AUSTRALIA Law and Practice Contributed by: Michael Lawson, Nicole Brown, Lizzie White and Tamaryn Leach, MinterEllison
VCLPs and ESVCLPs are incorporated limited partnerships established under state-based leg - islation. They are bodies corporate and need to be registered with relevant state regulatory bod - ies. In addition, these entities require registration with Innovation and Science Australia under the Venture Capital Act 2002 (Cth) (the “VC Act”). Due to legislative requirements, the general part - ner of the VCLPs and ESVCLPs will generally be an incorporated limited partnership (VCMP). The general partner of that VCMP is generally a company. The benefit of registering VCLPs and ESVCLPs is primarily the manner in which investment pro - ceeds are taxed for both the general partner and the limited partners. Managers of each of these vehicles are required to: • hold an AFSL; • be an authorised representative of an AFSL holder; or • have the benefit of a relevant exemption. • Key documents for partnerships are: • a partnership deed; • a subscription agreement; • a management agreement; and • any side letters. A partnership deed for the VCMP is also required. Incorporation of a limited partnership can occur in approximately two business days with modest registration fees. A VCLP or ESVCLP registration can be conditional or unconditional, depending on whether all registration conditions have been met. Following receipt of a complete application, Innovation and Science Australia must typically make a decision regarding registration under the VC Act within 60 days, though there is a power to extend this timeframe.
A significant workstream to be undertaken on fund inception is the relevant “carry” vehicles and rules applicable for the carry participants. As discussed later (see 2.2.2 Legal Structures Used by Fund Managers ), if a CCIV is the pre - ferred vehicle, these are formed on registration with ASIC. 2.1.3 Limited Liability The trust deed for most unit trusts includes what is, in effect, a contractual limitation of liability of investors. The effectiveness of such limitations has broad commercial acceptance. Despite such acceptance, the question of the legal effec - tiveness of such limitations has not been settled across Australia’s states and territories. In relation to limited partnership structures, as a general rule, an investor’s liability is limited to the capital that they committed to the investment vehicle. Typically, if there is a tax impost relating to an investor’s commitment, the investor must fund that impost. 2.1.4 Disclosure Requirements A fundamental disclosure requirement is that communications to investors cannot be mislead - ing or deceptive, including by omission. Where retail investors are issued with interests in a fund, the product disclosure statement (PDS) must comply with statutory disclosure rules, including detailed cost disclosure. The issuer of the product has continuous disclosure obliga - tions. 2.2 Fund Investment 2.2.1 Types of Investors in Alternative Funds Institutional investors from Australia and off - shore frequently invest in alternative funds. Most major Australian institutional investors have an
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