This document is a partnership agreement, designed to be used in a limited partnership.
What are limited partnerships?
Limited partnerships vary from ordinary partnerships in a profound way. In ordinary partnerships, subject to express agreement to the contrary, all partners have unlimited personal liability for activities of the partnership. This may be varied by agreement between the partners, but such an agreement does not affect third parties.
Limited partnerships, while still requiring limited partners to contribute capital and allowing them a share in profits, exclude limited partners from management of the partnership. This means that the liability of the limited partners is limited to an agreed capital contribution. Therefore, this directly affects third party claims against the partnership.
Limited partnerships only come into existence upon registration with the designated sate or territory authority responsible for such registrations.
Limited partnerships are uncommon, as limited liability companies are a more effective means of protecting individuals from liability in commercial ventures. Limited partnerships are useful as a means of implementing a joint venture for a specific project or for a venture which is by its nature temporary and where limited liability for one or more partners is desired.
Types of partners
Limited partnerships have at least 1 general partner and 1 limited partner. A body corporate may be a general partner or a limited partner.
A limited partnership may have any number of limited partners. Limited partner means a partner in a limited partnership whose liability for the liabilities of the partnership is limited under statute.
The number of general partners though should generally not exceed 20, although exceptions may apply (see section 115(2) of the Corporations Act 2011 (Cth).) General partner means a partner in a limited partnership who is not a limited partner.
Using this precedent
This precedent sets out the basic terms and conditions that practitioners would expect to find in a limited partnership agreement. It does not duplicate terms and conditions found in generally in ordinary partnership agreements and should be used in conjunction with an ordinary partnership precedent. See for example “Partnership agreement – general (short form)”.
It is important for the drafter to:
· be familiar with the relevant state or territory Partnership Act applicable to the specific partnership (each state and territory in Australia has a Partnership Act, the contents of which are very similar to each other);
· understand the relationship between the short and long term strategic objectives of the partners; and
be aware of any material regulations which impact the specific business of the partnership.
This document has been authored for LexisNexis by Michael Heraghty, Partner, TressCox Lawyers, Rosemarie Ryan, Barrister and Elise Margow, Principal Legally Speaking
This document is prepared with the assistance of Specialist Editor Stephen Newman, Executive Counsel, Ponte Earle.