Are O&G Joint Ventures and General Partnerships Securities?


SecuritesThere has been some discussion emanating from government securities agencies, at least in my home state of Colorado, regarding the reconsideration of oil and gas general partnerships and joint ventures as subject to securities regulations. Principle among the arguments is what is known in legal parlance as the Williamson Presumption or Williamson Test (Williamson v. Tucker). The Williamson Test is composed of three elements or tests which state that a general partnership or Joint Venture interest can be considered a security if:

  1. an agreement among the parties leaves so little power in the hands of the partner or venturer that the arrangement in fact distributes power as would a limited partnership; or
  2. the partner or venturer is so inexperienced and lacking in knowledge of business affairs and industry that he is incapable of intelligently exercising his partnership or venture powers; or
  3. the partner or venturer is so dependent on some unique entrepreneurial or managerial ability of the promoter or manager that he cannot replace the manager of the enterprise or otherwise exercise meaningful partnership or venture powers.

E&P companies, Issuers, and/or their Broker/Dealers raising money for drilling programs through private placements who wish to avoid the cross-hairs of government securities may want to make sure that their investors have some general knowledge about the oil and gas asset class as a defense against parts two and three of the Williamson Test. Investor educational products such as the ones we offer on and license to E&P companies, Issuers, and/or their Broker/Dealers through may go a long way towards ensuring that their Private Placements do not get classified as securities.


This entry was posted in Uncategorized and tagged , , , . Bookmark the permalink.