Second Reading Speech By Mrs Lim Hwee Hua Senior Minister Of State For Finance On The Limited Partnerships Bill 2008 at The Parliament, 18 Nov 200818 Nov 2008
Mr Speaker, Sir, I beg to move, "That the Bill be now read a second time".
2. The Bill before the House seeks to introduce a new business structure called Limited Partnership, or LP in short.
3. The LP is a well established concept in other leading jurisdictions and is most commonly used in the types of businesses that focus on a single or limited term project. They are also useful in ?labour-capital? partnerships, where one or more financial backers prefer to contribute money or resources while the other partner performs the actual work. The introduction of LPs will enable Singapore to better meet the diverse business needs and offer entrepreneurs and investors an additional form of business structure to choose from.
4. In coming up with the Singapore LP structure, we took reference from the US Delaware model, the Jersey model as well as the UK model, and were mindful of the need to be both pro-business and to safeguard the interests of potential creditors and partners.
General Features of an LP
5. Sir, allow me to elaborate on the general features of an LP. Clause 3 of the LP Bill requires that every LP shall have at least one general partner, and one limited partner at the point of registration. The LP and its partners must be registered with the Accounting and Corporate Regulatory Authority. The general partners of an LP are, in all major aspects, in the same legal position as partners in a conventional partnership. They have management control and have joint and several liability for the debts of the LP.
6. The limited partners' liability is limited to the extent of their investment in the LP. They cannot participate in management; otherwise, they would lose their limited liability protection. The First Schedule of the LP Bill sets out a list of "safe harbour activities" which are activities that a limited partner can undertake that will not be construed as "participation in management". The Minister for Finance is empowered under Clause 43 of the Bill, to amend the list through subsidiary legislation.
Flexibilities and Safeguards in the LP Bill
7. Limited partners are not required to disclose the capital contributions made at the point of registration, and they are also allowed to withdraw their capital contributions under Clause 7 of the Bill. This is because creditors would generally look towards the general partners of the LP to fulfil all the debts, liabilities and obligations of the LP.
8. To minimize abuse and protect the LP's other stakeholders, Clause 16 of the Bill requires the name of an LP to contain the words "limited partnership", or the acronym "LP", so that the status is clear to those it transacts with. While an LP is not required to file its accounts or have them audited, Clause 27 of the Bill requires it to keep proper accounting records that will enable true and fair financial statements to be prepared and audited if deemed necessary.
9.In addition, while limited partners are allowed to withdraw their capital contribution, this is subject to a claw back of the distribution received from the LP if the general partners are bankrupt at the point of distribution, or will become so as a result of the distribution and the limited partners have knowledge of this. The claw back requirement under Clause 7 of the Bill will only affect the distributions paid out one year prior to the bankruptcy of the general partner(s).
Other Provisions in the Bill
10. Finally, the Bill provides for consequential and related amendments to the Income Tax Act and the Goods and Services Tax Act. Given that an LP is not a separate legal entity, the tax treatment of the LP for income tax and GST purposes would follow the tax treatment of general partnerships.
11. Sir, the creation of the LP business vehicle will increase the options available to businessmen and investors and is consistent with our overall policy to make Singapore a conducive place for business.
12. Mr Speaker, Sir, I beg to move.