LP Consultation Paper
SUMMARY OF ISSUES FOR CONSULTATION
REGISTRATION REQUIREMENTS
Issue 1
Do you agree that we can allow a limited partner to pay for his contribution in kind, as
long as the information is properly disclosed in the registration statement?
Issue 2
Do you agree that we can allow a limited partner to pay his contribution in installments,
subject to proper disclosure of this information?
Issue 3
Do you agree that a limited partnership in Singapore should be required to include the
words “Limited Partnership” or the abbreviation “LP” in its business name and
letterheads?
Issue 4
Do you agree that we should retain the 20-partner limit for limited partnerships for now,
but empower the Minister to increase the limit in the future?
Issue 5
Do you agree that a limited partnership with only one partner should not be required to
dissolve or de-register itself, but that the sole remaining partner should be treated as a
general partner? Do you agree that the sole remaining partner in an LP should be a
natural person and not a corporation?
Issue 6
Do you agree that the disqualification criteria that are currently applicable to partners of a
general partnership should also apply to the partners of a limited partnership?
Issue 7
Do you agree that the proposed conversion process for an existing partnership to a limited
partnership is sufficient?
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DISCLOSURE AND REPORTING REQUIREMENT
Issue 8
Do you agree that a limited partnership should not be required by law to have its accounts
audited or filed with the regulators? Do you agree that a limited partnership should be
required to keep proper accounting records that will enable true and fair financial
statements to be prepared and audited if necessary?
LIABILITY OF A LIMITED PARTNER
Issue 9
Do you agree that a limited partner who participates in the management of the limited
partnership should lose his limited liability status and be regarded under the law as a
general partner? Do you agree that this should not be contingent on whether a third party
is aware of the limited partner’s participation in management?
Issue 10
Do you agree with the proposed list of “safe harbour” activities in paragraph 6.1.5 of the
Consultation paper? Are there other activities that should be included?
Issue 11
Do you agree that if a limited partner knew, at the point of distribution, that the limited
partnership was not solvent, he should be liable to repay the amount distributed (which
includes distributed profits and capital withdrawn) for a period of 3 years after the
distribution date?
Issue 12
Do you agree that a limited partner should be allowed to assign his economic interest
(e.g. rights to profits) to a third party? Do you agree that such assignments should not
require the consent of the other partners in the limited partnership?
Issue 13
Do you agree that a limited partner should be allowed to transfer his partnership interest
(e.g. rights, liabilities, debts and obligations) to a third party? Do you agree that such
assignments should require the unanimous consent of the other partners in the limited
partnership?
DISSOLUTION AND WINDING UP
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Issue 14
Do you agree that the dissolution and winding up rules and procedures applicable to
general partnerships (except for the modification stated in paragraph 7.1.3 of the
Consultation paper) should be extended to limited partnerships?
Issue 15
Do you agree that the death or bankruptcy of a limited partner should not automatically
dissolve the limited partnership? Do you agree with the two scenarios for automatic
dissolution as provided in the Jersey legislation?
Issue 16
Do you agree that the grounds for the voluntary and involuntary dissolution of general
partnerships (as modified in paragraph 7.3.3 of the Consultation Paper) should also apply
to limited partnerships?
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PUBLIC CONSULTATION PAPER ON
LIMITED PARTNERSHIPS IN SINGAPORE
1
INTRODUCTION
The Study Team on Limited Partnerships (“LP”) and Limited Liability
Partnerships (“LLP”) was set up by the Ministry of Finance in November 2002. Its terms
of reference are to work out the details of the legal framework governing LP and LLP.
The team members are:
Co-Chairmen : Mr Ronnie Quek Cheng Chye, Allen & Gledhill
Mr Quek See Tiat, PricewaterhouseCoopers
Members
: Mr Chee Hong Tat, Ministry of Finance
Ms Julie Huan, Attorney-General’s Chambers
Mr Ong Pang Chan, Ministry of Finance
Ms Suria Suriakumari Sidambaram, Registry of Companies and
Businesses
Ms Toh Wee San, Registry of Companies and Businesses
2
BACKGROUND
2.1
There are currently two forms of business structures in Singapore: business firms
(i.e. sole proprietorships and general partnerships) and companies. A business firm is not
a separate legal entity from its owners. Business owners have unlimited and joint
liability for all the debts and liabilities incurred by their firms and by their business
partners. A company, on the other hand, is a separate legal entity from its members. This
means that a member’s personal liability is separate from the company and from other
members. In addition, a member’s liability is limited to the capital that he has invested in
the company.
2.2
The Company Legislation and Regulatory Framework Committee (“CLRFC”)
had recommended that legislation be enacted to introduce LPs and LLPs into Singapore.
These new structures will increase the options available for businesses and investments.
The CLRFC report said that LLPs are useful as business, professional and investment
vehicles, while LPs can be used for private equity and fund investment businesses. The
CLRFC further recommended that the Singapore LP Act be modelled on the 1907 UK
Limited Partnerships Act (“UK LP Act’) and that LPs be made available to all types of
businesses.
2.3
This consultation paper focuses on LPs. The team has prepared a separate
consultation paper on LLPs. This is available at http://www.mof.gov.sg/cor/public_LPLLP.html. In reviewing the requirements under the LP Act, the team started with the UK
LP Act and considered whether adjustments were required to suit our local needs. The
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following areas are presented in this consultation paper: (a) registration requirements; (b)
disclosure and reporting requirements; (c) liability of limited partners and (d) dissolution
requirements. The team is also studying the tax treatment of LPs and LLPs and will be
including its recommendations on the tax issues in its report to the Government.
2.4
The team would like to invite the business community, professionals, academics
and all interested persons to comment on its preliminary views that are presented in this
consultation paper. Respondents are also welcome to surface other related issues
pertaining to LPs. The team would appreciate it if all responses could be received before
31 July 2003. Feedback can be submitted via email to [email protected] or
via fax to 6337 4134.
3
NATURE OF A LIMITED PARTNERSHIP
3.1
According to the UK LP Act, an LP should “consist of one or more persons called
general partners, who shall be liable for all debts and obligations of the firm, and one or
more persons to be called limited partners, who shall at the time of entering into such
partnership contribute thereto a sum or sums as capital or property valued at a stated
amount, and who shall not be liable for the debts and obligations of the firm beyond the
amount so contributed”. The partners can be either natural persons or corporations.
3.2
Limited partners have limited liability, but the tradeoff is that they cannot take
part in the management of the LP and have no powers to bind the LP. The LP structure
accords passive investors with limited liability, privacy (the accounts are not published)
and tax transparency (the partners are taxed as individuals at personal income tax rates).
Like a general partnership, the LP is not a legal entity. Hence, it cannot own assets in its
own name.
4
REGISTRATION REQUIREMENTS
4.1
Information required for registration
4.1.1 In UK, LPs are required to submit a registration document at the point of
registration. The registration document contains:
(a)
(b)
(c)
(d)
(e)
(f)
the LP’s name;
the general nature and principal place of its business;
the full name of each partner;
the term of the LP, if any;
the date of commencement;
a statement that the partnership is an LP together with a description of each
limited partner; and
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(g) details of the sums contributed by each limited partner1 (and whether these are
paid in cash or otherwise).
The registration document must be signed by all the partners and lodged with the
Registrar2. The registration document is available for inspection by any member of the
public.
4.1.2 In the UK, a partner’s contribution is restricted to “a sum or sums as capital or
property valued at a stated amount”. This appears to exclude contributions in kind e.g.
where the partner contributes by providing his services to the firm. In US-Delaware and
Jersey, a partner’s contribution can be in the form of services rendered. We are in favour
of adopting the US-Delaware and Jersey arrangement for LPs in Singapore, with proper
disclosure of the contributions from each limited partner, i.e. the amount contributed and
whether this is in cash or in kind. This will provide businessmen with more flexibility
when they set up LPs to conduct their business activities.
Issue 1
Do you agree that we can allow a limited partner to pay for his contribution in kind, as
long as the information is properly disclosed in the registration statement?
4.1.3 As the structure of an LP is similar to a general partnership, the team recommends
that the information required for the registration of an LP should be similar to the
information required for registering a general partnership, which includes:
(a) the name of the LP;
(b) the general nature of its business;
(c) the principal place of business and any other place where the business is
carried out;
(d) the name and address of every partner. Where the partner is a corporation, the
corporation’s name, registration number and registered office;
(e) the term, if any, for which the LP will exist, and the date of its
commencement; and
(f) a description of every limited partner together with details of the sum
contributed by him (including whether the contributions are paid in cash or in
kind).
This is similar to the registration information required for LPs in the UK.
4.1.4 In the UK, it has been observed by academics that the Act does not prevent a
limited partner from making his contributions in installments. The UK LP register will
1
UK academics have commented that the UK LP Act does not prevent a limited partner from making his
contributions in installments. The outstanding contributions will be reflected in the registration statement.
2
The Registrar of limited partnerships in the UK is the same person as the Registrar of companies.
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then reflect the contributions as and when they are paid up. The team is of the view that a
limited partner in Singapore should also be allowed to pay his contribution in
installments, subject to certain disclosure requirements. At the point of registration, the
limited partner must indicate the full amount of his intended contribution.
Notwithstanding the installment schedule, a limited partner remains liable for the full
amount that he has agreed to contribute but has not paid up. The team feels that this
arrangement would facilitate the setting up of LPs. At the same time, creditors’ interests
are not compromised, as the information is disclosed and the limited partner remains
liable for the amount indicated in the registration document.
Issue 2
Do you agree that we can allow a limited partner to pay his contribution in
installments, subject to proper disclosure of this information?
4.2
Disclosure of limited liability status
4.2.1 A necessary safeguard for any limitation of liability is that the nature of the entity
is sufficiently disclosed. Limited liability companies for example, have to identify
themselves with the word “Limited” or the abbreviation “Ltd”. In Jersey and USDelaware, an LP must identify itself with the words “Limited Partnership” or the
abbreviation “LP”. The LP is also required to state its name, in legible lettering, on all its
stationary or communications to the public. The UK is considering adopting this
requirement.
4.2.2 The team recommends that LPs in Singapore be required to include the words
“Limited Partnership” or the abbreviation “LP” in their business names and letterheads.
This would alert a potential third party to the fact that he is dealing with a partnership that
may have one or more limited partners.
Issue 3
Do you agree that a limited partnership in Singapore should be required to include the
words “Limited Partnership” or the abbreviation “LP” in its business name and
letterheads?
4.3
Composition of limited partnerships
4.3.1 In the UK, US-Delaware and Jersey, LPs are allowed to have corporate partners.
This is similar to our current arrangement under the Business Registration Act (“BR
Act”), which also allows general partnerships to have corporate partners. The team is of
the view that we should allow LPs in Singapore to have corporate partners.
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4.3.2 In Jersey, UK and US-Delaware, the law does not prescribe an upper limit on the
number of partners in an LP. The UK used to limit the number of partners in an LP to not
more than 20. However, this requirement was removed in December 2002.
4.3.3 Under the Singapore Companies Act, partnerships of more than 20 persons have
to be registered as companies3, with an exception for partnerships formed for the purpose
of carrying on a profession or calling which can only be carried on by those who possess
qualifications prescribed by law 4. In other words, professional partnerships such as legal
firms and accounting firms are not subject to the 20-partner limit.
4.3.4 Most of the team members feel that we should retain the 20-partner limit for now,
as this is similar to the current limit for general partnerships and exempt private
companies in Singapore. Hong Kong also imposes a 20-partner limit on LPs5. As with
the arrangements for general partnerships, the 20-partner limit will not apply to
professional firms. To facilitate future adjustments, the team further recommends that the
Minister be empowered to increase the limit.
Issue 4
Do you agree that we should retain the 20-partner limit for limited partnerships for
now, but empower the Minister to increase the limit in the future?
4.3.5 In Jersey and the UK, an LP must consist of at least two partners, one of whom
must be a general partner6. The team recommends that an LP should be formed with one
or more general partners and one or more limited partners. However, unlike the practice
in the UK and Jersey, the team is of the view that if an LP is subsequently left with only
one partner, it would not be required to dissolve or de-register itself. We think this is
more convenient for the LP, as it will not need to suffer the administrative burden of reregistering itself once it is able to find new partners.
4.3.6 To protect the interests of creditors, the sole remaining partner in the LP will be
treated as a general partner, i.e. with unlimited liability. In other words, an LP with one
partner is treated no differently by law from a sole proprietorship. As an additional
safeguard, the team recommends that the sole remaining partner in the LP should be a
natural person and not a corporation.
Issue 5
3
Section 17(3), Companies Act, Cap.50
4
Section 14(4), Companies Act, Cap.50
5
Section 3(2), Hong Kong Limited Partnerships Ordinance, Cap 37
6
Article 3(2), Limited Partnerships (Jersey) Law 1994
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Do you agree that a limited partnership with only one partner should not be required to
dissolve or de-register itself, but that the sole remaining partner should be treated as a
general partner? Do you agree that the sole remaining partner in an LP should be a
natural person and not a corporation?
4.4
Suitability of partners
4.4.1 Section 22 of the BR Act provides that an undischarged bankrupt should not
participate in the management of any business without the leave of the High Court or the
written permission of the Official Assignee. The team recommends that these
disqualification criteria be applicable to LP partners. In this way, people who are deemed
unsuitable by law to manage businesses will not be able to become partners in an LP.
Issue 6
Do you agree that the disqualification criteria that are currently applicable to partners
of a general partnership should also apply to the partners of a limited partnership?
4.5
Conversion from company or general partnership to limited partnership
4.5.1 In US-Delaware, a corporation or general partnership can easily convert to an LP
by filing a certificate of conversion with the Secretary of State7.
4.5.2 The team is of the view that ideally, the law should facilitate the process for
companies and partnerships to convert to LPs. We need to strike a balance however,
between minimising the disruption to businesses who wish to convert and protecting the
rights of third parties, such as creditors.
4.5.3 The team considered having a seamless conversion process from a company to an
LP. However, due to the different nature of these two business vehicles8, we are of the
view that it would not be practical for the conversion process to be provided by law. For
example, while a company can grant floating charges, an LP is unable to do so. Another
complication is that it is difficult for a company to novate all its existing contracts when it
converts to an LP. In practice, this should not affect the business community because
most companies would not convert to LPs. We expect most of the conversions will be
from general partnerships to LPs; general partnerships to LLPs; and companies to LLPs.
The conversion processes for LLPs will be covered in the LLP consultation paper.
7
Section 17-217, Delaware Limited Partnerships Act
8
In US-Delaware, a corporation can easily convert to an LP because both structures have separate legal
entity status. In the case of Singapore, the LP will not be a separate legal entity from its members.
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4.5.4 In the case of general partnerships, the team recommends that there should be a
seamless conversion process for a general partnership9 to an LP (and vice versa). As an
LP is similar in nature to a general partnership, the conversion process would be more
straightforward. The partnership should be able to retain its business name and
registration number when it converts to an LP. There should also be a seamless flow of
rights and obligations to the LP. To protect third parties such as creditors, the conversion
should be publicly announced so that parties dealing with the entity will know that it is
converting to an LP. The team also recommends that the limited partners (who were
previously general partners of the partnership) should continue to have unlimited liability
for the debts and obligations that arose prior to or that arose out of a contract entered into
prior to the formation of the LP. In other words, a partner in a general partnership cannot
avoid his liability by simply converting the general partnership to an LP.
4.5.5 One of the key conversion issues is the tax treatment of LPs, e.g. whether a
partnership is allowed to carry forward its tax losses and allowances when it converts to
an LP. To facilitate the conversion process, the team recommends that the LP should be
allowed to claim tax attributes, e.g. losses, capital allowances and accrued expenses that
were incurred by the partnership previously. There should be no time limit for the LP to
utilise these tax attributes.
Issue 7
Do you agree that the proposed conversion process for an existing partnership to a
limited partnership is sufficient?
5
DISCLOSURE AND REPORTING REQUIREMENTS
5.1
Filing and audit requirements
5.1.1 In the UK and US-Delaware, LPs do not need to publish their accounts or have
them audited. In Jersey, all LPs are required to maintain accounting records, but there is
also no statutory requirement for the accounts to be audited or filed with the Registrar10.
5.1.2 The team is of the view that, as an LP is similar in nature to a general partnership,
it should not be required by law to have its accounts audited, or filed with the regulators.
As a safeguard, an LP would be required to keep proper accounting records that will
enable true and fair financial statements to be prepared and audited if necessary.
Issue 8
Do you agree that a limited partnership should not be required by law to have its
accounts audited or filed with the regulators? Do you agree that a limited partnership
9
A sole proprietorship that wants to convert to an LP must first find one or more persons to become
partners in the LP. This is because the registration of an LP requires two or more partners.
10
Article 9, Limited Partnerships (Jersey) Law 1994
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should be required to keep proper accounting records that will enable true and fair
financial statements to be prepared and audited if necessary?
6
LIABILITY OF A LIMITED PARTNER
6.1
Management of a limited partnership
6.1.1 In all jurisdictions that offer the LP structure, limited partners are not allowed to
participate in the management of the LP. They also have no powers to bind the firm. A
limited partner who takes part in the management of the LP will lose his limited liability
status and will be regarded under the law as a general partner.
6.1.2 In Jersey and US-Delaware, a limited partner will lose his limited liability
protection if a third party is aware of his participation in management. The UK Law
Commission disagreed with this approach. It felt that the conceptual basis for the limited
liability of limited partners should not be dependent on the particular knowledge and
belief of a third party. The onus should not be placed on third parties to find out whether
a limited partner is indeed taking part in the management of the LP. It is the limited
partner’s responsibility to ensure that he does not assume any management duties in the
LP. The team agrees with the UK Law Commission’s position on this issue.
Issue 9
Do you agree that a limited partner who participates in the management of the limited
partnership should lose his limited liability status and be regarded under the law as a
general partner? Do you agree that this should not be contingent on whether a third
party is aware of the limited partner’s participation in management?
6.1.3 The UK LP Act provides little guidance on the types of activities that limited
partners are allowed to take part in. Section 6(1) of the UK LP Act states that, “A limited
partner shall not take part in the management of the partnership business and shall not
have the power to bind the firm. Provided that a limited partner may by himself or his
agent at any time inspect the books of the firm and examine into the state and prospects
of the partnership business, and may advise with the partners thereon.”
6.1.4 The legislation in Jersey and US-Delaware are clearer in this respect. They
contain a list of “safe harbour” activities that a limited partner can engage in, without
affecting his limited liability status. In its latest report, the UK Law Commission
indicated that it is considering adopting the Jersey model.
6.1.5 The team is in favour of adopting the Jersey model for LPs in Singapore.
According to Article 19(5) of the Limited Partnerships (Jersey) Law 1994, the safe
harbour activities are as follows:
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(a) being a contractor for or an agent or employee of the limited partnership or of
a general partner or acting as a director, officer or shareholder of a corporate
general partner;
(b) consulting with and advising a general partner with respect to the activities of
the limited partnership;
(c) investigating, reviewing, approving or being advised as to the accounts or
affairs of the limited partnership or exercising any right conferred by the LP
Law;
(d) acting as surety or guarantor for the limited partnership either generally or in
respect of specific obligations;
(e) approving or disapproving an amendment to the partnership agreement; or
(f) voting on, or otherwise signifying approval or disapproval of, one or more of
the following –
(i) the dissolution and winding up of the limited partnership;
(ii) the purchase, sale, exchange, lease, pledge, hypothecation, creation of
a security interest, or other dealing in any asset by or of the limited
partnership;
(iii) the creation or renewal of an obligation by the limited partnership;
(iv) a change in the nature of the activities of the limited partnership;
(v) the admission, removal or withdrawal of a general or limited partner
and the continuation of the limited partnership thereafter; or
(vi) transactions in which one or more of the general partners have an
actual or potential conflict of interest with one or more of the limited
partners; and
(g) bringing an action on behalf of the limited partnership.
The team would like to invite comments from respondents on whether Singapore should
adopt the above list of safe harbour activities and whether are there other activities that
should also be included in the list.
Issue 10
Do you agree with the proposed list of “safe harbour” activities in paragraph 6.1.5 of
the Consultation paper? Are there other activities that should be included?
6.2
Capital withdrawal
6.2.1 In the UK, a limited partner is not allowed to withdraw his capital contribution
from the LP. If he does, he will be liable for the debts and obligations of the LP up to
the amount withdrawn11. As there is no time limit to the liability period, this creates
uncertainty for the limited partners.
11
Section 4(3), UK Limited Partnerships Act 1907.
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6.2.2 In Jersey, a limited partner is allowed to withdraw his capital contribution. The
capital withdrawn is subject to clawback if the withdrawal is done when the LP is
insolvent, i.e. if it fails the solvency test. The limited partner will then have an obligation
to repay the amount withdrawn for a period of 6 months after the withdrawal date12.
6.2.3 US-Delaware also allows a limited partner to withdraw his capital contribution.
However, the amount distributed (which includes distributed profits and capital
withdrawn) is subject to clawback if the LP fails the assets test, i.e. if its liabilities exceed
its assets. Section 17-607(b) of the Delaware Limited Partnerships Act provides that if
the limited partner knew, at the point of distribution, that the LP has failed the assets test,
he will have an obligation to repay the amount distributed for a period of 3 years after the
distribution date.
6.2.4 The team is of the view that Singapore should adopt the US-Delaware approach.
A limited partner would be allowed to withdraw his capital contribution. If the
withdrawal is done when the LP is solvent, i.e. it can pay its debts when they fall due, and
its assets exceed its liabilities (including contingent liabilities), the limited partner will
not be subject to any clawback after the withdrawal. However, if the limited partner
knew at the point of distribution, that the LP was not solvent, he would be liable to repay
the amount distributed (which includes distributed profits and capital withdrawn) for a
period of 3 years after the distribution date. The limited partner would only be liable for
debts and liabilities incurred during the period when his contribution represented an asset
of the LP. For greater transparency, the team further recommends that the LP should
have to inform the regulators whenever there is a reduction in its capital.
6.2.5 A general partner who decides to leave the LP will continue to have unlimited
liability for all the liabilities incurred while he was a general partner. However, he will
not be liable for the debts or obligations that are incurred after he has left the LP.
Issue 11
Do you agree that if a limited partner knew, at the point of distribution, that the limited
partnership was not solvent, he should be liable to repay the amount distributed (which
includes distributed profits and capital withdrawn) for a period of 3 years after the
distribution date?
6.3
Assignment/assignation by limited partners
6.3.1 In the UK, a limited partner may, with the consent of the general partners, assign
his share in the LP to a third party and upon such assignment, the assignee will become a
limited partner with all the rights of the assignor13.
12
Article 17(2), Limited Partnerships (Jersey) Law 1994
13
Section 6(5)(b), UK Limited Partnerships Act 1907.
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6.3.2 In Canada-Ontario, the Ontario Limited Partnership Act 1990 provides that “a
limited partner’s interest is assignable”. The Ontario legislation distinguishes between
assignments carrying only a right to profits (which do not require the consent of the other
partners) and assignments to a “substituted limited partner” (which require the consent of
all the other partners). An assignee who is not a substituted limited partner has no right
to inspect the LP’s book or be given any information about matters affecting the LP. Such
assignees are only entitled to receive the share of the profits or other compensation by
way of income, or by way of the return of the contribution to which the assignor would
otherwise be entitled. A substituted limited partner, on the other hand, will have all the
rights and powers of, and be subject to all the restrictions and liabilities of, the assignor.
6.3.3 The team is in favour of adopting the Ontario approach, as it helps to clarify the
effects of an assignment on the obligations of the assignor. An assignment carrying only
a right to profits does not require the consent of the other partners (whether general or
limited). However, an assignment that involves a transfer of the rights and liabilities,
including debts and obligations, of a limited partner will require the unanimous consent
of all the other partners in the LP. After the transfer, the assignor will cease to be liable
for any liabilities (both past and future) of the LP, as these will be assumed by the
assignee.
Issue 12
Do you agree that a limited partner should be allowed to assign his economic interest
(e.g. rights to profits) to a third party? Do you agree that such assignments should not
require the consent of the other partners in the limited partnership?
Issue 13
Do you agree that a limited partner should be allowed to transfer his partnership
interest (e.g. rights, liabilities, debts and obligations) to a third party? Do you agree
that such assignments should require the unanimous consent of the other partners in
the limited partnership?
7
DISSOLUTION AND WINDING UP
7.1
General winding up rules and procedures of a limited partnership
7.1.1 In the UK and US-Delaware, the dissolution and winding up process for LPs is
similar to that for general partnerships. In Singapore, a general partnership that has been
dissolved does not cease to exist but enters a new phase known as “winding up”. The
authority of each partner to bind the firm and the rights and obligations of the partners
will continue during the winding up phase. The partnership will have this period to settle
its outstanding business affairs e.g. completion of pending contracts, payments of debts
and taxes, liquidation of assets to cash, adjustment of partners’ rights, and final
distribution to partners of their respective interests.
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7.1.2 The team is of the view that the dissolution and winding up procedures for general
partnerships in Singapore should be extended to LPs. For example, in the absence of any
contrary agreement, the partners will share in the capital profits in accordance with their
profit-sharing ratio (instead of their capital-sharing ratio). LPs will also adhere to the
same asset distribution rules as general partnerships.
7.1.3 One exception to the general rule is that, unlike a general partnership where all
partners14 are allowed to wind up the affairs of the partnership, only the general partners
are permitted to wind up the affairs of an LP.
Issue 14
Do you agree that the dissolution and winding up rules and procedures applicable to
general partnerships (except for the modification stated in paragraph 7.1.3 of the
Consultation paper) should be extended to limited partnerships?
7.2
Death or bankruptcy of a partner
7.2.1 In the UK, the death or bankruptcy of a limited partner will not dissolve the LP15.
However, the death or bankruptcy of a general partner will dissolve the LP16. Similarly,
the Jersey LP Act lists two possible scenarios that will cause the immediate dissolution of
the LP:
(a) Where the sole or last remaining general partner of an LP is an individual, his
death, legal incapacity, bankruptcy, retirement or withdrawal will dissolve the
LP; or
(b) Where the sole or last remaining general partner is a body corporate, its
dissolution, bankruptcy or withdrawal will dissolve the LP.
7.2.2 The team recommends adopting the Jersey approach, as it comprehensively
covers the scenarios where the sole or last remaining general partner is an individual or a
corporation. Under this approach, the death or bankruptcy of a limited partner will not
automatically dissolve the LP.
Issue 15
14
Technically, only solvent partners may wind up the affairs of the partnership. See section 38 of the
Partnership Act.
15
Section 6(2), UK Limited Partnerships Act 1907
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Section 7, UK Limited Partnerships Act 1907
LP Consultation Paper
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LP Consultation Paper
Do you agree that the death or bankruptcy of a limited partner should not
automatically dissolve the limited partnership? Do you agree with the two scenarios
for automatic dissolution as provided in the Jersey legislation?
7.3
Dissolution of Limited Partnerships
7.3.1 In Singapore, a partnership may be dissolved either voluntarily or involuntarily. A
partnership may be dissolved in any of the following circumstances without the
intervention of the Court:
(a) on expiration of the fixed term;
(b) on termination of a single adventure or undertaking;
(c) on the giving of notice, by a partner to the other partners, of his intention to
dissolve the partnership;
(d) on the death of a partner;
(e) on the making of a charging order, i.e. if any partner has his share in the
partnership property charged and the other partners opt to have the partnership
dissolved; and
(f) on the happening of an event which makes it unlawful for the business of the
firm to be carried on, or for the partners to carry it on as a partnership.
7.3.2 In Singapore, the Court may also order the dissolution of a partnership in any of
the following circumstances:
(a) when a partner is found by the Court to be of permanently unsound mind;
(b) when a partner becomes permanently incapable of performing his part of the
partnership contract;
(c) when the Court is of the opinion that a partner has been guilty of conduct that
is calculated to prejudicially affect the carrying on of the business;
(d) when a partner wilfully or persistently commits a breach of the partnership
agreement, or otherwise conducts himself in matters relating to the partnership
business in such a way so that it is not reasonably practicable for the other
partners to carry on business in partnership with him;
(e) when the business of the partnership can only be carried on at a loss; and
(f) whenever in any case, circumstances have arisen which, in the opinion of the
Court, render it just and equitable that the partnership be dissolved e.g. lack of
mutual confidence among the partners, deadlock in management etc.
7.3.3 The team is of the view that the grounds for the voluntary and involuntary
dissolution of general partnerships should also apply to LPs, except for the following
modifications which differentiate between general and limited partners:
(a) an LP shall not be dissolved by the death, bankruptcy or dissolution of a
limited partner;
LP Consultation Paper
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LP Consultation Paper
(b) the mental incapacity of a limited partner shall not be grounds for dissolution
by the Court unless the mentally incapacitated partner’s share cannot be
otherwise ascertained and realised;
(c) subject to any agreement between the partners, an LP shall not be dissolved by
the death or bankruptcy of a general partner if there remains at least one other
general partner;
(d) the other partners shall not be entitled to dissolve the partnership by reason of
any limited partner suffering his share to be charged for his separate debt; and
(e) subject to any agreement between the partners, a limited partner shall not be
entitled to dissolve a partnership by notice.
Issue 16
Do you agree that the grounds for the voluntary and involuntary dissolution of general
partnerships (as modified in paragraph 7.3.3 of the Consultation paper) should also
apply to limited partnerships?
LP Consultation Paper
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