Proclamation by the Government of Alberta streamlines formation process for limited partnerships
By Robyn Finley and Megan Grenon
Bill 22: The Red Tape Reduction Implementation Act (Bill 22) forms part of the Government of Alberta's efforts to reduce inefficient regulations and barriers to entry into the province, in turn promoting investment and making Alberta more competitive with other provinces. First introduced in June 2020, portions of Bill 22 were proclaimed and came into force on March 29, 2021, which included the removal of the requirement that at least 25% of the directors of corporations registered in Alberta be Canadian residents.
On May 27, 2021, additional amendments to the Partnership Act RSA 2000 c. P-3, (the Partnership Act) were proclaimed and came into force on June 1, 2021 (the Amendments).
The Partnership Act
Forming a new limited partnership
One of the Amendments streamlined the process for forming limited partnerships in Alberta. In order to form a limited partnership in Alberta, the registration of a certificate of limited partnership (CLP) is required. Previously, the Partnership Act required the public disclosure of a significant amount of information for the CLP. This included information about the limited partners (such as their names and addresses) as well as the rights and obligations of the partners to one another, including the amount of their contributions, partners' share of profits or other compensation and rights of priority between limited partners.
The large amount of public disclosure required to form a limited partnership in Alberta was due to policy reasons of balancing the limited liability status of the limited partners, with the rights of creditors and other third parties that engage with the limited partnership. Some of this information, such as the amount of capital contributed and the circumstances under which it can be withdrawn, was considered important information for third parties who deal with the limited partnership.
With the Amendments, the onerous public disclosure requirements have been significantly reduced for the formation of new limited partnerships in Alberta. The only information that parties must disclose on the CLP when forming a new limited partnership are:
- the name of the limited partnership;
- the name, email address, street address or postal address of each general partner; and
- a statement confirming that the limited partnership agreement (LPA) among the partners contains prescribed information.
The Partnership Amendment Regulation AR 105/2009 (the Regulations), which also came into force on June 1, 2021, prescribes that the information required to be stated in a LPA is the same information that was required to be disclosed publicly prior to the Amendments. This requirement has the effect of compelling the incorporators of limited partnerships to state that they have addressed the factors previously required to be disclosed publicly.
Limited partnerships are a business association favoured by groups of investors. The reduced public disclosure requirements may now allow investors to make investments without having to disclose the confidential terms of their business arrangements, in alignment with legislation in other provinces, such as Ontario, and most jurisdictions in the United States.
However, it is important to note that the amended Regulations now provide that a limited partnership may be required to file a copy of its LPA with the Alberta Registrar. It is not clear whether LPAs will be filed and publicly available through the corporate registry. If so, this will significantly undermine the benefit of the Amendments from an investor's perspective. Prior to the Amendments, and provided the required information was included in the CLP, there was no obligation to file a copy of the LPA with the Alberta Registrar. Many LPAs contain confidential and potentially competitively sensitive information that investors may not wish to make publicly available. Further guidance and/or amendments to the Regulations is required to address this ambiguity.
Amendments to the certificate of limited partnership
The Amendments create additional efficiencies by reducing the amount of circumstances that require filing an amendment to a CLP. The circumstances when an amendment must be filed are when there is a change in the information stated in the CLP and when a person is added as a limited partner or a general partner.
In light of the changes introduced by the Amendments, and pursuant to guidance provided by the Alberta Corporate Registry, the requirements for amendments to CLPs will diverge based on when the subject limited partnership was formed.
For limited partnerships in existence and registered before June 1, 2021, amendments to the CLP must be filed when there are any changes to the contents of an existing CLP or a person is added as a limited partner or a general partner. Such changes would include changes to limited and general partners and their contributions to the limited partnership. In effect, limited partnerships in existence before June 1, 2021 will not benefit from the privacy protection of the Amendments in that they will still have to file changes to the information that is contained in their CLP. It remains to be seen whether limited partnerships that predate the Amendments will be able to benefit from the Amendments by amending their CLPs and associated LPAs to comply with the Partnership Act, as amended by the Amendments. As the Amendments were focused on removing barriers for new limited partnerships, it is unclear whether the inclusion of this requirement as it applies to existing limited partnerships was inadvertent. We will update this bulletin if further guidance is provided and/or amendments to the Partnership Act are made.
For limited partnerships in existence and registered after June 1, 2021, an amendment to the CLP must only be filed when the name of the limited partnership has changed or there is a change, addition, or deletion of a general partner. The Partnership Act continues to provide that the CLP must be amended when a person has been added as a limited partner; however, we note that such requirement is inconsistent with the Amendments, as such information is not required to be included in the CLP when a new limited partnership is formed (as discussed above). Further guidance and/or amendments to the Partnership Act are required to address this inconsistency, as it may have been inadvertent.
Extra-provincial limited partnerships
The Amendments confirmed that extra-provincial limited partnerships are governed by the laws of the jurisdiction where the partnership was formed and not the Partnership Act. This applies to the organization, internal affairs of the limited partnership, and to the liability of the limited partners. The Amendments provide clarity for situations where there are discrepancies between the law in Alberta and the law of a limited partnership's home jurisdiction.
As more portions of Bill 22 are proclaimed and come into force, Alberta is getting closer to achieving the goal of breaking down barriers for businesses and cutting "red tape". With the recent amendments to the Partnership Act, Alberta is better positioned to compete with Ontario to attract investment and gives the province a competitive advantage over our neighbouring provinces Saskatchewan and British Columbia.
We would encourage readers to reach out to any member of our Energy and Business Law Groups to discuss the Amendments and the changes brought about by Bill 22.