What legal form of vehicle is typically used for private equity funds formed in your jurisdiction? Does such a vehicle have a separate legal personality or existence under the law of your jurisdiction? In either case, what are the legal consequences for investors and the manager?
The most common vehicle for a private equity fund in Canada is a limited partnership. For the purposes of this article, it is assumed that, in all cases, the form of vehicle is a limited partnership. Limited partnerships are formed under provincial laws. The specific characteristics of a limited partnership (including matters such as creation formalities and disclosure of limited partner's names) is dependent, in part, on the applicable laws of the province of formation. A limited partnership generally does not have status as a separate legal entity in Canada.
A limited partnership is required to have at least one general partner and at least one limited partner. Any type of entity can be either a limited partner or a general partner. A general partner's liability in a limited partnership is unlimited. As such, a special purpose corporation or management limited partnership is normally formed to act as the general partner. The liability of a limited partner generally is limited to its capital, as further described below.
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Reproduced with permission from Law Business Research Ltd. This article was first published in Getting the Deal Through — Private Equity 2014, (published in February 2014; contributing editors: Casey Cogut and William Curbow of Simpson Thacher & Bartlett LLP). For further information please visit GettingTheDealThrough.com.
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.