Tax Laws Amendment (2007 Measures No. 2) Act 2007 (78 of 2007)

Schedule 8   Venture capital

Part 2   Early stage venture capital limited partnerships

Venture Capital Act 2002

171   After section 9-1

Insert:

9-3 Registration requirements of ESVCLPs

(1) The registration requirements of an ESVCLP , in relation to a *limited partnership, are that:

(a) the partnership was established by or under a law in force in, or in any part of:

(i) Australia; or

(ii) a foreign country in respect of which a double tax agreement (as defined in Part X of the Income Tax Assessment Act 1936) is in force that is an agreement of a kind referred to in subparagraph (b)(i), (ia), (ii), (iii), (iv) or (v) of that definition; and

(b) all of the partners who are *general partners are residents of a country referred to in paragraph (a); and

(c) under the partnership agreement the partnership is to remain in existence for a period of not less than 5 years and not more than 15 years; and

(d) the partnership’s *committed capital:

(i) is at least $10 million; and

(ii) does not exceed $100 million; and

(e) none of the partners has *committed capital in the partnership that, taken together with the sum of the amounts of committed capital in the partnership of any of that partner’s *associates (other than associates to whom subsection (5) applies), exceeds 30% of the partnership’s committed capital; and

(f) each investment that the partnership holds is:

(i) an *eligible venture capital investment; or

(ii) an investment in a company, in which the partnership owns one or more eligible venture capital investments, that would have been an eligible venture capital investment but for subsections 118-425(2) and (6) of the Income Tax Assessment Act 1997; or

(iii) an investment in a unit trust, in which the partnership owns one or more eligible venture capital investments, that would have been an eligible venture capital investment but for subsections 118-427(3) and (7) of the Income Tax Assessment Act 1997; and

(g) each investment that the partnership holds is in accordance with the partnership’s *approved investment plan; and

(h) the partnership acts in accordance with the partnership’s approved investment plan; and

(i) the partnership does not hold any investment that breaches subsection (6); and

(j) the partnership only carries on activities that are related to making eligible venture capital investments, investments to which subparagraph (f)(ii) applies or investments to which subparagraph (f)(iii) applies; and

(k) every *debt interest that the partnership owns is, and continues to be, a *permitted loan.

(2) The requirements in paragraphs (1)(e), (f), (g), (h), (j) and (k) are investment registration requirements .

(3) The requirement in paragraph (1)(i) is the divestiture registration requirement .

(4) Paragraph (1)(e) does not apply in relation to a particular partner’s *committed capital in the partnership if:

(a) the *Venture Capital Registration Board allows, under section 9-4, the partner’s committed capital in the partnership to exceed 30% of the partnership’s committed capital; or

(b) subsection (5) applies to the partner.

(5) This subsection applies to:

(a) an *ADI; or

(b) a *life insurance company; or

(c) a public authority:

(i) that is constituted by a law of a State or internal Territory; and

(ii) that carries on life insurance business within the meaning of section 11 of the Life Insurance Act 1995; or

(d) a widely-held complying superannuation fund within the meaning of section 4A of the Pooled Development Funds Act 1992.

(6) An investment in a company or unit trust breaches this subsection if, at the end of the partnership’s preceding income year, the sum of the values of:

(a) the assets of the company or unit trust; and

(b) the assets of each other entity that is a *connected entity of the company or unit trust;

exceed $250 million.

9-4 Allowing a partner’s committed capital to exceed the 30% limit

(1) The *Venture Capital Registration Board may, on the application of a partner of a partnership, make a decision allowing the partner’s committed capital in the partnership to exceed 30% of the partnership’s committed capital.

(2) The application must be in the *form approved by the *Venture Capital Registration Board.

(3) In considering whether to make such a decision, the *Venture Capital Registration Board must apply the principles specified under subsection (4).

(4) The *Venture Capital Registration Board may, by legislative instrument, make principles about making decisions under this section.

(5) If the *Venture Capital Registration Board makes a decision under this section, the Venture Capital Registration Board must notify the *general partner as soon as practicable after the decision is made.

(6) If the *Venture Capital Registration Board refuses to make a decision allowing the partner’s committed capital in the partnership to exceed 30% of the partnership’s committed capital, the Venture Capital Registration Board must:

(a) notify the *general partner as soon as practicable after the refusal; and

(b) provide reasons for the refusal.