Investment Limited Partnerships Act, 1994

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Personal liability of officers of general partner where failure to keep proper books or records.

35.—(1) Subject to subsection (2) of this section, if—

(a) an investment limited partnership is being wound up and is unable to pay all of its debts, and

(b) the court considers that there has been a contravention of section 16 (1) or section 25 (1) which has contributed to the inability of the investment limited partnership to pay all of its debts or has resulted in substantial uncertainty as to the assets and liabilities and client money or investment instruments of the said investment limited partnership or has substantially impeded its orderly winding up,

the court, on the application of the liquidator or the Bank or any creditor or limited partner may, if it thinks it proper to do so, declare that any one or more of the officers or former officers or both of the general partner who is or are responsible for the contravention shall be personally liable, without any limitation of liability, for all, or such part as may be specified by the Court, of the debts and other liabilities of the said investment limited partnership.

(2) On the hearing of an application under subsection (1) of this section, the person bringing the application may give evidence or call witnesses.

(3) (a) Where the court makes a declaration under subsection (1) of this section, it may give such directions as it thinks proper for the purpose of giving effect to the declaration and in particular may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the investment limited partnership to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the investment limited partnership held by or vested in him or any company or other person on his behalf, or any person claiming as assignee from or through the person liable under the declaration or any company or person acting on his behalf, and may from time to time make such further order as may be necessary for the purpose of enforcing any charge imposed under this subsection.

(b) In paragraph (a) of this subsection “assignee” includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation or mortgage was created, issued or transferred or the interest created but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the grounds of which the declaration is made.

(c) A copy of the declaration referred to in paragraph (a) above shall be lodged with the registrar of companies and made available for public inspection.

(4) The court shall not make a declaration under subsection (1) of this section in respect of a person if it considers that—

(a) he took all reasonable steps to secure compliance by the investment limited partnership with section 16 (1) or section 25 (1) of this Act, or

(b) he had reasonable grounds for believing and did believe that a competent and reliable person, acting under the supervision or control of a person who has been formally allocated such responsibility, was charged with the duty of ensuring that these sections were complied with and was in a position to discharge that duty.

(5) This section shall have effect notwithstanding that the person concerned may be liable to be prosecuted for a criminal offence in respect of the matters on the ground of which the declaration is to be made or that such person has been convicted of such an offence.

(6) In this section “officer”, in relation to a general partner includes a director, a person in accordance with whose directions or instructions the directors are accustomed to act, or the secretary.

(7) If—

(a) (i) an investment limited partnership is being wound up and is unable to pay all of its debts and has contravened section 16 (1) or section 25 (1) of this Act, and

(ii) the court considers that such contravention has contributed to the inability of the investment limited partnership to pay all of its debts or has resulted in substantial uncertainty as to the assets and liabilities or client money and investment instruments of the investment limited partnership or has substantially impeded the orderly winding up thereof,

every officer of the investment limited partnership who is in default shall be guilty of an offence.

(b) In a prosecution for an offence under this section, it shall be a defence for the person charged to show that—

(i) he took all reasonable steps to secure compliance by the investment limited partnership with section 16 (1) or section 25 (1), or

(ii) he had reasonable grounds for believing and did believe that a competent and reliable person, acting under the supervision or control of the investment limited partnership who has been formally allocated such responsibility, was charged with the duty of ensuring that that section was complied with and was in a position to discharge that duty.

(8) An investment limited partnership and a person who, being a director or member of an investment limited partnership fails to take all reasonable steps to secure compliance by the investment limited partnership with the requirement of section 16 (1) or section 25 (1) of the Act or has by his own wilful act been the cause of any default by the investment limited partnership thereunder, shall be guilty of an offence:

Provided, however, that—

(a) in any proceedings against a person in respect of an offence under this section consisting of a failure to take reasonable steps to secure compliance by the investment limited partnership with the requirements of section 16 (1) or section 25 (1), it shall be a defence to prove that he had reasonable grounds for believing and did believe that a competent and reliable person was charged with the duty of ensuring that those requirements were complied with and was in a position to discharge that duty, and

(b) a person shall not be sentenced to imprisonment for such an offence unless, in the opinion of the Court, the offence was committed wilfully.