate 1 or more people for appointment to or removal from, a committee that considers, approves of, consents to or disapproves of any 1 or more of the following proposals from a general partner:

a proposal involving a material change in the nature of the partnership’s business (including a change in, or departure from, any investment guidelines, policies or conditions relating to the partnership’s business);

a proposal for the adoption of a method for valuing some or all of the partnership’s assets (including a change to, replacement of or variation from the method);

a proposal for an extension or reduction in the period in which, under the partnership agreement, investments (or certain kinds of investments) can be made by the partnership, or for any approval or disapproval of investments that the partnership does not otherwise have a right to make;

a proposal relating to any actual or potential transaction or anything else involving any actual or potential conflict of interest;

a proposal relating to any actual or potential transaction, contract, arrangement or understanding between 1 or more of the partners, or their associates, and the general partner, the partnership or any associate of the general partner or of the partnership;

a proposal for the delegation, waiver, release or variation of an authority, right, duty or obligation of the general partner;

a proposal for the appointment or approval under the partnership agreement of anyone as a senior executive of the general partner or an associate of the general partner; or

nominates, selects, investigates, evaluates or negotiates with anyone in relation to the removal or replacement of a general partner, or participates on a committee that proposes, considers, approves of, consents to or disapproves of any nomination, selection, appointment, change in control or ownership, suspension, replacement or removal of a general partner or an associate of a general partner; or

takes any action, or participates in any action taken by any other limited partner, for the purpose of registering or maintaining the registration of the partnership or a general partner in the partnership as a VCLP, ESVCLP or AFOF under the Venture Capital Act 2002 (Cwlth), part 2 (Registration of limited partnerships).

A limited partner in an incorporated limited partnership or a person authorised by the limited partner may, if and to the extent the partner or person is authorised by the partnership agreement—

have access to and inspect the books or records of the partnership or copy any of them; and

examine the state or prospects of the business of the partnership and advise, or consult with, other partners in relation to them.

The operation of this section may not be varied by the partnership agreement or with the consent of the partners, whether given under the partnership agreement or otherwise.

Note Section 66 (4) (Relationship of partners to others and between themselves) enables partners to give consent in accordance with the partnership agreement.

Subsection (4) does not imply that a limited partner in an incorporated limited partnership is to be regarded as taking part in the management of the partnership’s business only because the limited partner or a person acting on behalf of the partner does any thing in relation to the conduct of that business that is not mentioned in that subsection.

For this section, a limited partner in an incorporated limited partnership that is a venture capital management partnership under the Income Tax Assessment Act 1936 (Cwlth), section 94D (3) (Corporate limited partnerships) is not to be regarded as taking part in the management of the partnership’s business only because of any act the limited partner takes in relation to the incorporated limited partnership in the capacity of a partner or associate of a partner in the venture capital management partnership.