February 2004

Dear NZVCA colleague,

On behalf of the NZVCA Council, best wishes everyone for 2004!

After a busy 2003 the NZVCA is well underway on number of fronts and the main goal this year is to build on this momentum.

The Association's 2004/2005 business plan has been finalised and our "Mission" and five key organisational objectives for the coming year are outlined in the "About NZVCA" section of our new website launched in December 2003. I would encourage you all to have a quick look at this as it gives a good overview of our priorities in terms of developing the venture capital and private equity industry. The relevant link to view this is:
www.nzvca.co.nz

One of the main initiatives for the industry is the introduction of a limited liability partnership investment structure in New Zealand (probably in late 2005) and I have included an update on this initiative below.

It's great to have this online newsletter and we look forward to developing it over time to bring you regular industry news, alert you to NZVCA events and provide feature articles from both NZ and international contributors.

The new website is a critical plank in the NZVCA's mission to develop the New Zealand venture capital and private equity industry.

The intention is that the site will develop as a true industry "hub" providing up to date information on industry players, news and events and setting out educational resources for venture capital and private equity managers and business owners and managers alike.

We welcome your comments on how the site could be improved. Do not hesitate to get in touch with us with your comments and ideas.

It was a very constructive session and we had a superb turnout which reflected the importance that the industry places on this initiative. In terms of next steps, the NZVCA's Tax/Regulatory sub-committee is currently preparing a draft submission based on the outputs from the meeting and we will circulate a copy of this to everyone as soon as possible

In a nutshell, it was agreed at this meeting that the NZVCA's key objectives are to promote an LLP structure that is 100 per cent familiar to overseas investors and will be widely adopted by the local VC/PE industry; is labeled a "Limited Liability" structure; is generic in its application to NZ business and does not relate solely to the VC/PE industry; provides clear limited liability and tax flow-through and has separate legal entity status.

The favoured overall approach to drafting the LLP legislation is to base NZ's LLP structure on the Delaware LLP model in terms of its core ingredients in preference to using recent Australian partnership law changes as the starting point. However, the actual drafting of the legislation should follow a more familiar NZ and Australian style. In addition, any appropriate "improvements" to the Delaware structure should be added in if/where desirable (possibly drawing on some of the recent Australian limited partnership reforms).

The NZVCA will make it clear in its submission to MED that the ability to offer offshore investors a simple, internationally recognised LLP structure is a fundamental precursor to international investment in the industry. However, we are also of the opinion that further taxation reforms are necessary to ensure that NZ has a world-class VC and PE regulatory and tax environment that is attractive to offshore investment in NZ.

We are aiming to finalise the NZVCA submission during the course of this week and we will keep members informed on progress.

Chris Twiss
ex NZVCA