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Historically the gains accruing to a life insurer on its holdings in venture capital investment partnerships (VCIP) were calculated in the same way as any gains on partnerships¹. It was often difficult to calculate these gains, because they were dependent on information in accounts that were either slow in production or not always readily available particularly if the partnership operated overseas so legislation was introduced to address these problems.

The legislation applies to investments held by a life insurance company for the purposes of its long-term business as a limited partner in a VCIP. To qualify as a VCIP, the partnership must meet three conditions²:

1. Ìý

   •ÌýÌýÌýÌý its sole or main purpose, as evidenced by its partnership agreement or prospectus issued to potential investors, must be to invest in unquoted shares and securities

2. Ìý

   •ÌýÌýÌýÌý it must not carry on a trade; and

3. Ìý

   •ÌýÌýÌýÌý no less than 90% of the book value of its investments must be shares or securities that were unquoted at the time