Why Is There A Need For Limited Partnerships In Progressive Markets?
The possibility of allowing the Limited Partnership scheme in Singapore had come in 2002, a decade ago, to further propel the country into a business-friendly status. Limited Partnerships were seen as another option for businesses to diversify, for entrepreneurs to finally break ground, and for investments to steadily come in.
The Singapore model of limited partnerships was inspired by three other models: the US Delaware model, the United Kingdom model, and the Jersey model. Limited partnerships in the United Kingdom are used for property investments.
But this wasn’t the only consideration for going for such scheme. According to the Accounting and Corporate Regulatory Authority or ACRA, legislators of Singapore had to strike a balance between keeping the country as business-friendly as possible and protecting the interests of their creditors and partners. This was the reason the Limited Partnerships Act or LPA was enacted with these two subsidiary acts: the Limited Partnerships Regulations 2009, and the Limited Partnerships (Restriction on Registration of Name) Notification 2009.
What are the key features of a Limited Partnership? An LP, by law, has to have at least one general partner and one limited partner. Any of these partners can be individuals, companies, or Limited Liability Partnerships or LLPs, as well as foreign companies registered under section 368 of the Companies Act. Unregistered foreign companies must note, however, that they cannot be registered as general partners.
Regarding legal matters, the general partners are the ones personally liable for the LP’s obligations as well as debts. Limited partners can only be held liable for debts that are within their agreed contribution to the partnership if they are not actively managing the partnership. If they are occupying active management roles, however, they will be deemed as general partners and will consequently be held personally liable for all debts and obligations.