Many South African private equity funds are structured as en commandite partnerships, which are governed by common law and established through a partnership agreement, which should be reduced to writing.
One significant advantage of this partnership structure is that limited partners, known as commanditarians, are only liable for the partnership's debts up to the extent of their investment commitment (as long as they meet the requirements under common law for an en commandite partnership).
On the other hand, the managing partner, also referred to as the general partner or disclosed partner, assumes unlimited liability for the partnership's debts.
Having said that, it is important to carefully review the general partner's powers, particularly any powers of attorney granted to them, and to establish clear limitations on the general partner's ability to expose the limited partners to liability beyond their investment commitment.
All contracts for the en commandite partnership should be concluded by the general partner alone.
Also, financiers will invariably, when it is disclosed to them in confidence (as it should be), ask for suretyships from en commandite partners and each of those suretyships should be limited as to amount and period of liability and their obligations as en commandite partners should be limited accordingly.