What is GP / LP Structure?

The General Partner (GP) and Limited Partner (LP) structure is the legal foundation of NZ Limited Partnerships, governed by the Limited Partnerships Act 2008 (legislation.govt.nz).

General Partner (GP): - Has unlimited liability for partnership debts. - Manages day-to-day operations, makes investment decisions, signs contracts on the partnership's behalf. - Typically structured as a NZ limited liability company (e.g. "Pacific Channel Fund V GP Limited") to isolate the unlimited liability behind a separate corporate shell. - Charges management fees (typically 1-2% of committed capital) and performance fees (typically 20% of profits above an 8% hurdle — the "2 and 20" market standard).

Limited Partners (LPs): - Have liability capped at their committed capital. - Cannot participate in management without losing limited-liability protection. - Receive distributions per the partnership agreement's waterfall. - Are typically wholesale investors (the LP structure is conventional for PE / VC / property syndicates which are wholesale-only).

Why the structure dominates PE/VC: - Tax flow-through means income is taxed at the LP's level, allowing institutional LPs to claim foreign tax credits and family offices to optimise their personal tax position. - Limited-liability protection for LPs while still permitting the GP active investment management. - Standardised waterfall mechanics make returns comparable across funds. - Aligned manager incentives — the GP's performance fee creates skin-in-the-game.

Standard waterfall: (1) return of LP capital; (2) preferred return to LPs (typically 8% per annum, the "hurdle rate"); (3) catch-up to GP (typically 100% of profits above the hurdle until the GP has received 20% of total profits-above-hurdle); (4) split — 80% to LPs, 20% to GP.

NZ examples: Movac Fund 4 LP, Pacific Channel Fund V LP, Pioneer Capital Private Debt II LP, Direct Capital Fund V LP.