Partnership Regulations 2021

Incorporated limited partnership (ILP). A type of limited partnership registered under Part 3 of the Partnership Act 1891. Unlike an ordinary partnership, an ILP has separate legal personality and limited liability for limited partners. It is typically used for venture capital and investment funds. The regulations apply only to ILPs, not to unincorporated partnerships.

Commission. The administrative body designated under the Partnership Act. The regulations refer simply to "the Commission". In practice this is the South Australian Consumer and Business Services division of the Attorney-General's Department. The Commission has powers to issue show cause notices, publish certificates requiring winding up, appoint liquidators, approve security, set fees, and maintain the register.

Voluntary winding up. A winding up initiated by the partners without a court order. Under regulation 4, voluntary winding up may proceed either in accordance with the partnership agreement (if it sets out terms) or, subject to the agreement, by special resolution of the limited partners. Crucially, only limited partners vote; general partners appear to have no statutory right to initiate voluntary winding up under this regulation. Voluntary winding up is prohibited if an insolvency application has been filed or the court has ordered winding up in insolvency.

Winding up on the Commission's certificate. A compulsory winding up triggered by a certificate published in the Gazette after a show cause process. The Commission first gives written notice requiring the ILP to show good cause within 28 days why it should not be wound up. If the Commission remains satisfied that winding up is required and good cause has not been shown, it may publish a certificate. The certificate is subject to court review within 28 days; its operation is suspended during review.

Liquidator. On a compulsory winding up, the Commission may appoint a person (subject to conditions) to act as liquidator. The liquidator need not be a registered liquidator under the Corporations Act, may be a general partner in the partnership, must publish notice of appointment in a newspaper, must give security if the Commission directs, is entitled to fees decided by the Commission, and may resign or be removed by the Commission. The liquidator has all the powers and duties of a liquidator under the Corporations Act, subject to conditions of appointment.

Assets. Defined narrowly as assets remaining after satisfaction of the partnership's liabilities and the costs, charges and expenses of winding up. This definition applies only for the purposes of the regulations, not necessarily for other parts of the Partnership Act.

Special resolution. Not defined in the regulations. By implication it adopts the meaning from the Partnership Act or general company law (three-quarters majority), but the regulations do not specify voting thresholds. This is a gap: partners must look to the partnership agreement or the Act for the definition.

VCLP, AFOF, ESVCLP, VCMP. These are Commonwealth tax‑advantaged venture capital structures. An ILP may be registered under Part 3 of the Partnership Act on the basis that it is or is intended to be registered under the Venture Capital Act 2002 (Cth) as one of these entities, or that it meets the VCMP definition in section 94D(3) of the Income Tax Assessment Act 1936. The regulations make failure to achieve or maintain such registration a ground for compulsory winding up by the Commission.

Court. The regulations refer to "the Court". Under the Partnership Act this is the Supreme Court of South Australia.

Register. The register of incorporated limited partnerships maintained by the Commission under the Partnership Act.

Incorporated limited partnerships. Any entity registered as an ILP under Part 3 of the Partnership Act 1891 is directly subject to these regulations. As of 2021, this primarily covers South Australian venture capital funds and pooled investment vehicles that have chosen the ILP structure. The regulations apply to all such partnerships regardless of size or duration.

General partners. They bear the primary compliance burden. Regulation 11 makes each general partner personally guilty of an offence if the partnership fails to notify the Commission of commencement or completion of winding up. Maximum penalty $2,500 per offence. General partners also face personal liability for failing to lodge a copy of any court order under section 74 of the Partnership Act (regulation 13, penalty $1,250). They are not required to approve a voluntary winding up (only limited partners vote), but they must cooperate with the liquidator.

Limited partners. They have the right to resolve by special resolution to wind up voluntarily (regulation 4(1)(b)). They are potentially affected by the default distribution rule if the partnership agreement is silent on asset distribution on winding up: assets are distributed among partners in shares proportionate to their respective contributions of capital or property. This could produce outcomes very different from the profit-sharing ratio or the liquidation waterfall typical in venture capital funds. Limited partners also have standing to apply to court for review of a Commission certificate issued for compulsory winding up (regulation 6(1): "person whose interests are affected").

The Commission. The regulations confer on the Commission significant administrative powers: to issue show cause notices, to decide whether to publish a certificate, to appoint liquidators (with discretion over conditions and fees), to decide whether to waive or reduce fees, and to cancel registration upon completion of winding up. The Commission also maintains the register and records notices and cancellations.

Liquidators. Any person appointed by the Commission to wind up an ILP on its certificate becomes subject to duties, conditions, and potential offence liability. A liquidator may be a natural person or a firm. They do not need to be registered liquidators, which lowers barriers to entry but raises competence and conflict concerns. A liquidator who is also a general partner faces an inherent conflict: they must wind up the partnership while being a party interested in the distribution of assets.

Practitioners and advisors. Lawyers advising ILPs or limited partners need to understand the interaction between the partnership agreement, the regulations, and the displaced Corporations Act provisions. Accountants and tax advisors need to be aware of the venture capital registration triggers and the 28‑day deadlines for show cause and review.

Creditors. Although not directly mentioned in the regulations, creditors of an ILP are affected because winding up suspends the partnership's operations and assets are applied first to satisfy liabilities and winding up costs before any distribution to partners. The regulations do not give creditors a direct role in the winding up process (they cannot apply under regulation 6 for review), but they may apply to the court under general law.

Duty to respond to show cause notice. An ILP that receives a written notice from the Commission under regulation 5(1) must, within 28 days, show good cause why it should not be required to be wound up. There is no prescribed form for the response. The duty falls on the partnership as an entity, but in practice the general partners will manage the response.

Right to apply for review of Commission certificate. A person whose interests are affected by a decision to publish a certificate may apply to the Court for review within 28 days after publication (regulation 6(1)). The certificate's operation is suspended pending review (regulation 6(2)). The Court may affirm the decision or set it aside and cancel the certificate. The Commission may also cancel a certificate voluntarily even after an application is made (regulation 6(4)). This review right is limited: it only challenges the certificate, not the underlying decision to issue the show cause notice.

Duty to commence and complete winding up on time. When winding up is required on a Commission certificate, the partnership must commence winding up within 28 days of the certificate publication (or 28 days after court affirms the decision). The winding up must end by the date specified by the Commission in a notice, being no earlier than 60 days after commencement (regulation 7(1)). Missing these deadlines does not carry an express penalty, but non-compliance could lead to Commission enforcement or court application.

Right of aggrieved persons to apply to court regarding asset distribution. Under regulation 4(4) (voluntary winding up) and regulation 9(2) (compulsory winding up), a person aggrieved by the operation of the regulation in relation to assets may apply to the Court. The Court may make any orders it considers necessary or appropriate. This appears to cover disputes over the default distribution rule or the interpretation of the partnership agreement's winding up provisions. "Aggrieved" is a lower threshold than "person whose interests are affected" in regulation 6, but still requires some direct interest.

Duty to notify Commission. An ILP must give written notice of the commencement of a voluntary winding up within 7 days after the special resolution (or after commencement if no special resolution). Notice of completion must be given within 28 days, stating the completion date. Failure by the partnership results in each general partner being guilty of an offence (penalty $2,500). The Commission must record receipt promptly.

Liquidator's duties and powers. On a compulsory winding up, the liquidator must publish notice of appointment in a newspaper circulating generally throughout South Australia within 10 days of appointment (regulation 7(3)(d)), give security if directed by the Commission (regulation 7(3)(e)), obey conditions of appointment, and may resign or be removed. The liquidator has all the powers and duties of a liquidator under the Corporations Act, subject to conditions. Contravention of a condition of appointment is an offence (penalty $5,000). The liquidator may apply to the Court for directions about the winding up (regulation 8).

Right to distribute assets. On both voluntary and compulsory winding up, if the partnership agreement sets out how assets are to be dealt with on that type of winding up, it prevails. Otherwise, assets are distributed among partners proportionately to their respective contributions of capital or property. This is a default rule that may override partners' expectations if the agreement is silent.

Duty to lodge court orders. A limited partnership or ILP must lodge a copy of any order made under section 74 of the Partnership Act with the Commission within 7 days (regulation 13, penalty $1,250). Section 74 deals with court-ordered winding up.

The regulations create three specific offences, all strict liability in nature (no mens rea stated), and all with modest maximum fines.

Liquidator contravening condition of appointment: $5,000. Regulation 7(5). The liquidator is appointed by the Commission subject to conditions specified in the instrument of appointment. Any contravention or failure to comply is an offence. This gives the Commission broad enforcement power over the liquidator's conduct. The maximum penalty is relatively low, but it is a criminal offence. The liquidator could be prosecuted, not just removed.

General partner failing to notify Commission of winding up: $2,500. Regulation 11(4). If the partnership fails to give notice of commencement or completion of winding up within the prescribed period, each general partner is guilty of an offence. This imposes personal criminal liability on individuals for an entity's failure. There is no due diligence defence explicitly stated.

Failure to lodge copy of court order: $1,250. Regulation 13. Applies to "limited partnership or incorporated limited partnership". The penalty is on the partnership, not directly on partners. But if the partnership fails, the general partners may be personally liable under general partnership law.

These penalties are administrative rather than punitive. The maximum of $5,000 is insignificant for a commercial ILP but could be material for an individual general partner. The real enforcement risk is not the fine but the reputational damage and the potential for the Commission to take further action, such as applying to court for directions or referring conduct to prosecuting authorities.

Beyond the specific offences, the regulations give the Court substantial enforcement powers. Under regulation 4(5) and 9(3), the Court may make orders on applications by aggrieved persons. Under regulation 8, the Court may give directions and guidance on winding up. The Commission itself can enforce compliance with its certificate process: if a partnership fails to commence or complete winding up on time, the Commission could presumably apply to court (though not expressly stated) or rely on the liquidator's powers.

The regulations do not confer a power on the Commission to impose civil penalties or infringement notices. Enforcement requires court action or prosecution. This is a lighter enforcement regime compared to the Corporations Act's extensive penalty provisions. It reflects the relatively narrow scope of the regulations (procedural winding up) and the small number of ILPs in South Australia.

The Commission also has indirect enforcement tools: it can refuse to cancel registration until winding up is complete (regulation 12), and it can decide whether to waive or reduce fees (regulation 14), which could be used to incentivise compliance. However, there is no express power to impose conditions on fee relief.

Partnership Act 1891 (SA). The regulations are made under this Act. They flesh out the winding up provisions that the Act itself contains only in outline. Section 74 of the Act provides for court-ordered winding up on just and equitable grounds, but the regulations add the Commission's certificate process and the voluntary winding up mechanism. The regulations also supplement the Act's provisions on registration, cancellation, and the duties of the Commission.

Corporations Act 2001 (Cth). Regulation 10 is a key provision. It declares the winding up of an ILP to be an excluded matter for the purposes of section 5F of the Corporations Act in relation to Part 5.7 (Winding up bodies other than companies). This means that the Commonwealth's winding up regime for unincorporated bodies does not apply to ILP winding ups under the Partnership Act. Instead, the regulations apply Part 5.7 of the Corporations Act with specific modifications to ILP winding ups that are not voluntary and not on the Commission's certificate (i.e. court-ordered winding ups). The modifications are: inserting "or in the public interest" after "just and equitable" in section 583(c)(ii), and deleting paragraph (d) from section 583 (which relates to winding up of a Part 5.7 body that is not a company). This broadens the grounds on which the Court may order winding up. For voluntary winding ups and Commission certificate windings, Part 5.7 is displaced entirely and the regulations provide the sole procedure.

Australian Securities and Investments Commission Act 2001 (Cth). Under regulation 10(3), ASIC may exercise functions under the modified Part 5.7 only if there is an intergovernmental agreement (under section 11(8) or (9A)(b) of the ASIC Act) and ASIC is authorised to exercise that function under section 11. This means ASIC's role is contingent on an arrangement between the Commonwealth and South Australia. If no such arrangement exists, the Commission takes the reference to ASIC in the modified Part 5.7 (regulation 10(4)). This creates potential for regulatory gaps if agreements are not in place.

Venture Capital Act 2002 (Cth) and Income Tax Assessment Act 1936 (Cth). The Commission's power to issue a certificate for compulsory winding up is triggered if an ILP registered on the basis of being or intending to be a VCLP, AFOF, ESVCLP fails to register within two years, or its registration is revoked (regulation 5(1)(b)). Similarly, failure to meet VCMP requirements within two years or ceasing to meet them triggers the power (regulation 5(1)(c)). This creates a link between state partnership law and Commonwealth tax and venture capital regulation. A revocation of Commonwealth registration can lead to compulsory winding up under state law.

State administrative law. The Commission's decision to publish a certificate is subject to review by the Court under regulation 6. This is a statutory review, not judicial review under the Administrative Decisions (Judicial Review) Act. The 28‑day limit and suspension provision are set out explicitly. The standard of review is not specified; the Court may affirm or set aside. This gives the Court a merits review role, not just a legality check.

Fees Act and other SA regulations. Regulation 14 allows the Commission to waive, reduce or refund prescribed fees. The prescribed fees would be set by separate regulation or by the Commission's fee schedule. The ability to vary fees individually introduces discretion and potential for inconsistent treatment.

The Partnership Regulations 2021 were made on 1 July 2021 and published in the South Australian Government Gazette on that date (Gazette 1.7.2021 p2469). They commenced on 1 August 2021, as stated in regulation 2. They revoked and replaced the Partnership Regulations 2006 (Schedule 1). No subsequent amendments appear in the source text. The legislative history note at the end of the document refers users to the Index of South Australian Statutes or legislation.sa.gov.au for further information. The regulations were relatively new at the time of writing (2021) and there is no indication of amendment bills or subordinate instrument changes. The short title, commencement, and interpretation provisions are standard. The regulations have a simple structure: 14 regulations, no schedules beyond revocation. The principal change from the 2006 regulations is not detailed in the source, but the revocation of the earlier regulations suggests a redrafting to reflect changes in the Partnership Act or venture capital frameworks. The legislative history note also references the Act and subordinate legislation made under the Act, but no specific amendments are itemised. Practitioners should verify whether any subsequent amendments have been made since 2021 by checking the SA legislation website.

The source text itself contains no references to any litigation arising under these regulations or their predecessors, the 2006 regulations. The regulations are procedural and administrative in nature, so reported cases are likely rare. That said, the regulations provide for court involvement in several respects: review of Commission certificates (regulation 6), directions from the Court on winding up (regulation 8), and applications by aggrieved persons regarding asset distribution (regulations 4 and 9). It is possible that disputes have arisen over the interpretation of the partnership agreement's winding up provisions, the default distribution rule, or the Commission's exercise of its show cause power. However, without specific case references, it is not possible to confirm any litigation history from the source. The user is cautioned not to invent cases. A reader interested in litigation should search South Australian Supreme Court databases for references to "Partnership Regulations 2021", "Partnership Act 1891", "incorporated limited partnership", and "winding up". Given the narrow scope and small number of ILPs in South Australia, litigation is likely infrequent. The regulations are designed to minimise the need for court involvement by providing a clear administrative process, but the court retains a supervisory role.

Voluntary winding up is limited to limited partners. Regulation 4(1)(b) says a voluntary winding up may be effected "if the limited partners so resolve by special resolution". It does not say "partners" but "limited partners". This excludes general partners from the decision to wind up voluntarily. If the partnership agreement gives general partners control over dissolution, the regulation may override that. Conversely, if the partnership agreement requires general partner consent, the regulation might be read as "subject to the partnership agreement" (regulation 4(1)(b) begins "subject to the partnership agreement"), so the agreement's provisions may prevail. This creates ambiguity: if the agreement is silent, only limited partners vote; if the agreement requires general partner consent, that may apply.

Distribution default is proportional to contributions, not profit shares. Many venture capital partnerships distribute proceeds in a different order (e.g. return of capital, then preferred return, then carried interest). Regulation 4(3)(b) and 9(1)(b) provide that if the partnership agreement is silent, assets are distributed "among the partners in shares that are proportionate to their respective contributions of capital or property". This could produce a result contrary to the economic deal if partners have contributed different amounts but agreed to share profits differently. The partnership agreement should expressly address distribution on winding up, including both voluntary and compulsory windings, to avoid this default.

Liquidator may be a general partner. Under regulation 7(3)(c), the Commission may appoint a general partner as liquidator. This creates an inherent conflict: the liquidator owes duties to creditors and partners generally but is also a partner with a personal interest in the distribution. While the regulation permits this, it exposes the appointment to challenge for conflict of interest. The Commission's conditions of appointment may attempt to mitigate this, but the risk remains. A general partner acting as liquidator should be scrupulous about transparency.

Commission can wind up for failure to register as VCLP within two years, or for revocation of registration. An ILP that intended to become a VCLP but failed to achieve registration within two years is at risk. Similarly, if the Commonwealth revokes VCLP status, the Commission may initiate compulsory winding up. The partnership may have legitimate reasons for delay or dispute the revocation, but the Commission's power is not conditional on the partnership's fault. This can force dissolution of a functioning business.

28‑day deadlines are tight. Partners have 28 days to respond to a show cause notice. The same period applies to apply for court review of a certificate. Missing these deadlines forfeits the opportunity to challenge the winding up. The regulations do not provide for extensions of time by the Commission, though the Court could likely grant an extension if an application is made within time.

Winding up on certificate must end by a date set by the Commission. Regulation 7(1)(b) states the Commission gives notice of the day by which winding up must end, which must be at least 60 days after commencement. The Commission can set any date beyond 60 days. If the liquidation is complex, the Commission may not extend the date, potentially forcing a premature conclusion with unresolved liabilities.

Vacancy in liquidator is filled by the Commission. Partners have no say in who becomes liquidator. Regulation 7(4) gives the Commission sole power to appoint a replacement. If partners have lost confidence in the liquidator, they can only apply to the Court for directions (regulation 8) or petition for removal.

Offence liability without fault. The penalties under regulations 7(5), 11(4), and 13 appear to be strict liability. No mental element is required. A general partner can be guilty even if they took reasonable steps to ensure compliance. This is harsh, especially for individuals.

Cancellation of registration ends the partnership's existence. Regulation 12(2) states: "An incorporated limited partnership ceases to exist on the cancellation of its registration." This is a bright line. From that point, the partnership cannot sue or be sued. Any residual assets or claims must be dealt with before cancellation.

Compliance with the Partnership Regulations 2021 depends on whether the ILP is winding up voluntarily, being wound up by court order, or being wound up compulsorily on the Commission's certificate.

For all ILPs: review and update the partnership agreement. The most important step to avoid the default rules is to ensure the partnership agreement contains clear provisions on:

• How a voluntary winding up may be initiated and by whom (including whether limited partners alone or all partners).
• How assets are to be distributed on a voluntary winding up and on a compulsory winding up (if different). The agreement should specify the order of distribution and the shares.
• Who will act as liquidator or how the liquidator will be chosen.
• How notices to the Commission will be handled.

Voluntary winding up: follow regulation 4.

• Check whether the partnership agreement sets out winding up terms. If yes, follow them exactly. If no, proceed under the default.
• If using the default, the limited partners must pass a special resolution. The threshold for "special resolution" should be defined in the partnership agreement or the Act. Ensure the resolution is properly recorded.
• Do not commence winding up if an insolvency application has been filed or a court order made for winding up in insolvency.
• Within 7 days of the resolution (or commencement), give written notice to the Commission. Retain proof of delivery.
• Winding up must be carried out in accordance with the agreement or the default distribution rule. If anyone is aggrieved, they may apply to Court.
• Within 28 days of completion, give written notice to the Commission stating the completion date.

Compulsory winding up on Commission certificate:

• If a show cause notice is received, respond within 28 days with good cause. Consider seeking legal advice promptly. Good cause could include: partnership has not ceased business; registration as VCLP is pending or will be regained; no illegal purpose; etc.
• If the Commission issues a certificate, decide within 28 days whether to apply to the Court for review. The application suspends the certificate's operation. Prepare evidence to support the review.
• If no review, or if review is unsuccessful, commence winding up within 28 days of the certificate or court decision. The liquidator will be appointed by the Commission. Ensure the liquidator complies with conditions, publishes notice in a statewide newspaper within 10 days, gives security if directed, and exercises powers under the Corporations Act as modified.
• The winding up must end by the day stated in the Commission's notice (at least 60 days after commencement). The liquidator should manage the process to meet this timeline.
• After winding up, the Commission will cancel registration upon notice in the Gazette. The partnership ceases to exist at cancellation.

Notification obligations: general partners beware.

• Even if the partnership is winding up voluntarily, the general partners are personally responsible for ensuring the 7‑day and 28‑day notices are given. Implement internal reminders and designate a responsible person.
• If a court order is obtained under section 74 of the Partnership Act (any winding up order), the partnership must lodge a copy with the Commission within 7 days. Failure is an offence with a $1,250 fine.

Fees. The Commission may waive, reduce or refund prescribed fees. If fees are burdensome, consider applying for a waiver or reduction, providing reasons. There is no prescribed form; write to the Commission.

Record keeping. The Commission records notices and cancellations in the register. Partners should keep copies of all correspondence, resolutions, and notices to evidence compliance.

Engage legal advice. The regulations interact with the Partnership Act, the Corporations Act, and Commonwealth venture capital tax laws. Any winding up of an ILP should be guided by legal and accounting professionals familiar with South Australian partnership law.