PART II

Constitution

5. —(1) An investment limited partnership may be formed by two or more persons and shall—

(a) have as its principal business, to be expressed in the partnership agreement establishing the investment limited partnership, the investment of its funds in property;

(b) consist of one or more general partners and one or more limited partners;

(c) have appointed a custodian or custodians being a person or persons maintaining a place of business in the State, and approved by the Bank under section 8 of this Act, in whom the assets of the investment limited partnership shall be entrusted for safe keeping, who is charged with verifying that the business of an investment limited partnership is conducted in accordance with the partnership agreement and with such powers or duties of a custodian with regard to the investment limited partnership as are specified by the Bank and in section 24 ;

(d) have specified in the partnership agreement, the conditions under which there may be effected, and the procedure to be followed with respect to, the replacement of a general partner or a custodian to the partnership with another general partner or custodian including a replacement by the Bank under section 30 and the admission of additional general partners or custodians and shall contain provision to ensure the protection of limited partners in the event of any such replacement;

(e) comply with such further and other requirements made by the Bank from time to time under section 7 hereof;

(f) hold a certificate of authorisation issued in accordance with Part III of this Act.

(2) A body corporate with or without limited liability may be a general partner or a limited partner and a partnership may be a limited partner.

(3) The contribution made by a limited partner to the capital of the investment limited partnership may be satisfied in cash or other property provided that in the case of a non-cash contribution, the value of the relevant property shall, for the purposes of satisfying the obligation to contribute to the capital of the investment limited partnership, be the fair market value of the property at the time of transfer of the property to the investment limited partnership.

(4) For the avoidance of doubt, the contribution made by a limited partner to the capital of the investment limited partnership shall not be satisfied by the provision of any services or loans by the limited partner.

6. —(1) A limited partner shall not take part in the conduct of the business of the investment limited partnership and in particular shall not have power to contract on behalf of the investment limited partnership and all letters, contracts, deeds, instruments and documents whatsoever shall be entered into by the general partner on behalf of the investment limited partnership.

(2) If a limited partner takes part in the conduct of the business of the investment limited partnership in its dealings with persons who are not partners, that limited partner shall be liable in the event of the insolvency of the investment limited partnership for debts of the investment limited partnership incurred during the period that he so participates in the conduct of the business as though he were for such period a general partner.

(3) A limited partner shall be liable by virtue of subsection (2) only in respect of debts or obligations incurred by the investment limited partnership in favour of a person who at the time the debt or obligation was so incurred reasonably believed, based upon the conduct of the limited partner, that the limited partner was a general partner and whether or not such debts or obligations have since been assigned or otherwise transferred to another person.

(4) A limited partner does not take part in the conduct of the business of an investment limited partnership within the meaning of this Act solely by doing any one or more of the following, irrespective of the frequency of such acts:

(a) being a contractor for, or being an agent or employee of, the investment limited partnership or a general partner or acting as a director, officer or shareholder of a general partner which is a body corporate;

(b) consulting with and advising a general partner with respect to the business of the investment limited partnership;

(c) investigating, reviewing, or being advised as to the accounts or business affairs of the investment limited partnership or exercising any right conferred by this Act;

(d) acting as surety or guarantor or providing any other form of security for the investment limited partnership either generally or in respect of specific obligations;

(e) voting as a limited partner on one or more of the following matters:

(i) the dissolution and winding up of the investment limited partnership;

(ii) the purchase, sale, exchange, lease, mortgage, pledge, or other acquisition or transfer of any asset or assets by or on behalf of the investment limited partnership;

(iii) the incurring or renewal of any indebtedness of the investment limited partnership;

(iv) a change in the objectives or policies of the investment limited partnership;

(v) the admission, removal or withdrawal of a general or limited partner or custodian and the continuation of the business of the investment limited partnership thereafter;

(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.

(5) Subsection (4) shall not import any implication that the possession or exercise of any other power by a limited partner will necessarily constitute the taking part by such limited partner in the business of the investment limited partnership.