It is common for developers to undertake real estate
developments using limited partnerships formed specifically for
that purpose. They generally do so in order to provide limited
partners with limited liability, to allow for the pass through of
profits and losses directly to limited partners and to facilitate
raising capital from investors and financing from lenders. In
British Columbia, limited partnerships are formed upon the filing
of a certificate of limited partnership with the Registrar of
Companies. The certificate must contain certain information
prescribed by the Partnership Act (British Columbia) (Act)
and third parties are entitled to rely on the information set out
in the certificate.
The general partner of a limited
partnership has unlimited liability for the debts and obligations
of the limited partnership, whereas a limited partner's
liability is, subject to certain exceptions, limited to the amount
of property (including cash) the limited partner contributes or
agrees to contribute to the capital of the limited partnership. For
this reason, the general partner is commonly a company with no
assets (other than its interest in the limited partnership) and the
limited partners contribute substantially all of the limited
The limited liability protection otherwise available to limited
partners may be diminished if there is a change in the amount or
character of the limited partners' capital contributions, but
the certificate is not amended to reflect the change.
Unfortunately, the requirement to amend the certificate is often
The Act provides that a limited partner is liable for:
the difference, if any, between the actual amount of the
limited partner's contribution and the amount stated in the
certificate as having been made; and
any unpaid contribution that the limited partner agreed in the
certificate to make in the future at the time and on the
conditions, if any, stated in the certificate.
The Act also provides that a limited partner is not entitled to
the return of any part of the limited partner's contribution
until the certificate is cancelled or amended to reflect the
withdrawal or reduction. The potential liability arising from a
failure to comply with this requirement can be significant. For
example, it is common for a limited partnership to sell all the
strata lots in a real estate development and use the proceeds to
pay out all its known liabilities and return the limited
partnership's capital to its partners. However, if the
certificate is not cancelled or amended to reflect the return of
the capital contributions, and the limited partnership subsequently
incurs an unanticipated liability (such as a claim for a
construction defect), the limited partners could be compelled to
return their capital contributions to the limited partnership to
satisfy such liability.
In light of this, if there is to be any change to a limited
partner's capital contribution (including any return of capital
to the limited partners), it is important to ensure that the
necessary amendment to the certificate is prepared and filed or, if
the limited partnership is being wound up, that the certificate is
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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