ABSTRACT
This chapter aims to explore a series of feasible approaches to improve the internal governance and ownership structures to reduce the agency costs in limited partnerships. In a world-wide sense, the origin of the limited partnership can be traced back to the commenda which was, firstly, used for maritime ventures in medieval Italy. In comparison with general partnerships, the fundamental characteristic of a limited partnership is the separation of the control and ownership between the general partner (GP) and limited partner (LP), in which the pool of the capital is managed by the GPs on behalf of all partners. In terms of the profit distribution system of PE limited partnerships in China, the main problem is the lack of continuity in motivating the general partner to perform well on behalf of the LPs. The limited partnership has been recognised and legalised by the Law of Partnership Enterprises of China in 2006.
