Is leave required to commence a derivative action on behalf of a limited partnership? In Schmidt v. Balcom, 2016 BCSC 2438, the court noted this issue was “unsettled” in BC and held that the leave requirement for companies outlined in s. 232 of the BCA was applicable in the case of a limited partnership. In Ontario, case law has held that leave is not required for limited partnerships.

The applicants were investors in a limited partnership which was established to build senior care homes. They alleged their investments were mismanaged and certain of the principals of the general partner had made fraudulent misrepresentations and breached various contractual and trust duties.

With respect to the good faith requirement, the court outlined that the applicants had to bring the claim “primarily for the benefit of the partnership”. Leave could be granted where the “general partner fails to respond adequately, or at all, to alleged significant financial irregularity”. The respondents had refused to respond to various requests for financial information about the investments and land transactions.

The court concluded the proposed derivative action was in the best interests of the limited partnership and was being brought in good faith. The derivative action was the only way in which a remedy could be issued if the allegations were proven.