D R A F T

 

FOR DISCUSSION ONLY

 

 

 

 

ENTITY HARMONIZATION REVISIONS TO THE

UNIFORM PARTNERSHIP ACT (1997)

 

 

 

 

NATIONAL CONFERENCE OF COMMISSIONERS

 

ON UNIFORM STATE LAWS

 

 

 

 

For March 12-14, 2010 Drafting Committee Meeting

 

Strike and Score Version

 

• Additions to RUPA are highlighted with underlining, deletions with strike-through. When a revision derives from the HUB, yellow highlighting indicates any passages in the revision that substantially deviate from the HUB. 
• Footnotes contain a Co-Reporter’s explanations as well as some queries.
• Some new sections are numbered with a number and a capital letter so as to preserve uniform numbering with states that have already enacted RUPA or will have done so before this drafting project is complete.
• RULLCA was presented in statutory order at the December 4-6, 2009 drafting meeting in Chicago. RUPA was broken into parts in an attempt to pair with relevant RULLCA sections. Accordingly, unlike RULLCA, many parts of RUPA were never discussed. This Draft requires careful discussion to determine if more or less change to RUPA should occur.

[ARTICLE] 1

                                        GENERAL PROVISIONS

 

SECTION 101.  DEFINITIONS.  In this [Act]:

(1)  “Business” includes every trade, occupation, and profession.

(1A) “Contribution”, except in the phrase “right of contribution,” means any benefit provided by a person to partnership in order to become a member;[1]

(2)  “Debtor in bankruptcy” means a person who is the subject of:

(i) an order for relief under Title 11 of the United States Code or a comparable order under a successor statute of general application; or

(ii) a comparable order under federal, state, or foreign law governing insolvency.

(2A) “Designated office” means:

(i) the office that a limited liability partnership is required to designate and maintain under Section 1001(c)(3); or

(ii) the principal office of a foreign limited liability partnership.[2]

(3) “Distribution” means a transfer of money or other property from a partnership to a partner in the partner’s capacity as a partner or to the partner’s transfereeanother person on account of a transferable interest and includes a redemption or other purchase by a partnership of a transferable interest.[3]

(4) “Foreign limited liability partnership” means a partnership

that:

(i) is formed under the law of a jurisdictions other than the laws of this State and

(ii) has the status ofdenominated by that law as a limited liability partnership under those laws.

(5) “Limited liability partnership”, except in the phrase “foreign limited liability partnership”, means a partnership whose statement of qualification states that the partnership is a limited liability partnershipmeans a partnership that has filed a statement of qualification under Section 1001 and does not have a similar statement in effect in any other jurisdiction.[4]

(5A) “Partner” means a person that has become a partner of a partnership under Section 202 and has not dissociated under Section 601.[5]

(6) “Partnership” means an association of two or more persons to carry on as co-owners a business for profit formed under Section 202, predecessor law, or comparable law of another jurisdiction.

(7) “Partnership agreement” means the agreement, whether written, oral, or implied, among the partners concerning the partnership, including amendments to the partnership agreement.or not referred to as a partnership agreement and whether oral, in a record, implied, or in any combination thereof, of all the partners of a partnership concerning the matters described in Section 103(a). The term includes the agreement as amended or restated.[6]

(8) “Partnership at will” means a partnership in which the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking.

(9)  “Partnership interest” or “partner’s interest in the partnership” means all of a partner’s interests in the partnership, including the partner’s transferable interest and all management and other rights.

(10) Person” means an individual, corporation, partnership, limited partnership, limited liability company, [general cooperative association,] limited cooperative association, unincorporated nonprofit trust association, statutory trust, business trust, or common-law business trust, estate, trust, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity “Person” means an individual, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.[7]

(10A) “Principal office” means the principal executive office of a foreign limited liability partnership, whether or not the office is located in this state.[8]

(11) “Property” means all property, real, personal, or mixed, tangible or intangible, or any interest therein.[9]

(11A) “Record”, used as a noun, means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.[10]

(11B) “Sign” means, with the present intent to authenticate or adopt a record:

(i) to execute or adopt a tangible symbol; or

(ii) to attach or logically associate with the record an electronic symbol, sound, or process.[11]

(12) “State” means a State of the United States, the

District of Columbia, the Commonwealth of Puerto Rico, or any territory or insular possession subject to the jurisdiction of the United States.

(13) “Statement” means a statement of partnership authority under Section 303, a statement of denial under Section 304, a statement of dissociation under Section 704, a statement of dissolution under Section 805, a statement of merger under Section 907, a statement of qualification under Section 1001, a statement of foreign qualification under Section 1102, or an amendment or cancellation of any of the foregoing.

(14) “Transfer” includes an assignment, conveyance, lease, mortgage, deed, encumbrance, gift, and transfer by operation of law.[12]

(14A) “Transferable interest” means the right, as initially owned by some person in the person’s capacity as a partner, to receive distributions from a partnership in accordance with the partnership agreement. The term applies, whether or not the person remains a partner or continues to own any part of the right and includes any fraction of the right.[13]

(14B) “Transferee” means a person to which all or part of a transferable interest has been transferred, whether or not the transferor is a partner.[14]

 

SECTION 102.  KNOWLEDGE;  AND NOTICE.[15]

(a) A person knows a fact if when the person: has actual knowledge of it.

(1) has actual knowledge of it; or

(2) is deemed to know it under subsection (d)(1) or law other than this [act].

(b) A person has notice of a fact if when the person:

(1) knows of it;

(2) has received a notification of it; or

(1) has reason to know it existsthe fact from all of the facts known to the person at the time in question; or

(2) is deemed to have notice of the fact under subsection (d)(2).

(c) A person notifies or gives a notification to another of a fact by taking steps reasonably required to inform the other person in ordinary course, whether or not the other person learns of itknows the fact.

(d) A person receives a notification when the notificationthat is not a partner is deemed:

(1) to know of a limitation on authority to transfer real property as provided in Section 303(e); and

(2) is duly delivered at the person’s place of business or at any other place held out by the person as a place for receiving communications.to have notice of a partnership’s:

(A) dissolution, 90 days after a statement of dissolution under Section 805 becomes effective; and

(B) merger, conversion, or domestication, 90 days after articles of merger, conversion, or domestication under [Article] 9 become effective.

(e)  Except as otherwise provided in subsection (f), a person other than an individual knows, has notice, or receives a notification of a fact for purposes of a particular transaction when the individual conducting the transaction knows, has notice, or receives a notification of the fact, or in any event when the fact would have been brought to the individual’s attention if the person had exercised reasonable diligence.  The person exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the individual conducting the transaction and there is reasonable compliance with the routines.  Reasonable diligence does not require an individual acting for the person to communicate information unless the communication is part of the individual’s regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.

(e)  A partner’s knowledge, notice, or receipt of a notification of a fact relating to the partnership is effective immediately as knowledge by, notice to, or receipt of a notification by the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner.[16]

 

SECTION 103. EFFECT OF PARTNERSHIP AGREEMENT; NONWAIVABLE PROVISIONS.

(a) Except as otherwise provided in subsection (b), relations among the partners and between the partners and the partnership are governed by the partnership agreement. To the extent the partnership agreement does not otherwise provide, this [Act] governs relations among the partners and between the partners and the partnership.

(b) The partnership agreement may not:

(1) vary the rights and duties under Section 105 except to eliminate the duty to provide copies of statements to all of the partners;

(2) unreasonably restrict the right of access to books and records under Section 403(b);

(3) eliminate the duty of loyalty under Section 404(b) or 603(b)(3), but:

(i) the partnership agreement may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable; or

(ii) all of the partners or a number or percentage specified in the partnership agreement may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty;

(4) unreasonably reduce the duty of care under Section 404(c) or 603(b)(3);

(5) eliminate the obligation of good faith and fair dealing under Section 404(d), but the partnership agreement may prescribe the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable;

(6) vary the power to dissociate as a partner under Section 602(a), except to require the notice under Section 601(1) to be in writing;

(7) vary the right of a court to expel a partner in the events specified in Section 601(5);

(8) vary the requirement to wind up the partnership business in cases specified in Section 801(4), (5), or (6);

(9) vary the law applicable to a limited liability partnership under Section 106(b); or

(10) restrict rights of third parties under this [Act].

 

SECTION 103B. EFFECT OF PARTNERSHIP AGREEMENT ON PARTNERSHIP AND PERSONS WHO BECOME PARTNERS.[17]

 

(a) A partnership is bound by and may enforce the partnership agreement, whether or not the partnership has itself manifested assent to the partnership agreement.

(b) A person who becomes a partner of a partnership is deemed to assent to the partnership agreement.

(c) An amendment to the partnership agreement made after a person becomes a transferee or dissociated partner is effective with regard to any debt, obligation, or other liability of the partnership or its partners to the person in the person’s capacity as a transferee or dissociated partner.[18]

 

SECTION 104. SUPPLEMENTAL PRINCIPLES OF LAW.  Unless displaced by particular provisions of this [Act], the principles of law and equity supplement this [Act].[19]

(b)  If an obligation to pay interest arises under this [Act] and the rate is not specified, the rate is that specified in [applicable statute].

 

SECTION 105. EXECUTION, FILING, AND RECORDING OF STATEMENTS.[20]

(a) A statement permitted by this [act] may be delivered to the [Secretary of State] for filing.

(b) To be filed by the [Secretary of State] pursuant to this [act], a statement must be received by the office of the [Secretary of State] and must comply with this [act] and satisfy the following requirements:[21]

(1) The filing of the statement must be permitted by this [act].

(2) When a record is delivered to the office of the [Secretary of State] for filing, any fee required under this [act] and any tax, license fee, or penalty required to be paid under this [act] or law other than this [act] must be paid in a manner permitted by the [Secretary of State] or by that law.

(3) The statement must be physically delivered in written form unless the [Secretary of State] adopts rules permitting electronic delivery of statements in other than written form.

(4) The words in the statement must be in English, and numbers must be in Arabic or Roman numerals, but the name of the partnership need not be in English if written in English letters or Arabic or Roman numerals.

(5) The statement must be signed by an individual authorized to sign the filing under subsection (c).

(6) The statement must state the name and capacity, if any, of the individual who signed it but need not contain a seal, attestation, acknowledgment, or verification.

(c) A statement delivered to the [Secretary of State] for filing pursuant to this [act] must be signed, under penalty of perjury that the information stated in the statement is accurate:

(1) if a partnership statement, by at least two partners, or their agents; and

(2) if by a partner, by that partner, or that partner’s agent.

(d) A statement filing is effective:

(1) on the date and at the time of its filing by the [Secretary of State];

(2) on the date of filing and at the time specified in the entity filing as its effective time, if later than the time under paragraph (1); or

(3) at a specified delayed effective time and date, which may not be more than 90 days after the date of filing.

(d) A statement may be filed in the office of [the Secretary of State].  A certified copy of a statement that is filed in an office in another State may be filed delivered in the office ofto the [the Secretary of State] for filing.  Either The filing has the effect provided in this [aAct] with respect to partnership property located in or transactions that occur in this State.

(eb)  A certified copy of a statement that has been filed in the office ofby the [Secretary of State] and recorded in the office for recording transfers of real property has the effect provided for recorded statements in this [aAct].  A recorded statement that is not a certified copy of a statement filed in the office ofby the [Secretary of State] does not have the effect provided for recorded statements in this [aAct].

(c)  A statement filed by a partnership must be executed by at least two partners.  Other statements must be executed by a partner or other person authorized by this [Act].  An individual who executes a statement as, or on behalf of, a partner or other person named as a partner in a statement shall personally declare under penalty of perjury that the contents of the statement are accurate.

(fd)  A person authorized by this [Act] to file deliver a statement for filing by the [Secretary of State] may amend or cancel the statement by delivering for filing by the [Secretary of State] an amendment or cancellation that names the partnership, identifies the statement, and states the substance of the amendment or cancellation.

(ge)  A person who files delivers a statement for filing by the [Secretary of State] pursuant to this section shall promptly send a copy of the filed statement to every nonfiling partner and to any other person named as a partner in the statement.  Failure to send a copy of a statement to a partner or other person does not limit the effectiveness of the statement as to a person not a partner.

(f)  The [Secretary of State] may collect a fee for filing or providing a certified copy of a statement.  The [officer responsible for recording transfers of real property] may collect a fee for recording a statement.

 

SECTION 105A. POWERS.[22]

A partnership has the powers to do all things necessary or convenient to carry on its activities, including the power to sue, be sued, and defend in its own name and to maintain an action against a partner for harm caused to the partnership by a breach of the partnership agreement or a violation of a duty to the partnership.

 

SECTION 106. GOVERNING LAW.

(a)  Except as otherwise provided in subsection (b), theThe law of this state, in the case of a limited liability partnership, and the law of the jurisdiction in which a partnership has its chief executive office, in the case of a partnership, governs:

(1) the internal affairs of the partnership or limited liability partnership; and

(2) the liability of a partner as a partner for the debts, obligations, or other liabilities of the partnership or limited liability partnership.relations among the partners and between the partners and the partnership.[23]

(b)  The law of this State governs relations among the partners and between the partners and the partnership and the liability of partners for an obligation of a limited liability partnership.

SECTION 107. PARTNERSHIP SUBJECT TO AMENDMENT OR REPEAL OF [ACT].  A partnership governed by this [Act] is subject to any amendment to or repeal of this [Act]The [legislature of this state] has the power to amend or repeal all or part of this [act] at any time, and all domestic or foreign entities subject to this [act] are governed by the amendment or repeal.[24]

[ARTICLE] 2

NATURE OF PARTNERSHIP

 

SECTION 201. PARTNERSHIP AS ENTITY.

(a) A partnership is an entity distinct from its partners.

(b) A limited liability partnership continues to be the same entity that existed before the filing of a statement of qualification under Section 1001partnership is the same entity regardless of whether a statement of qualification states that the partnership is a limited liability partnership.[25]

 

SECTION 202. FORMATION OF PARTNERSHIP.

(a) Except as otherwise provided in subsection (b), the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.

(b) An association formed under a statute other than this [Act], a predecessor statute, or a comparable statute of another jurisdiction is not a partnership under this [Act].

(c) In determining whether a partnership is formed, the following rules apply:

(1) Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not by itself establish a partnership, even if the co-owners share profits made by the use of the property.

(2) The sharing of gross returns does not by itself establish a partnership, even if the persons sharing them have a joint or common right or interest in property from which the returns are derived.

(3) A person who receives a share of the profits of a business is presumed to be a partner in the business, unless the profits were received in payment:

(i) of a debt by installments or otherwise;

(ii) for services as an independent contractor or of wages or other compensation to an employee;

(iii) of rent;

(iv) of an annuity or other retirement or health benefit to a beneficiary, representative, or designee of a deceased or retired partner;

(v) of interest or other charge on a loan, even if the amount of payment varies with the profits of the business, including a direct or indirect present or future ownership of the collateral, or rights to income, proceeds, or increase in value derived from the collateral; or

(vi) for the sale of the goodwill of a business or other property by installments or otherwise.

 

SECTION 203. PARTNERSHIP PROPERTY. Property acquired by a partnership is property of the partnership and not of the partners individually.

 

SECTION 204. WHEN PROPERTY IS PARTNERSHIP PROPERTY.

(a) Property is partnership property if acquired in the name of:

(1) the partnership; or

(2) one or more partners with an indication in the instrument transferring title to the property of the person’s capacity as a partner or of the existence of a partnership but without an indication of the name of the partnership.

(b) Property is acquired in the name of the partnership by a transfer to:

(1) the partnership in its name; or

(2) one or more partners in their capacity as partners in the partnership, if the name of the partnership is indicated in the instrument transferring title to the property.

(c) Property is presumed to be partnership property if purchased with partnership assets, even if not acquired in the name of the partnership or of one or more partners with an indication in the instrument transferring title to the property of the person’s capacity as a partner or of the existence of a partnership.

(d) Property acquired in the name of one or more of the partners, without an indication in the instrument transferring title to the property of the person’s capacity as a partner or of the existence of a partnership and without use of partnership assets, is presumed to be separate property, even if used for partnership purposes.

[ARTICLE] 3

RELATIONS OF PARTNERS TO PERSONS DEALING WITH PARTNERSHIP

 

SECTION 301. PARTNER AGENT OF PARTNERSHIP. Subject to the effect of a statement of partnership authority under Section 303:

(1) Each partner is an agent of the partnership for the purpose of its business.  An act of a partner, including the execution of an instrument in the partnership name, for apparently carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership, unless the partner had no authority to act for the partnership in the particular matter and the person with whom the partner was dealing knew or had received a notification that the partner lacked authority.

(2) An act of a partner which is not apparently for carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership only if the act was authorized by the other partners.

 

SECTION 302. TRANSFER OF PARTNERSHIP PROPERTY.

(a) Partnership property may be transferred as follows:

(1) Subject to the effect of a statement of partnership authority under Section 303, partnership property held in the name of the partnership may be transferred by an instrument of transfer executed by a partner in the partnership name.

(2) Partnership property held in the name of one or more partners with an indication in the instrument transferring the property to them of their capacity as partners or of the existence of a partnership, but without an indication of the name of the partnership, may be transferred by an instrument of transfer executed by the persons in whose name the property is held.

(3) Partnership property held in the name of one or more persons other than the partnership, without an indication in the instrument transferring the property to them of their capacity as partners or of the existence of a partnership, may be transferred by an instrument of transfer executed by the persons in whose name the property is held.

(b) A partnership may recover partnership property from a transferee only if it proves that execution of the instrument of initial transfer did not bind the partnership under Section 301 and:

(1) as to a subsequent transferee who gave value for property transferred under subsection (a)(1) and (2), proves that the subsequent transferee knew or had received a notification that the person who executed the instrument of initial transfer lacked authority to bind the partnership; or

(2) as to a transferee who gave value for property transferred under subsection (a)(3), proves that the transferee knew or had received a notification that the property was partnership property and that the person who executed the instrument of initial transfer lacked authority to bind the partnership.

(c) A partnership may not recover partnership property from a subsequent transferee if the partnership would not have been entitled to recover the property, under subsection (b), from any earlier transferee of the property.

(d) If a person holds all of the partners’ interests in the partnership, all of the partnership property vests in that person. The person may execute a document in the name of the partnership to evidence vesting of the property in that person and may file or record the document.

 

SECTION 303. STATEMENT OF PARTNERSHIP AUTHORITY.[26]

(a) A partnership may deliver to the [Secretary of State] for filing file a statement of partnership authority. , whichThe statement:

(1) must include :

(i) the name of the partnership and ;

(ii) the street and mailing address of its chief executive office and of one office in this State, if there is one;

(2) with respect to any position that exists in or with respect to the partnership, may state the authority, or limitations on the authority, of all persons holding the position to:

(A) execute an instrument transferring real property held in the name of the partnership; or

(B) enter into other transactions on behalf of, or otherwise act for or bind, the partnership; and

(3) may state the authority, or limitations on the authority, of a specific person to:

(A) execute an instrument transferring real property held in the name of the company; or

(B) enter into other transactions on behalf of, or otherwise act for or bind, the company.

(b) To amend or cancel a statement of authority filed by the [Secretary of State] under Section 105(f), a partnership must deliver to the [Secretary of State] for filing an amendment or cancellation stating:

(1) the name of the partnership;

(2) the street and mailing address of the partnership’s chief executive office and of one office in this State, if there is one;

(3) the caption of the statement being amended or canceled and the date the statement being affected became effective; and

(4) the contents of the amendment or a declaration that the statement being affected is canceled.

(c) A statement of authority affects only the power of a person to bind a partnership to persons that are not partners.

(d) Subject to subsection (c) and Section 102(d) and except as otherwise provided in subsections (f), (g), and (h), a limitation on the authority of a person or a position contained in an effective statement of authority is not by itself evidence of knowledge or notice of the limitation by any person.

(e) Subject to subsection (c), a grant of authority not pertaining to transfers of real property and contained in an effective statement of authority is conclusive in favor of a person that gives value in reliance on the grant, except to the extent that when the person gives value:

(1) the person has knowledge to the contrary;

(2) the statement has been canceled or restrictively amended under subsection (b); or

(3) a limitation on the grant is contained in another statement of authority that became effective after the statement containing the grant became effective.

(f) Subject to subsection (c), an effective statement of authority that grants authority to transfer real property held in the name of the partnership and that is recorded by certified copy in the office for recording transfers of the real property is conclusive in favor of a person that gives value in reliance on the grant without knowledge to the contrary, except to the extent that when the person gives value:

(1) the statement has been canceled or restrictively amended under subsection (b) and a certified copy of the cancellation or restrictive amendment has been recorded in the office for recording transfers of the real property; or

(2) a limitation on the grant is contained in another statement of authority that became effective after the statement containing the grant became effective and a certified copy of the later-effective statement is recorded in the office for recording transfers of the real property.

(g) Subject to subsection (c), if a certified copy of an effective statement containing a limitation on the authority to transfer real property held in the name of a partnership is recorded in the office for recording transfers of that real property, all persons are deemed to know of the limitation.

(h) Subject to subsection (i), an effective statement of dissolution is a cancellation of any filed statement of authority for the purposes of subsection (f) and is a limitation on authority for the purposes of subsection (g).

(i) After a statement of dissolution becomes effective, a partnership may deliver to the [Secretary of State] for filing and, if appropriate, may record a statement of authority that is designated as a post-dissolution statement of authority. The statement operates as provided in subsections (f) and (g).

(j) Unless earlier canceled, an effective statement of authority is canceled by operation of law five years after the date on which the statement, or its most recent amendment, becomes effective. This cancellation operates without need for any recording under subsection (f) or (g).

(k) An effective statement of denial operates as a restrictive amendment under this section and may be recorded by certified copy for the purposes of subsection (f)(1).

(iii) the names and mailing addresses of all of the partners or of an agent appointed and maintained by the partnership for the purpose of subsection (b); and

(iv) the names of the partners authorized to execute an instrument transferring real property held in the name of the partnership; and

(2) may state the authority, or limitations on the authority, of some or all of the partners to enter into other transactions on behalf of the partnership and any other matter.

(b)  If a statement of partnership authority names an agent, the agent shall maintain a list of the names and mailing addresses of all of the partners and make it available to any person on request for good cause shown.

(c)  If a filed statement of partnership authority is executed pursuant to Section 105(c) and states the name of the partnership but does not contain all of the other information required by subsection (a), the statement nevertheless operates with respect to a person not a partner as provided in subsections (d) and (e).

(d)  Except as otherwise provided in subsection (g), a filed statement of partnership authority supplements the authority of a partner to enter into transactions on behalf of the partnership as follows:

(1)  Except for transfers of real property, a grant of authority contained in a filed statement of partnership authority is conclusive in favor of a person who gives value without knowledge to the contrary, so long as and to the extent that a limitation on that authority is not then contained in another filed statement.  A filed cancellation of a limitation on authority revives the previous grant of authority.

(2)  A grant of authority to transfer real property held in the name of the partnership contained in a certified copy of a filed statement of partnership authority recorded in the office for recording transfers of that real property is conclusive in favor of a person who gives value without knowledge to the contrary, so long as and to the extent that a certified copy of a filed statement containing a limitation on that authority is not then of record in the office for recording transfers of that real property.  The recording in the office for recording transfers of that real property of a certified copy of a filed cancellation of a limitation on authority revives the previous grant of authority.

(e)  A person not a partner is deemed to know of a limitation on the authority of a partner to transfer real property held in the name of the partnership if a certified copy of the filed statement containing the limitation on authority is of record in the office for recording transfers of that real property.

(f)  Except as otherwise provided in subsections (d) and (e) and Sections 704 and 805, a person not a partner is not deemed to know of a limitation on the authority of a partner merely because the limitation is contained in a filed statement.

(g)  Unless earlier canceled, a filed statement of partnership authority is canceled by operation of law five years after the date on which the statement, or the most recent amendment, was filed with the [Secretary of State].

 

SECTION 304. STATEMENT OF DENIAL. A person named in a filed statement of authority granting that person authority may deliver to the [Secretary of State] for filing a statement of denial that:

(1) provides the name of the partnership and the caption of the statement of authority to which the statement of denial pertains; and

(2) denies the grant of authority.[27] A partner or other person named as a partner in a filed statement of partnership authority or in a list maintained by an agent pursuant to Section 303(b) may file a statement of denial stating the name of the partnership and the fact that is being denied, which may include denial of a person’s authority or status as a partner.  A statement of denial is a limitation on authority as provided in Section 303(d) and (e).

 

 

 

 

SECTION 305. PARTNERSHIP LIABLE FOR PARTNER’S ACTIONABLE CONDUCT.

(a) A partnership is liable for loss or injury caused to a person, or for a penalty incurred, as a result of a wrongful act or omission, or other actionable conduct, of a partner acting in the ordinary course of business of the partnership or with authority of the partnership.

(b) If, in the course of the partnership’s business or while acting with authority of the partnership, a partner receives or causes the partnership to receive money or property of a person not a partner, and the money or property is misapplied by a partner, the partnership is liable for the loss.

 

SECTION 306. PARTNER’S LIABILITY.

(a) Except as otherwise provided in subsections (b) and (c), all partners are liable jointly and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law.

(b) A person admitted as a partner into an existing partnership is not personally liable for any partnership obligation incurred before the person’s admission as a partner.

(c) A debt, obligations, or other liability of a limited liability partnership is solely the debt, obligation, or other liabilities of the limited liability partnership. A partner, manager, agent of the partnership, or agent of a manager is not personally liable, directly or indirectly, by way of contribution or otherwise, for a debt, obligation, or other liability of the limited liability partnership solely by reason of being or acting as a member, manager, agent of the limited liability partnership, or agent of a manager An obligation of a partnership incurred while the partnership is a limited liability partnership, whether arising in contract, tort, or otherwise, is solely the obligation of the partnership.  A partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for such an obligation solely by reason of being or so acting as a partner. This subsection applies notwithstanding anything inconsistent in the partnership agreement that existed immediately before the vote required to become a limited liability partnership under Section 1001(b).[28]

 

SECTION 307. ACTIONS BY AND AGAINST PARTNERSHIP AND PARTNERS.[29]

(a)  A partnership may sue and be sued in the name of the partnership.

(ab) An action may be brought against the partnership and, to the extent not inconsistent with Section 306, any or all of the partners in the same action or in separate actions.

(bc) A judgment against a partnership is not by itself a judgment against a partner.  A judgment against a partnership may not be satisfied from a partner’s assets unless there is also a judgment against the partner.

(cd) A judgment creditor of a partner may not levy execution against the assets of the partner to satisfy a judgment based on a claim against the partnership unless the partner is personally liable for the claim under Section 306 and:

(1) a judgment based on the same claim has been obtained against the partnership and a writ of execution on the judgment has been returned unsatisfied in whole or in part;

(2) the partnership is a debtor in bankruptcy;

(3) the partner has agreed that the creditor need not exhaust partnership assets;

(4) a court grants permission to the judgment creditor to levy execution against the assets of a partner based on a finding that partnership assets subject to execution are clearly insufficient to satisfy the judgment, that exhaustion of partnership assets is excessively burdensome, or that the grant of permission is an appropriate exercise of the court’s equitable powers; or

(5) liability is imposed on the partner by law or contract independent of the existence of the partnership.

(de) This section applies to any partnership liability or obligation resulting from a representation by a partner or purported partner under Section 308.

 

SECTION 308.  LIABILITY OF PURPORTED PARTNER.

(a)  If a person, by words or conduct, purports to be a partner, or consents to being represented by another as a partner, in a partnership or with one or more persons not partners, the purported partner is liable to a person to whom the representation is made, if that person, relying on the representation, enters into a transaction with the actual or purported partnership. If the representation, either by the purported partner or by a person with the purported partner’s consent, is made in a public manner, the purported partner is liable to a person who relies upon the purported partnership even if the purported partner is not aware of being held out as a partner to the claimant. If partnership liability results, the purported partner is liable with respect to that liability as if the purported partner were a partner. If no partnership liability results, the purported partner is liable with respect to that liability jointly and severally with any other person consenting to the representation.

(b) If a person is thus represented to be a partner in an existing partnership, or with one or more persons not partners, the purported partner is an agent of persons consenting to the representation to bind them to the same extent and in the same manner as if the purported partner were a partner, with respect to persons who enter into transactions in reliance upon the representation. If all of the partners of the existing partnership consent to the representation, a partnership act or obligation results. If fewer than all of the partners of the existing partnership consent to the representation, the person acting and the partners consenting to the representation are jointly and severally liable.

(c) A person is not liable as a partner merely because the person is named by another in a statement of partnership authority.

(d) A person does not continue to be liable as a partner merely because of a failure to file a statement of dissociation or to amend a statement of partnership authority to indicate the partner’s dissociation from the partnership.

(e) Except as otherwise provided in subsections (a) and (b), persons who are not partners as to each other are not liable as partners to other persons.  

[ARTICLE] 4

RELATIONS OF PARTNERS TO EACH OTHER AND TO PARTNERSHIP

 

SECTION 401. PARTNER’S RIGHTS AND DUTIES.[30]

(a)   Each partner is deemed to have an account that is:

(1)  credited with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, the partner contributes to the partnership and the partner’s share of the partnership profits; and

(2)  charged with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, distributed by the partnership to the partner and the partner’s share of the partnership losses.

(ab)  Each partner is entitled to an equal share of the partnership profits and is chargeable with a share of the partnership losses in proportion to the partner’s share of the profits.

(bc) A partnership shall reimburse a partner for payments made and indemnify a partner for liabilities incurred by the partner in the ordinary course of the business of the partnership or for the preservation of its business or property.

(cd) A partnership shall reimburse a partner for an advance to the partnership beyond the amount of capital the partner agreed to contribute.

(de) A payment or advance made by a partner which gives rise to a partnership obligation under subsection (bc) or (cd) constitutes a loan to the partnership which accrues interest from the date of the payment or advance.

(ef) Each partner has equal rights in the management and conduct of the partnership business.[31]

(fg) A partner may use or possess partnership property only on behalf of the partnership.

(gh) A partner is not entitled to remuneration for services performed for the partnership, except for reasonable compensation for services rendered in winding up the business of the partnership.

(hi) A person may become a partner only with the consent of all of the partners.

(ij) A difference arising as to a matter in the ordinary course of business of a partnership may be decided by a majority of the partners. An act outside the ordinary course of business of a partnership and an amendment to the partnership agreement may be undertaken only with the consent of all of the partners.

(jk) This section does not affect the obligations of a partnership to other persons under Section 301.

 

SECTION 401A. FORM OF CONTRIBUTION. A contribution may consist of tangible or intangible property or other benefit to a limited liability company, including money, services performed, promissory notes, other agreements to contribute money or property, and contracts for services to be performed.[32]

 

SECTION 401B. LIABILITY FOR CONTRIBUTION AND FOR PROPERTY IMPROPERLY PAID OR DISTRIBUTED.[33]

(a) A person’s obligation to make a contribution to a limited liability company is not excused by the person’s death, disability, or other inability to perform personally. If a person does not make a required contribution, the person or the person’s estate is obligated to contribute money equal to the value of the part of the contribution which has not been made, at the option of the partnership.

(b) The obligation of a person to make a contribution or return money or other property paid or distributed in violation of this [Act] may be compromised only by consent of all members. A creditor of a partnership that extends credit or otherwise acts in reliance on an obligation described in subsection (a), without notice of any compromise under this subsection, may enforce the original obligation.

 

SECTION 402. SHARING OF AND RIGHT TO DISTRIBUTIONS BEFORE DISSOLUTION. DISTRIBUTIONS IN KIND.

(a) Any distributions made by a partnership before its dissolution and winding up must be in equal shares among partners and dissociated partners, except to the extent necessary to comply with any transfer effective under Section 503 and any charging order in effect under Section 504.

(b) A person has a right to a distribution before the dissolution and winding up of a partnership only if the partnership decides to make an interim distribution.

(c) A person does not have a right to demand or receive a distribution from a partnership in any form other than money. Except as otherwise provided in Section 807, a partnership may distribute an asset in kind if each part of the asset is fungible with each other part and each person receives a percentage of the asset equal in value to the person’s share of distributions.

(d) If a partner or transferee becomes entitled to receive a distribution, the partner or transferee has the status of, and is entitled to all remedies available to, a creditor of the partnership with respect to the distribution.  A partner has no right to receive, and may not be required to accept, a distribution in kind.

 

SECTION 402A. LIMITATIONS ON DISTRIBUTIONS OF A LIMITED LIABILITY PARTNERSHIP.[34]

(a) A limited liability partnership may not make a distribution if after the distribution:

(1) the limited liability partnership would not be able to pay its debts as they become due in the ordinary course of the limited liability partnership’s activities; or

(2) the limited liability partnership’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the limited liability partnership were to be dissolved and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up of partners whose preferential rights are superior to those of persons receiving the distribution.[35]

(b) A limited liability partnership may base a determination that a distribution is not prohibited under subsection (a) on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable under the circumstances.

(c) Except as otherwise provided in subsection (f), the effect of a distribution under subsection (a) is measured:

(1) in the case of a distribution by purchase, redemption, or other acquisition of a transferable interest in the limited liability partnership, as of the date money or other property is transferred or debt incurred by the limited liability partnership;

(2) in the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and

(3) in all other cases, as of the date:

(A) the distribution is authorized, if the payment occurs within 120 days after that date; or

(B) the payment is made, if the payment occurs more than 120 days after the distribution is authorized.

(d) A limited liability partnership’s indebtedness to a partner incurred by reason of a distribution made in accordance with this section is at parity with the limited liability partnership’s indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.

(e) A limited liability partnerships’s indebtedness, including indebtedness issued in connection with or as part of a distribution, is not a liability for purposes of subsection (a) if the terms of the indebtedness provide that payment of principal and interest are made only to the extent that a distribution could be made to partners under this section.

(f) If indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is made.

(g) In subsection (a), “distribution” does not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of business under a bona fide retirement plan or other benefits program.

 

SECTION 402B. LIABILITY FOR IMPROPER DISTRIBUTIONS OF A LIMITED LIABILITY PARTNERSHIP.[36]

(a) Except as otherwise provided in subsection (b), if a partner of a limited liability partnership consents to a distribution made in violation of Section 402A and in consenting to the distribution fails to comply with Section 404, the partner is personally liable to the limited liability partnership for the amount of the distribution that exceeds the amount that could have been distributed without the violation of Section 402A.

(b) To the extent the partnership agreement expressly relieves a partner of the authority and responsibility to consent to distributions and imposes that authority and responsibility on one or more other partners, the liability stated in subsection (a) applies to the other partners and not the partner that the partnership agreement relieves of authority and responsibility.

(c) A person that receives a distribution knowing that the distribution to that person was made in violation of Section 402A is personally liable to the limited liability partnership but only to the extent that the distribution received by the person exceeded the amount that could have been properly paid under Section 402A.

(d) A person against which an action is commenced because the person is liable under subsection (a) may:

(1) implead any other person that is subject to liability under subsection (a) and seek to compel contribution from the person; and

(2) implead any person that received a distribution in violation of subsection (c) and seek to compel contribution from the person in the amount the person received in violation of subsection (c).

(e) An action under this section is barred if not commenced within two years after the distribution.

 

SECTION 403. PARTNER’S RIGHTS AND DUTIES WITH RESPECT TO INFORMATION.[37]

(a) A partnership shall keep its books and records, if any, at its chief executive office.

(b) A partnership shall provide partners and their agents and attorneys access to its books and records. It shall provide former partners and their agents and attorneys access to books and records pertaining to the period during which they were partners. The right of access provides the opportunity to inspect and copy books and records during ordinary business hours. A partnership may impose a reasonable charge, covering the costs of labor and material, for copies of documents furnished.

(c) Each partner and the partnership shall furnish to a partner, and to the legal representative of a deceased partner or partner under legal disability:

(1) without demand, any information concerning the partnership’s business and affairs reasonably required for the proper exercise of the partner’s rights and duties under the partnership agreement or this [Act]; and

(2) on demand, any other information concerning the partnership’s business and affairs, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances.

 

SECTION 404. GENERAL STANDARDS OF PARTNER’S CONDUCT.

 (a)  The only fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care set forth in subsections (b) and (c).

(ab)  A partner’sThe duty of loyalty to the partnership and the other partners is limited to the followingof a partner includes the duties:[38]

(1) to account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner:

(A) in the conduct and or winding up of the partnership’s business;

(B) or derived from a use by the partner of the partnership’s property; or

(C) including from the appropriation of a partnership opportunity;;

(2) to refrain from dealing with the partnership in the conduct or winding up of the partnership business activities as or on behalf of a party person having an interest adverse to the partnership; and

(3) to refrain from competing with the partnership in the conduct of the partnership’s business activities before the dissolution of the partnership.

(bc) A partner’s duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

(cd) A partner shall discharge the duties to the partnership and the other partners under this [aAct] or under the partnership agreement and exercise any rights consistently with the contractual obligation of good faith and fair dealing.

(de) A partner does not violate a duty or obligation under this [aAct] or under the partnership agreement merely because the partner’s conduct furthers the partner’s own interest.[39]

(ef) A partner may lend money to and transact other business with the partnership, and as to each loan or transaction the rights and obligations of the partner are the same as those of a person who is not a partner, subject to other applicable law. It is a defense to a claim under subsection (a)(2) and any comparable claim in equity or at common law that the transaction was fair to the partnership.

(fg) This section applies to a person winding up the partnership business as the personal or legal representative of the last surviving partner as if the person were a partner.

 

SECTION 405. ACTIONS BY PARTNERSHIP ANDDIRECT ACTION BY A PARTNERS.[40]

(a) Subject to subsection (b), a partner may maintain a direct action against another partner, a manager, or the partnership to enforce the partner’s rights and otherwise protect the partner’s interests, including rights and interests under the partnership agreement or this [act] or arising independently of the partnership relationshipA partnership may maintain an action against a partner for a breach of the partnership agreement, or for the violation of a duty to the partnership, causing harm to the partnership.

(b)  A partner maintaining a direct action under this section must plead and prove an actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the partnership.A partner may maintain an action against the partnership or another partner for legal or equitable relief, with or without an accounting as to partnership business, to:

(1) enforce the partner’s rights under the partnership agreement;

(2) enforce the partner’s rights under this [Act], including:

(i) the partner’s rights under Sections 401, 403, or 404;

(ii) the partner’s right on dissociation to have the partner’s interest in the partnership purchased pursuant to Section 701 or enforce any other right under [Article] 6 or 7; or

(iii) the partner’s right to compel a dissolution and winding up of the partnership business under Section 801 or enforce any other right under [Article] 8; or

(3) enforce the rights and otherwise protect the interests of the partner, including rights and interests arising independently of the partnership relationship.

(c)  The accrual of, and any time limitation on, a right of action for a remedy under this section is governed by other law.  A right to an accounting upon a dissolution and winding up does not revive a claim barred by law

 

SECTION 405A. DERIVATIVE ACTION BY A PARTNER. A partner may maintain a derivative action to enforce a right of a partnership if:

(1) the partner first makes a demand on the other partners requesting that they cause the partnership to bring an action to enforce the right, and the other partners do not bring the action within a reasonable time; or

(2) a demand under paragraph (1) would be futile.

 

SECTION 405B. PROPER PLAINTIFF. A derivative action may be maintained only by a person that is a partner at the time the action is commenced and:

(1) that was a partner when the conduct giving rise to the action occurred; or

(2) whose status as a partner devolved upon the person by operation of law or pursuant to the terms of the operating agreement from a person that was a partner at the time of the conduct.

 

SECTION 405C. PROPER PLEADING. In a derivative action under Section 405A, the complaint must state with particularity:

(1) the date and content of plaintiff’s demand and the response to the demand by the other partners; or

(2) why demand should be excused as futile.

 

SECTION 405D. SPECIAL LITIGATION COMMITTEE.

(a) If a partnership is named as or made a party in a derivative proceeding, the partnership may appoint a special litigation committee to investigate the claims asserted in the proceeding and determine whether pursuing the action is in the best interests of the partnership. If the partnership appoints a special litigation committee, on motion by the committee made in the name of the partnership, except for good cause shown, the court shall stay discovery for the time reasonably necessary to permit the committee to make its investigation. This subsection does not prevent the court from enforcing a person’s right to information under Section 403 or, for good cause shown, granting extraordinary relief in the form of a temporary restraining order or preliminary injunction.

(b) A special litigation committee may be composed of one or more disinterested and independent individuals, who may be partners.

(c) A special litigation committee may be appointed by the consent of a majority of the partners not named as defendants or plaintiffs in the proceeding and if all partners are named as defendants or plaintiffs in the proceeding, by a majority of the partners named as defendants.

(d) After appropriate investigation, a special litigation committee may determine that it is in the best interests of the partnership that the proceeding:

(1) continue under the control of the plaintiff;

(2) continue under the control of the committee;

(3) be settled on terms approved by the committee; or

(4) be dismissed.

(e) After making a determination under subsection (d), a special litigation committee shall file with the court a statement of its determination and its report supporting its determination, giving notice to the plaintiff. The court shall determine whether the partners of the committee were disinterested and independent and whether the committee conducted its investigation and made its recommendation in good faith, independently, and with reasonable care, with the committee having the burden of proof. If the court finds that the partners of the committee were disinterested and independent and that the committee acted in good faith, independently, and with reasonable care, the court shall enforce the determination of the committee. Otherwise, the court shall dissolve the stay of discovery entered under subsection (a) and allow the action to proceed under the direction of the plaintiff.

 

SECTION 405E. PROCEEDS AND EXPENSES.

(a) Except as otherwise provided in subsection (b):

(1) any proceeds or other benefits of a derivative action under Section 405A, whether by judgment, compromise, or settlement, belong to the partnership and not to the plaintiff; and

(2) if the plaintiff receives any proceeds, the plaintiff shall remit them immediately to the partnership.

(b) If a derivative action under Section 405A is successful in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees and costs, from the recovery of the partnership.

 

SECTION 406. CONTINUATION OF PARTNERSHIP BEYOND DEFINITE TERM OR PARTICULAR UNDERTAKING.

(a) If a partnership for a definite term or particular undertaking is continued, without an express agreement, after the expiration of the term or completion of the undertaking, the rights and duties of the partners remain the same as they were at the expiration or completion, so far as is consistent with a partnership at will.

(b) If the partners, or those of them who habitually acted in the business during the term or undertaking, continue the business without any settlement or liquidation of the partnership, they are presumed to have agreed that the partnership will continue.

[ARTICLE] 5

TRANSFEREES AND CREDITORS OF PARTNER

 

SECTION 501.  PARTNER NOT CO-OWNER OF PARTNERSHIP PROPERTY.  A partner is not a co-owner of partnership property and has no interest in partnership property which that can be transferred, either voluntarily or involuntarily.

 

SECTION 502. PARTNER’S NATURE OF TRANSFERABLE INTEREST IN PARTNERSHIP.  The only transferable interest of a partner in the partnershipwhich is transferable is the partner’s share of the profits and losses of the partnership and the partner’s right to receive distributionstransferable interest. The A transferable interest is personal property.[41]

 

SECTION 503. TRANSFER OF PARTNER’S TRANSFERABLE INTEREST.

(a) A transfer, in whole or in part, of a partner’s transferable interest in the partnership:

(1) is permissible;

(2) does not by itself cause the a partner’s dissociation or a dissolution and winding up of the partnership businessactivities; and

(3) subject to Section 505 does not, as against the other partners or the partnership, entitle the transferee to:

(A), during the continuance of the partnership, to participate in the management or conduct of the partnership’s activities; or

(B) business, to requireexcept as otherwise provided in subsection (c), have access to records or other information concerning the partnership’s transactions, or to inspect or copy the partnership books or recordsactivities.

 (b)  A transferee of a partner’s transferable interest in the partnership has a the right:

(1) to receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled; and

(2) to receive upon the dissolution and winding up of the partnership business, in accordance with the transfer, the net amount otherwise distributable to the transferor; and

(23) to seek under Section 801(6) a judicial determination that it is equitable to wind up the partnership businessactivities.

(c)  In a dissolution and winding up of a partnership, a transferee is entitled to an account of the partnership’s transactions only from the date of the latest account agreed to by all of the partners.[42]

(d) Except as otherwise provided in Section 601(4)(B), when a partner transfers a transferable interest, the transferor retains the rights of a member other than the interest in distributions transferred and retains all duties and obligations of a memberUpon transfer, the transferor retains the rights and duties of a partner other than the interest in distributions transferred.

(e) A partnership need not give effect to a transferee’s rights under this section until it the partnership has notice of the transfer.

(f) A transfer of a partner’s transferable interest in the partnership in violation of a restriction on transfer contained in the partnership agreement is ineffective as to a person having notice of the restriction at the time of transfer.

 

SECTION 504.  PARTNER’S TRANSFERABLE INTEREST SUBJECT TO CHARGING ORDER.

(a) On application by a judgment creditor of a partner or transferee, a court may enter a charging order against the transferable interest of the judgment debtor for the unsatisfied amount of the judgment. A charging order constitutes a lien on a judgment debtor’s transferable interest and requires the partnership to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor On application by a judgment creditor of a partner or of a partner’s transferee, a court having jurisdiction may charge the transferable interest of the judgment debtor to satisfy the judgment.  The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the partnership and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or which the circumstances of the case may require.

(b) To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under subsection (a), the court may: A charging order constitutes a lien on the judgment debtor’s transferable interest in the partnership.  The court may order a foreclosure of the interest subject to the charging order at any time.  The purchaser at the foreclosure sale has the rights of a transferee.

(c)  At any time before foreclosure, an interest charged may be redeemed:

(1) appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made; andby the judgment debtor;

(2) make all other orders necessary to give effect to the charging order.with property other than partnership property, by one or more of the other partners; or

(c3) Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, the court may foreclose the lien and order the sale of the transferable interest. The purchaser at the foreclosure sale only obtains the transferable interest, does not thereby become a member, and is subject to Section 503with partnership property, by one or more of the other partners with the consent of all of the partners whose interests are not so charged.

(d)  At any time before foreclosure under subsection (c), the partner or transferee whose transferable interest is subject to a charging order under subsection (a) may extinguish the charging order by satisfying the judgment and filing a certified copy of the satisfaction with the court that issued the charging orderThis [Act] does not deprive a partner of a right under exemption laws with respect to the partner’s interest in the partnership.

(e)  At any time before foreclosure under subsection (c), a partnership or one or more partners whose transferable interests are not subject to the charging order may pay to the judgment creditor the full amount due under the judgment and thereby succeed to the rights of the judgment creditor, including the charging orderThis section provides the exclusive remedy by which a judgment creditor of a partner or partner’s transferee may satisfy a judgment out of the judgment debtor’s transferable interest in the partnership.

(f) This [act] does not deprive any partner or transferee of the benefit of any exemption laws applicable to the partner’s or transferee’s transferable interest.

(g) This section provides the exclusive remedy by which a person seeking to enforce a judgment against a partner or transferee may, in the capacity of judgment creditor, satisfy the judgment from the judgment debtor’s transferable interest.

 

SECTION 505. POWER OF PERSONAL REPRESENTATIVE OF DECEASED PARTNER. If a partner dies, the deceased partner’s personal representative or other legal representative may exercise the rights of a transferee as provided in Section 503 and, for the purposes of settling the estate, may exercise the rights of a current partner.

[ARTICLE] 6

PARTNER’S DISSOCIATION

 

SECTION 601. EVENTS CAUSING PARTNER’S DISSOCIATION.[43] A person partner is dissociated as a partner from a partnership upon the occurrence of any of the following eventswhen:

(1)  the partnership’s having has notice of the personartner’s express will to withdraw as a partner, but, if the person specified a withdrawal date later than the date the partnership had notice, on that later dateor on a later date specified by the partner;

(2) an event agreed tostated in the partnership agreement as causing the personartner’s dissociation as a partner occurs;

(3) the partnerperson is’s expelled as a partnerulsion pursuant to the partnership agreement;

(4) the partner’person is expelleds as a partner expulsion by the unanimous vote of the other partners if::

(Ai) it is unlawful to carry on the partnership’s business activities with that the person as a partner;

(B)

(ii) there has been a transfer of all or substantially all[44] of that the partner’s transferable interest in the partnership, other than:

(i) a transfer for security purposes, or

(ii) a court order charging the partner’s interestcharging order in effect under Section 504, which has not been foreclosed:;

(Ciii) the person is a corporation and, within 90 days after the partnership notifies the person that it will be expelled as a member because the person has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, the certificate of dissolution has not been revoked or its charter or right to conduct business has not been reinstated; orwithin 90 days after the partnership notifies a corporate partner that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, there is no revocation of the certificate of dissolution or no reinstatement of its charter or its right to conduct business; or

(Div) the person is a limted liability company or a partnership that is a partner has been dissolved and its whose business is being wound up;

 (5) on application by the partnership or another partner, the person is expelled as a partner’s expulsion by judicial determination order because the person::

(Ai) the partnerhas engaged, or is engaging, in wrongful conduct that has adversely and materially affected, or will affect, the partnership businessactivities;

(B)

(ii) the partnerhas willfully or persistently committed, or is willfully and persistently committing, a material breach of the partnership agreement or of a dutythe person’s duties or obligations owed to the partnership or the other partners under Section 404; or

(Ciii) the partnerhas engaged, or is engaging, in conduct relating to the partnership’s business activities which makes it not reasonably practicable to carry on the business activities with the person as a partnerin partnership with the partner;

(6) the partner’s:[45]

(i) becoming a debtor in bankruptcy;

(ii) executing an assignment for the benefit of creditors;

(iii) seeking, consenting to, or acquiescing in the appointment of a trustee, receiver, or liquidator of that partner or of all or substantially all of that partner’s property; or

(iv) failing, within 90 days after the appointment, to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the partner or of all or substantially all of the partner’s property obtained without the partner’s consent or acquiescence, or failing within 90 days after the expiration of a stay to have the appointment vacated;

(7) in the case of a partner who is an individual::

(Ai) the partner’s death;

(Bii) the appointment of a guardian or general conservator for the partner is appointed; or

(Ciii) there is a judicial determination that the partner has otherwise become incapable of performing the partner’s duties under [this act] or the partnership agreement;

(8) in the case of a partner that is a trust or is acting as a partner by virtue of being a trustee of a trust, the trust’s distribution of the trust’s entire transferable interest is distributedin the partnership; , but not merely by reason of the substitution of a successor trustee;

(9) in the case of a partner that is an estate or is acting as a partner by virtue of being a personal representative of an estate, distribution of the estate’s entire transferable interest in the partnership is distributed; , but not merely by reason of the substitution of a successor personal representative; or

(10) termination in the case of a partner who is not an individual, partnership, limited liability company, corporation, trust, or estate, the termination of the partner;

(11) the partnership participates in a merger under [Article] 9, if:

(A) the partnership is not the surviving entity, or

(B) otherwise as a result of the merger, the person ceases to be a partner;

(12) the partnership participates in a conversion under [Article] 9; or

(13) the partnership participates in a domestication under [Article] 9, if, as a result of the domestication, the person ceases to be a partner.

 

 

 

SECTION 602. PARTNER’S POWER TO DISSOCIATE; WRONGFUL DISSOCIATION.

(a) A person partner has the power to dissociate as a partner at any time, rightfully or wrongfully, by express willwithdrawing as a partner by express will pursuant under to Section 601(1).[46]

(b) A person’s partner’s dissociation as a partner from a partnership is wrongful only if the dissociation::

(1) it is in breach of an express provision of the partnership agreement; or

(2) occurs before the expiration of a term, in the case of a partnership for a definite term, or before the completion of an undertaking, in the case of a partnership for a particular undertaking, before the expiration of the term or the completion of the undertakingand:

(Ai) the partner person withdraws as a partner by express will, unless the withdrawal follows within 90 days after another partner’s dissociation by death or otherwise under Section 601(6) through (10) or wrongful dissociation under this subsection;

(B)

(ii) the partner person is expelled as a partner by judicial determination under Section 601(5);

(C)

(iii) the partner person is dissociated as a partner by becoming a debtor in bankruptcy; or

(D)

(iv) in the case of a partner person who that is not an individual,a trust other than a business trust, or an estate, or an individual, the person partner is expelled as a partner or otherwise dissociated because it willfully dissolved or terminated.

(c) A partner who that wrongfully dissociates as a partner is liable to the partnership and to the other partners for damages caused by the dissociation. The liability is in addition to any other debt, obligation, or other liability of the partner to the partnership or to the other partners.

 

SECTION 603. EFFECT OF PARTNER’S DISSOCIATION.

(a) If a personpartner’s dissociation as a partner results in a dissolution and winding up of the partnership businessactivities, [Article] 8 applies; otherwise, [Article] 7 applies.

(b) Upon When a person is dissociated as a partner of a partnership’s dissociation:

(1) the person’s right to participate in the management and conduct of the partnership activities as a partner terminates, except as otherwise provided in Section 803the partner’s right to participate in the management and conduct of the partnership business terminates, except as otherwise provided in Section 803;

(2) the person’s duties as a partner under Section 404 terminate; and[47]the partner’s duty of loyalty under Section 404(b)(3) terminates; and

(3) subject to Section 505 and [Article] 9, any transferable interest owned by the person immediately before dissociation in the person’s capacity as a partner is owned by the person solely as a transferee.the partner’s duty of loyalty under Section 404(b)(1) and (2) and duty of care under Section 404(c) continue only with regard to matters arising and events occurring before the partner’s dissociation, unless the partner participates in winding up the partnership’s business pursuant to Section 803.

(c) A person’s dissociation as a partner of a partnership does not of itself discharge the person from any debt, obligation, or other liability to the partnership or the other partners which the person incurred while a partner.

[ARTICLE] 7

PARTNER’S DISSOCIATION WHEN BUSINESS NOT WOUND UP

 

SECTION 701. PURCHASE OF DISSOCIATED PARTNER’S INTEREST.

(a) If a partner is dissociated from a partnership without resulting in a dissolution and winding up of the partnership business under Section 801, the partnership shall cause the dissociated partner’s interest in the partnership to be purchased for a buyout price determined pursuant to subsection (b).

(b) The buyout price of a dissociated partner’s interest is the amount that would have been distributable to the dissociating partner under Section 807(b) if, on the date of dissociation, the assets of the partnership were sold at a price equal to the greater of the liquidation value or the value based on a sale of the entire business as a going concern without the dissociated partner and the partnership were wound up as of that date. Interest must be paid from the date of dissociation to the date of payment.

(c) Damages for wrongful dissociation under Section 602(b), and all other amounts owing, whether or not presently due, from the dissociated partner to the partnership, must be offset against the buyout price. Interest must be paid from the date the amount owed becomes due to the date of payment.

(d) A partnership shall indemnify a dissociated partner whose interest is being purchased against all partnership liabilities, whether incurred before or after the dissociation, except liabilities incurred by an act of the dissociated partner under Section 702.

(e) If no agreement for the purchase of a dissociated partner’s interest is reached within 120 days after a written demand for payment, the partnership shall pay, or cause to be paid, in cash to the dissociated partner the amount the partnership estimates to be the buyout price and accrued interest, reduced by any offsets and accrued interest under subsection (c).

(f) If a deferred payment is authorized under subsection (h), the partnership may tender a written offer to pay the amount it estimates to be the buyout price and accrued interest, reduced by any offsets under subsection (c), stating the time of payment, the amount and type of security for payment, and the other terms and conditions of the obligation.

(g) The payment or tender required by subsection (e) or (f) must be accompanied by the following:

(1) a statement of partnership assets and liabilities as of the date of dissociation;

(2) the latest available partnership balance sheet and income statement, if any;

(3) an explanation of how the estimated amount of the payment was calculated; and

(4) written notice that the payment is in full satisfaction of the obligation to purchase unless, within 120 days after the written notice, the dissociated partner commences an action to determine the buyout price, any offsets under subsection (c), or other terms of the obligation to purchase.

(h) A partner who wrongfully dissociates before the expiration of a definite term or the completion of a particular undertaking is not entitled to payment of any portion of the buyout price until the expiration of the term or completion of the undertaking, unless the partner establishes to the satisfaction of the court that earlier payment will not cause undue hardship to the business of the partnership. A deferred payment must be adequately secured and bear interest.

(i) A dissociated partner may maintain an action against the partnership, pursuant to Section 405(b)(2)(ii), to determine the buyout price of that partner’s interest, any offsets under subsection (c), or other terms of the obligation to purchase. The action must be commenced within 120 days after the partnership has tendered payment or an offer to pay or within one year after written demand for payment if no payment or offer to pay is tendered. The court shall determine the buyout price of the dissociated partner’s interest, any offset due under subsection (c), and accrued interest, and enter judgment for any additional payment or refund. If deferred payment is authorized under subsection (h), the court shall also determine the security for payment and other terms of the obligation to purchase. The court may assess reasonable attorney’s fees and the fees and expenses of appraisers or other experts for a party to the action, in amounts the court finds equitable, against a party that the court finds acted arbitrarily, vexatiously, or not in good faith. The finding may be based on the partnership’s failure to tender payment or an offer to pay or to comply with subsection (g).

 

SECTION 702. DISSOCIATED PARTNER’S POWER TO BIND AND LIABILITY TO PARTNERSHIP.

(a) For two years after a partner dissociates without resulting in a dissolution and winding up of the partnership business, the partnership, including a surviving partnership under [Article] 9, is bound by an act of the dissociated partner which would have bound the partnership under Section 301 before dissociation only if at the time of entering into the transaction the other party:

(1) reasonably believed that the dissociated partner was then a partner;

(2) did not have notice of the partner’s dissociation; and

(3) is not deemed to have had knowledge under Section 303(e) or notice under Section 704(c).

(b) A dissociated partner is liable to the partnership for any damage caused to the partnership arising from an obligation incurred by the dissociated partner after dissociation for which the partnership is liable under subsection (a).

 

SECTION 703. DISSOCIATED PARTNER’S LIABILITY TO OTHER PERSONS.

(a) A partner’s dissociation does not of itself discharge the partner’s liability for a partnership obligation incurred before dissociation.  A dissociated partner is not liable for a partnership obligation incurred after dissociation, except as otherwise provided in subsection (b).

(b) A partner who dissociates without resulting in a dissolution and winding up of the partnership business is liable as a partner to the other party in a transaction entered into by the partnership, or a surviving partnership under [Article] 9, within two years after the partner’s dissociation, only if the partner is liable for the obligation under Section 306 and at the time of entering into the transaction the other party:

(1) reasonably believed that the dissociated partner was then a partner;

(2) did not have notice of the partner’s dissociation; and

(3) is not deemed to have had knowledge under Section 303(e) or notice under Section 704(c).

(c) By agreement with the partnership creditor and the partners continuing the business, a dissociated partner may be released from liability for a partnership obligation.

(d) A dissociated partner is released from liability for a partnership obligation if a partnership creditor, with notice of the partner’s dissociation but without the partner’s consent, agrees to a material alteration in the nature or time of payment of a partnership obligation.

 

SECTION 704. STATEMENT OF DISSOCIATION.

(a) A dissociated partner or the partnership may file a statement of dissociation stating the name of the partnership and that the partner is dissociated from the partnership.

(b) A statement of dissociation is a limitation on the authority of a dissociated partner for the purposes of Section 303(d) and (e).

(c) For the purposes of Sections 702(a)(3) and 703(b)(3), a person not a partner is deemed to have notice of the dissociation 90 days after the statement of dissociation is filed.

 

SECTION 705. CONTINUED USE OF PARTNERSHIP NAME. Continued use of a partnership name, or a dissociated partner’s name as part thereof, by partners continuing the business does not of itself make the dissociated partner liable for an obligation of the partners or the partnership continuing the business.

[ARTICLE] 8

DISSOLUTION AND WINDING UP[48]

 

SECTION 801. EVENTS CAUSING DISSOLUTION AND WINDING UP OF PARTNERSHIP BUSINESS. A partnership is dissolved, and its business activities must be wound up, onlyupon upon the occurrence of any of the following events:

(1) in a partnership at will, the partnership has notice of a person’s express will to withdraw as a partner, other than a person who has dissociated under Section 601(2) through (10), but, if the person specified a withdrawal date later than the date the partnership had notice, on that later date;

the partnership’s having notice from a partner, other than a partner who is dissociated under Section 601(2) through (10), of that partner’s express will to withdraw as a partner, or on a later date specified by the partner;

(2) in a partnership for a definite term or particular undertaking:

(i) within 90 days after a personpartner's dissociation as a partner by death or otherwise under Section 601(6) through (10) or wrongful dissociation under Section 602(b), the express willconsent of at least half of the remaining partners to wind up the partnership business, for which purpose a partner's rightful dissociation pursuant to Section 602(b)(2)(i) constitutes the expression of that partner's will to wind up the partnership business;

(ii) the express willconsent of all of the partners to wind up the partnership business; or

(iii) the expiration of the term or the completion of the undertaking;

(3) an event or circumstance that agreed to in the partnership agreement resulting in the winding up of the partnership businessstates causes the dissolution;

(4) an event that makes it unlawful for all or substantially all of the business of the partnership to be continued, but a cure of illegality within 90 days after notice to the partnership of the event is effective retroactively to the date of the event for purposes of this section;

(5) on application by a partner, a judicial determination that:[49]

(i) the economic purpose of the partnership is likely to be unreasonably frustrated;

(ii) another partner has engaged in conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership with that partner; or

(iii) it is not otherwise reasonably practicable to carry on the partnership business in conformity with the partnership agreement;[50] or

(6) on application by a transferee of a partner’s transferable interest, a judicial determination that it is equitable to wind up the partnership business:

(i) after the expiration of the term or completion of the undertaking, if the partnership was for a definite term or particular undertaking at the time of the transfer or entry of the charging order that gave rise to the transfer; or

(ii) at any time, if the partnership was a partnership at will at the time of the transfer or entry of the charging order that gave rise to the transfer.

 

SECTION 802. PARTNERSHIP CONTINUES AFTER DISSOLUTIONWINDING UP.[51]

(a) Subject to subsection (b), a partnership continues after dissolution only for the purpose of winding up its business. The partnership is terminated when the winding up of its business is completed.

(b) At any time after the dissolution of a partnership and before the winding up of its business is completed, all of the partners, including any dissociating partner other than a wrongfully dissociating partner, may waive the right to have the partnership’s business wound up and the partnership terminated. In that event:

(1) the partnership resumes carrying on its business as if dissolution had never occurred, and any liability incurred by the partnership or a partner after the dissolution and before the waiver is determined as if dissolution had never occurred; and

(2) the rights of a third party accruing under Section 804(1) or arising out of conduct in reliance on the dissolution before the third party knew or received a notification of the waiver may not be adversely affected.

 

SECTION 803. RIGHT TO WIND UP PARTNERSHIP BUSINESS.

(a) After dissolution, a partner who has not wrongfully dissociated may participate in winding up the partnership’s business, but on application of any partner, partner’s legal representative, or transferee, the [designate the appropriate court], for good cause shown, may order judicial supervision of the winding up.

(b) The legal representative of the last surviving partner may wind up a partnership’s business.

(c) A person winding up a partnership’s business may preserve the partnership business or property as a going concern for a reasonable time, prosecute and defend actions and proceedings, whether civil, criminal, or administrative, settle and close the partnership’s business, dispose of and transfer the partnership’s property, discharge the partnership’s liabilities, distribute the assets of the partnership pursuant to Section 807, settle disputes by mediation or arbitration, and perform other necessary acts.

 

SECTION 804. PARTNER’S POWER TO BIND PARTNERSHIP AFTER DISSOLUTION. Subject to Section 805, a partnership is bound by a partner’s act after dissolution that:

(1) is appropriate for winding up the partnership business; or

(2) would have bound the partnership under Section 301 before dissolution, if the other party to the transaction did not have notice of the dissolution.

 

SECTION 805. STATEMENT OF DISSOLUTION.

(a) After dissolution, a partner who has not wrongfully dissociated may file a statement of dissolution stating the name of the partnership and that the partnership has dissolved and is winding up its business.

(b) A statement of dissolution cancels a filed statement of partnership authority for the purposes of Section 303(d) and is a limitation on authority for the purposes of Section 303(e).

(c) For the purposes of Sections 301 and 804, a person not a partner is deemed to have notice of the dissolution and the limitation on the partners’ authority as a result of the statement of dissolution 90 days after it is filed.

(d) After filing and, if appropriate, recording a statement of dissolution, a dissolved partnership may file and, if appropriate, record a statement of partnership authority which will operate with respect to a person not a partner as provided in Section 303(d) and (e) in any transaction, whether or not the transaction is appropriate for winding up the partnership business.

 

SECTION 806. PARTNER’S LIABILITY TO OTHER PARTNERS AFTER DISSOLUTION.[52]

          (a) Except as otherwise provided in subsection (b) and Section 306, after dissolution a partner is liable to the other partners for the partner’s share of any partnership liability incurred under Section 804.

(b) A partner who, with knowledge of the dissolution, incurs a partnership liability under Section 804(2) by an act that is not appropriate for winding up the partnership business is liable to the partnership for any damage caused to the partnership arising from the liability.

 

SECTION 807. SETTLEMENT OF ACCOUNTS AND CONTRIBUTIONS AMONG PARTNERS.[53]

(a) In winding up its activities, a partnership shall discharge the partnership’s debts, obligations, or other liabilities, settle and close the partnership’s activities, and marshal and distribute the assets of the partnership.

(b) If partnership assets are not adequate to satisfy partnership debts, obligations or other liabilities,

In winding up a partnership’s business, the assets of the partnership, including the contributions of the partners required by this section, must be applied to discharge its obligations to creditors, including, to the extent permitted by law, partners who are creditors. Any surplus must be applied to pay in cash the net amount distributable to partners in accordance with their right to distributions under subsection (b).

(b) Each partner is entitled to a settlement of all partnership accounts upon winding up the partnership business. In settling accounts among the partners, profits and losses that result from the liquidation of the partnership assets must be credited and charged to the partners’ accounts. The partnership shall make a distribution to a partner in an amount equal to any excess of the credits over the charges in the partner’s account. each A partner shall contribute to the partnership an equal share of the excess excluding from the calculation charges attributable to an obligation for which the partner is not personally liable under Section 306.partner shall contribute to the partnership an amount equal toany excess of the charges over the credits in the partner’s account but excluding from the calculation charges attributable to an obligation for which the partner is not personally liable under Section 306.

(c) If a partner fails to contribute the full amount required under subsection (b), all of the other partners shall contribute, in the proportions in which those partners share partnership losses, the additional amount necessary to satisfy the partnership obligations for which they are personally liable under Section 306. A partner or partner’s legal representative may recover from the other partners any contributions the partner makes to the extent the amount contributed exceeds that partner’s share of the partnership obligations for which the partner is personally liable under Section 306.

(d) After the settlement of accounts, each partner shall contribute, in the proportion in which the partner shares partnership losses, the amount necessary to satisfy partnership obligations that were not known at the time of the settlement and for which the partner is personally liable under Section 306.

(de) The estate of a deceased partner is liable for the partner’s obligation to contribute to the partnership.

(ef) An assignee for the benefit of creditors of a partnership or a partner, or a person appointed by a court to represent creditors of a partnership or a partner, may enforce a partner’s obligation to contribute to the partnership.

[ARTICLE] 9

CONVERSIONS AND MERGERSMERGER, CONVERSION AND DOMESTICATION

 

SECTION 901. DEFINITIONS. In this [article]:

(1) “Constituent partnership” means a constituent organization that is a partnership.

(2) “Constituent organization” means an organization that is party to a merger.

(3) “Converted organization” means the organization into which a converting organization converts pursuant to Sections 906 through 909.

(4) “Converting partnership” means a converting organization that is a partnership.

(5) “Converting organization” means an organization that converts into another organization pursuant to Section 906.

(6) “Domesticated partnership” means the limited liability partnership that exists after a domesticating foreign partnership or limited liability partnership effects a domestication pursuant to Sections 910 through 913.

(7) “Domesticating partnership” means the limited liability partnership that effects domestication pursuant to Sections 910 through 913.

(8) “Foreign partnership” means a partnership that has its chief executive office in a jurisdiction other than this state or that has specified in its partnership agreement that relations among the partners and between the partners and the partnership will be governed by the law of a jurisdiction other than this state.

(9) “Governing statute” means the statute that governs an organization’s internal affairs.

(10) “Organization” means a general partnership, including a limited liability partnership, limited partnership, including a limited liability limited partnership, limited liability company, business trust, corporation, or any other person having a governing statute. The term includes a domestic or foreign organization regardless of whether organized for profit.

(11) “Organizational documents” means:

(A) for a domestic or foreign general partnership, its partnership agreement;

(B) for a limited partnership or foreign limited partnership, its certificate of limited partnership and partnership agreement;

(C) for a domestic or foreign limited liability company, its certificate or articles of organization and operating agreement, or comparable records as provided in its governing statute;

(D) for a business trust, its agreement of trust and declaration of trust;

(E) for a domestic or foreign corporation for profit, its articles of incorporation, bylaws, and other agreements among its shareholders which are authorized by its governing statute, or comparable records as provided in its governing statute; and

(F) for any other organization, the basic records that create the organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it.

(12) “Personal liability” means liability for a debt, obligation, or other liability of an organization that is imposed on a person that co-owns, has an interest in, or is a member of the organization:

(A) by the governing statute solely by reason of the person co-owning, having an interest in, or being a member of the organization; or

(B) by the organization’s organizational documents under a provision of the governing statute authorizing those documents to make one or more specified persons liable for all or specified debts, obligations, or other liabilities of the organization solely by reason of the person or persons co-owning, having an interest in, or being a member of the organization.

(13) “Surviving organization” means an organization into which one or more other organizations are merged whether the organization preexisted the merger or was created by the merger.

(1) “General partner” means a partner in a partnership and a general partner in a limited partnership.

(2) “Limited partner” means a limited partner in a limited partnership.

(3) “Limited partnership” means a limited partnership created under the [State Limited Partnership Act], predecessor law, or comparable law of another jurisdiction.

(4) “Partner” includes both a general partner and a limited partner.

 

SECTION 902. CONVERSION OF PARTNERSHIP TO LIMITED PARTNERSHIPMERGER.

(a) A partnership may merge with one or more other constituent organizations pursuant to this section, Sections 903 through 905, and a plan of merger, if:

(1) the governing statute of each of the other organizations authorizes the merger;

(2) the merger is not prohibited by the law of a jurisdiction that enacted any of the governing statutes; and

(3) each of the other organizations complies with its governing statute in effecting the merger.

(b) Unless each constituent organization and the surviving organization are partnerships other than limited liability partnerships, a plan of merger must be in a record and must include:

(1) the name and form of each constituent organization;

(2) the name and form of the surviving organization and, if the surviving organization is to be created by the merger, a statement to that effect;

(3) the terms and conditions of the merger, including the manner and basis for converting the interests in each constituent organization into any combination of money, interests in the surviving organization, and other consideration;

(4) if the surviving organization is to be created by the merger, the surviving organization’s organizational documents that are proposed to be in a record; and

(5) if the surviving organization is not to be created by the merger, any amendments to be made by the merger to the surviving organization’s organizational documents that are, or are proposed to be, in a record.

(a) A partnership may be converted to a limited partnership pursuant to this section.

(b) The terms and conditions of a conversion of a partnership to a limited partnership must be approved by all of the partners or by a number or percentage specified for conversion in the partnership agreement.

(c) After the conversion is approved by the partners, the partnership shall file a certificate of limited partnership in the jurisdiction in which the limited partnership is to be formed. The certificate must include:

(1) a statement that the partnership was converted to a limited partnership from a partnership;

(2) its former name; and

(3) a statement of the number of votes cast by the partners for and against the conversion and, if the vote is less than unanimous, the number or percentage required to approve the conversion under the partnership agreement.

(d) The conversion takes effect when the certificate of limited partnership is filed or at any later date specified in the certificate.

(e) A general partner who becomes a limited partner as a result of the conversion remains liable as a general partner for an obligation incurred by the partnership before the conversion takes effect. If the other party to a transaction with the limited partnership reasonably believes when entering the transaction that the limited partner is a general partner, the limited partner is liable for an obligation incurred by the limited partnership within 90 days after the conversion takes effect. The limited partner’s liability for all other obligations of the limited partnership incurred after the conversion takes effect is that of a limited partner as provided in the [State Limited Partnership Act].

 

 

 

SECTION 903. ACTION ON PLAN OF MERGER BY CONSTITUENT PARTNERSHIPCONVERSION OF LIMITED PARTNERSHIP TO PARTNERSHIP.

(a) Subject to Section 914, a plan of merger must be consented to by all the partners of a constituent partnership.

(b) Subject to Section 914 and any contractual rights, after a merger is approved, and at any time before articles of merger are delivered to the [Secretary of State] for filing under Section 904, a constituent partnership may amend the plan or abandon the merger:

(1) as provided in the plan; or

(2) except as otherwise prohibited in the plan, with the same consent as was required to approve the plan.

(a) A limited partnership may be converted to a partnership pursuant to this section.

(b) Notwithstanding a provision to the contrary in a limited partnership agreement, the terms and conditions of a conversion of a limited partnership to a partnership must be approved by all of the partners.

(c) After the conversion is approved by the partners, the limited partnership shall cancel its certificate of limited partnership.

(d) The conversion takes effect when the certificate of limited partnership is canceled.

(e) A limited partner who becomes a general partner as a result of the conversion remains liable only as a limited partner for an obligation incurred by the limited partnership before the conversion takes effect.  Except as otherwise provided in Section 306, the partner is liable as a general partner for an obligation of the partnership incurred after the conversion takes effect.

 

SECTION 904. FILINGS REQUIRED AND PERMITTED FOR MERGER; EFFECTIVE DATEEFFECT OF CONVERSION; ENTITY UNCHANGED.

(a) After each constituent organization has approved a merger, articles of merger must be signed on behalf of:

(1) each constituent partnership, as provided in Section 105, unless the merger is only between or among general partnerships, none of which is a limited liability partnership, and the surviving organization will be a general partnership other than a limited liability partnership; and

(2) each other constituent organization, as provided in its governing statute.

(b) Articles of merger under this section must include:

(1) the name and form of each constituent organization and the jurisdiction of its governing statute;

(2) the name and form of the surviving organization, the jurisdiction of its governing statute, and, if the surviving organization is created by the merger, a statement to that effect;

(3) the date the merger is effective under the governing statute of the surviving organization;

(4) if the surviving organization is to be created by the merger:

(A) if it will be a limited liability partnership, the limited liability partnership’s statement of qualification; or

(B) if it will be an organization other than a limited liability partnership, the organizational document that creates the organization that is in a public record;

(5) if the surviving organization preexists the merger, any amendments provided for in the plan of merger for the organizational document that created the organization that are in a public record;

(6) a statement as to each constituent organization that the merger was approved as required by the organization’s governing statute;

(7) if the surviving organization is a foreign organization not authorized to transact business in this state, the street and mailing addresses of an office that the [Secretary of State] may use for the purposes of Section 905(b); and

(8) any additional information required by the governing statute of any constituent organization.

(c) Each constituent partnership that is a limited liability partnership shall, and each constituent partnership that is not a limited liability partnership may, may deliver the articles of merger for filing in the office of the [Secretary of State].

(d) A merger becomes effective under this [article]:

(1) if the surviving organization is a partnership, upon the later of:

(A) compliance with subsection (c); or

(B) as specified in the articles of merger; or

(2) if the surviving organization is not a partnership, as provided by the governing statute of the surviving organization.

(a)   partnership or limited partnership that has been converted pursuant to this [article] is for all purposes the same entity that existed before the conversion.

(b) When a conversion takes effect:

(1) all property owned by the converting partnership or limited partnership remains vested in the converted entity;

(2) all obligations of the converting partnership or limited partnership continue as obligations of the converted entity; and

(3) an action or proceeding pending against the converting partnership or limited partnership may be continued as if the conversion had not occurred.

 

SECTION 905. EFFECT OF MERGERMERGER OF PARTNERSHIPS.

(a) When a merger becomes effective:

(1) the surviving organization continues or comes into existence;

(2) each constituent organization that merges into the surviving organization ceases to exist as a separate entity;

(3) all property owned by each constituent organization that ceases to exist vests in the surviving organization;

(4) all debts, obligations, or other liabilities of each constituent organization that ceases to exist continue as debts, obligations, or other liabilities of the surviving organization;

(5) an action or proceeding pending by or against any constituent organization that ceases to exist may be continued as if the merger had not occurred;

(6) except as prohibited by other law, all of the rights, privileges, immunities, powers, and purposes of each constituent organization that ceases to exist vest in the surviving organization;

(7) except as otherwise provided in the plan of merger, the terms and conditions of the plan of merger take effect; and

(8) except as otherwise agreed, if a constituent partnership ceases to exist, the merger does not dissolve the partnership for the purposes of [Article] 8;

(9) if the surviving organization is created by the merger:

(A) if it is a partnership, the partnership is formed upon approval of and on the date specified in the plan of merger;

(B) if it is a limited liability partnership, the partnership is formed and the statement of qualification takes effect after filing of the articles of merger by the secretary of state and upon the filing of the statement of qualification pursuant to section 1001 or on the date provided therein, whichever is later; or

(C) if it is an organization other than a partnership, the organizational document that creates the organization becomes effective; and

(10) if the surviving organization preexisted the merger, any amendments provided for in the articles of merger for the organizational document that created the organization become effective.

(b) A surviving organization that is a foreign organization consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability owed by a constituent organization, if before the merger the constituent organization was subject to suit in this state on the debt, obligation, or other liability. A surviving organization that is a foreign organization and not authorized to transact business in this state appoints the [Secretary of State] as its agent for service of process for the purposes of enforcing a debt, obligation, or other liability under this subsection. Service of any process, notice, or demand on the [Secretary of State] as agent for a surviving organization that is a foreign organization may be made by delivering to the Secretary of State duplicate copies of the process, notice, or demand. If a process, notice, or demand is served upon the [Secretary of State], the [Secretary of State] shall forward one of the copies by registered or certified mail, return receipt requested, to the organization at its registered office. Service is effected under this subsection at the earliest of:

(1)       the date the surviving organization receives the process, notice, or demand;

(2)       the date shown on the return receipt, if signed on behalf of the organization; or

(3)       five days after the process, notice, or demand is deposited with the United States Postal Service, if correctly addressed and with sufficient postage.

(a) Pursuant to a plan of merger approved as provided in subsection (c), a partnership may be merged with one or more partnerships or limited partnerships.

(b) The plan of merger must set forth:

(1) the name of each partnership or limited partnership that is a party to the merger;

(2) the name of the surviving entity into which the other partnerships or limited partnerships will merge;

(3) whether the surviving entity is a partnership or a limited partnership and the status of each partner;

(4) the terms and conditions of the merger;

(5) the manner and basis of converting the interests of each party to the merger into interests or obligations of the surviving entity, or into money or other property in whole or part; and

(6) the street address of the surviving entity’s chief executive office.

(c) The plan of merger must be approved:

(1) in the case of a partnership that is a party to the merger, by all of the partners, or a number or percentage specified for merger in the partnership agreement; and

(2) in the case of a limited partnership that is a party to the merger, by the vote required for approval of a merger by the law of the State or foreign jurisdiction in which the limited partnership is organized and, in the absence of such a specifically applicable law, by all of the partners, notwithstanding a provision to the contrary in the partnership agreement.

(d) After a plan of merger is approved and before the merger takes effect, the plan may be amended or abandoned as provided in the plan.

(e) The merger takes effect on the later of:

(1) the approval of the plan of merger by all parties to the merger, as provided in subsection (c);

(2) the filing of all documents required by law to be filed as a condition to the effectiveness of the merger; or

(3) any effective date specified in the plan of merger.

 

 

 

 

SECTION 906. CONVERSIONEFFECT OF MERGER.

(a) An organization other than a partnership or a foreign partnership may convert to a partnership, and a partnership may convert to an organization other than a foreign partnership pursuant to this section, sections 907 through 909, and a plan of conversion, if:

(1) the other organization’s governing statute authorizes the conversion;

(2) the conversion is not prohibited by the law of the jurisdiction that enacted the other organization’s governing statute; and

(3) the other organization complies with its governing statute in effecting the conversion.

(b) A plan of conversion must be in a record and must include:

(1) the name and form of the organization before conversion;

(2) the name and form of the organization after conversion;

(3) the terms and conditions of the conversion, including the manner and basis for converting interests in the converting organization into any combination of money, interests in the converted organization, and other consideration; and

(4) the organizational documents of the converted organization that are, or are proposed to be, in a record.

(a) When a merger takes effect:

(1) the separate existence of every partnership or limited partnership that is a party to the merger, other than the surviving entity, ceases;

(2) all property owned by each of the merged partnerships or limited partnerships vests in the surviving entity;

(3) all obligations of every partnership or limited partnership that is a party to the merger become the obligations of the surviving entity; and

(4) an action or proceeding pending against a partnership or limited partnership that is a party to the merger may be continued as if the merger had not occurred, or the surviving entity may be substituted as a party to the action or proceeding.

(b) The [Secretary of State] of this State is the agent for service of process in an action or proceeding against a surviving foreign partnership or limited partnership to enforce an obligation of a domestic partnership or limited partnership that is a party to a merger.  The surviving entity shall promptly notify the [Secretary of State] of the mailing address of its chief executive office and of any change of address.  Upon receipt of process, the [Secretary of State] shall mail a copy of the process to the surviving foreign partnership or limited partnership.

(c) A partner of the surviving partnership or limited partnership is liable for:

(1) all obligations of a party to the merger for which the partner was personally liable before the merger;

(2) all other obligations of the surviving entity incurred before the merger by a party to the merger, but those obligations may be satisfied only out of property of the entity; and

(3) except as otherwise provided in Section 306, all obligations of the surviving entity incurred after the merger takes effect, but those obligations may be satisfied only out of property of the entity if the partner is a limited partner.

(d) If the obligations incurred before the merger by a party to the merger are not satisfied out of the property of the surviving partnership or limited partnership, the general partners of that party immediately before the effective date of the merger shall contribute the amount necessary to satisfy that party’s obligations to the surviving entity, in the manner provided in Section 807 or in the [Limited Partnership Act] of the jurisdiction in which the party was formed, as the case may be, as if the merged party were dissolved.

(e) A partner of a party to a merger who does not become a partner of the surviving partnership or limited partnership is dissociated from the entity, of which that partner was a partner, as of the date the merger takes effect.  The surviving entity shall cause the partner’s interest in the entity to be purchased under Section 701 or another statute specifically applicable to that partner’s interest with respect to a merger.  The surviving entity is bound under Section 702 by an act of a general partner dissociated under this subsection, and the partner is liable under Section 703 for transactions entered into by the surviving entity after the merger takes effect.

 

SECTION 907. ACTION ON PLAN OF CONVERSION BY CONVERTING PARTNERSHIPSTATEMENT OF MERGER.

(a) Subject to Section 914, a plan of conversion must be consented to by all the partners of a converting partnership.

(b) Subject to Section 914 and any contractual rights, after a conversion is approved, and at any time before articles of conversion are delivered to the Secretary of State for filing under Section 908, a converting partnership may amend the plan or abandon the conversion:

(1) as provided in the plan; or

(2) except as otherwise prohibited in the plan, by the same consent as was required to approve the plan.

(a) After a merger, the surviving partnership or limited partnership may file a statement that one or more partnerships or limited partnerships have merged into the surviving entity.

(b) A statement of merger must contain:

(1) the name of each partnership or limited partnership that is a party to the merger;

(2) the name of the surviving entity into which the other partnerships or limited partnership were merged;

(3) the street address of the surviving entity’s chief executive office and of an office in this State, if any; and

(4) whether the surviving entity is a partnership or a limited partnership.

(c) Except as otherwise provided in subsection (d), for the purposes of Section 302, property of the surviving partnership or limited partnership which before the merger was held in the name of another party to the merger is property held in the name of the surviving entity upon filing a statement of merger.

(d) For the purposes of Section 302, real property of the surviving partnership or limited partnership which before the merger was held in the name of another party to the merger is property held in the name of the surviving entity upon recording a certified copy of the statement of merger in the office for recording transfers of that real property.

(e) A filed and, if appropriate, recorded statement of merger, executed and declared to be accurate pursuant to Section 105(c), stating the name of a partnership or limited partnership that is a party to the merger in whose name property was held before the merger and the name of the surviving entity, but not containing all of the other information required by subsection (b), operates with respect to the partnerships or limited partnerships named to the extent provided in subsections (c) and (d).

 

SECTION 908. FILINGS REQUIRED FOR CONVERSION; EFFECTIVE DATENONEXCLUSIVE.

(a) After a plan of conversion is approved:

(1) a converting limited liability partnership shall deliver to the Secretary of State for filing articles of conversion, which must be signed as provided in Section 105 and must include;

(A) a statement that the limited liability partnership has been converted into another organization;

(B) the name and form of the converted organization and the jurisdiction of its governing statute;

(C) the date the conversion is effective under the governing statute of the converted organization;

(D) a statement that the conversion was approved as required by this act;

(E) a statement that the conversion was approved as required by the governing statute of the converted organization; and

(F) if the converted organization is a foreign organization not authorized to transact business in this state, the street and mailing addresses of an office which the Secretary of State may use for the purposes of Section 909(c); and

(2) if the converting organization is not a converting partnership or limited liability partnership, the converting organization shall deliver to the Secretary of State for filing a statement of conversion, which must include:

(A) a statement that the converted organization was converted from another organization, and whether the converted organization is a partnership or a limited liability partnership;

(B) the name and form of that converting organization and the jurisdiction of its governing statute; and

(C) a statement that the conversion was approved in a manner that complied with the converting organization’s governing statute.

(b) A conversion becomes effective:

(1) if the converted organization is a partnership, as provided in the plan or statement of conversion;

(2) if the converted organization is a limited liability partnership, after  the filing of the statement of conversion required by subsection (a)(2) and upon the filing of the statement of qualification pursuant to section 1001 with the [Secretary of State], or on the date provided therein, whichever is later; or

(3) if the converted organization is not a partnership or limited liability partnership, as provided by the governing statute of the converted organization.

 

SECTION 909. EFFECT OF CONVERSION.

(a) An organization that has been converted pursuant to this [article] is for all purposes the same entity that existed before the conversion.

(b) When a conversion takes effect:

(1) all property owned by the converting organization remains vested in the converted organization;

(2) all debts, obligations, or other liabilities of the converting organization continue as debts, obligations, or other liabilities of the converted organization;

(3) an action or proceeding pending by or against the converting organization may be continued as if the conversion had not occurred;

(4) except as prohibited by law other than this [act], all of the rights, privileges, immunities, powers, and purposes of the converting organization remain vested in the converted organization;

(5) except as otherwise provided in the plan of conversion, the terms and conditions of the plan of conversion take effect; and

(6) except as otherwise agreed, the conversion does not dissolve a converting partnership for the purposes of [Article] 8.

(c) A converted organization that is a foreign organization consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability for which the converting partnership or limited liability partnership is liable if, before the conversion, the converting partnership or limited liability partnership was subject to suit in this state on the debt, obligation, or other liability. A converted organization that is a foreign organization and not authorized to transact business in this state appoints the [Secretary of State] as its agent for service of process for purposes of enforcing a debt, obligation, or other liability under this subsection. Service on the [Secretary of State] under this subsection of any process, notice, or demand as agent for a converted organization that is a foreign organization may be made by delivering to the [Secretary of State] duplicate copies of the process, notice, or demand. If a process, notice, or demand is served upon the [Secretary of State], the [Secretary of State] shall forward one of the copies by registered or certified mail, return receipt requested, to the organization at its registered office. Service is effected under this subsection at the earliest of:

(1)       the date the converted organization receives the process, notice, or demand;

(2)       the date shown on the return receipt, if signed on behalf of the organization; or

(3)       five days after the process, notice, or demand is deposited with the United States Postal Service, if correctly addressed and with sufficient postage.

 

SECTION 910. DOMESTICATION.

(a) A foreign limited liability partnership may become a limited liability partnership pursuant to this section, Sections 911 through 913, and a plan of domestication, if:

(1) the foreign limited liability partnership’s governing statute authorizes the domestication;

(2) the domestication is not prohibited by the law of the jurisdiction that enacted the governing statute; and

(3) the foreign limited liability partnership complies with its governing statute in effecting the domestication.

(b) A limited liability partnership may become a foreign limited liability partnership pursuant to this section, Sections 911 through 913, and a plan of domestication, if:

(1) the foreign limited liability partnership’s governing statute authorizes the domestication;

(2) the domestication is not prohibited by the law of the jurisdiction that enacted the governing statute; and

(3) the foreign limited liability partnership complies with its governing statute in effecting the domestication.

(c) A plan of domestication must be in a record and must include:

(1) the name of the domesticating limited liability partnership before domestication and the jurisdiction of its governing statute;

(2) the name of the domesticated limited liability partnership after domestication and the jurisdiction of its governing statute;

(3) the terms and conditions of the domestication, including the manner and basis for converting interests in the domesticating limited liability partnership into any combination of money, interests in the domesticated limited liability partnership, and other consideration; and

(4) the organizational documents of the domesticated company that are, or are proposed to be, in a record.

 

SECTION 911. ACTION ON PLAN OF DOMESTICATION BY DOMESTICATING PARTNERSHIP.

(a) A plan of domestication must be consented to:

(1) by all the partners, subject to Section 914, if the domesticating company is a limited liability partnership; and

(2) as provided in the domesticating company’s governing statute, if the company is a foreign limited liability partnership.

(b) Subject to any contractual rights, after a domestication is approved, and at any time before articles of domestication are delivered to the [Secretary of State] for filing under Section 912, a domesticating limited liability partnership may amend the plan or abandon the domestication:

(1) as provided in the plan; or

(2) except as otherwise prohibited in the plan, by the same consent as was required to approve the plan.

 

SECTION 912. FILINGS REQUIRED FOR DOMESTICATION; EFFECTIVE DATE.

(a) After a plan of domestication is approved, a domesticating limited liability partnership shall deliver to the [Secretary of State] for filing articles of domestication, which must include:

(1) a statement, as the case may be, that the limited liability partnership has been domesticated from or into another jurisdiction;

(2) the name of the domesticating limited liability partnership and the jurisdiction of its governing statute;

(3) the name of the domesticated limited liability partnership and the jurisdiction of its governing statute;

(4) the date the domestication is effective under the governing statute of the domesticated limited liability partnership;

(5) if the domesticating company was a limited liability partnership, a statement that the domestication was approved as required by this [act];

(6) if the domesticating limited liability partnership was a foreign limited liability partnership, a statement that the domestication was approved as required by the governing statute of the other jurisdiction; and

(7) if the domesticated limited liability partnership is a foreign limited liability partnership not authorized to transact business in this state, the street and mailing addresses of an office that the Secretary of State may use for the purposes of Section 913(b).

(b) A domestication becomes effective:

(1) upon the filing of the statement of qualification pursuant to section 1001 or on the date provided therein, whichever is later, if the domesticated partnership is a limited liability partnership; and

(2) according to the governing statute of the domesticated limited liability partnership, if it is a foreign limited liability partnership.

 

SECTION 913. EFFECT OF DOMESTICATION.

(a) When a domestication takes effect:

(1) the domesticated limited liability partnership is for all purposes the limited liability partnership that existed before the domestication;

(2) all property owned by the domesticating limited liability partnership remains vested in the domesticated limited liability partnership;

(3) all debts, obligations, or other liabilities of the domesticating limited liability partnership continue as debts, obligations, or other liabilities of the domesticated limited liability partnership;

(4) an action or proceeding pending by or against a domesticating limited liability partnership may be continued as if the domestication had not occurred;

(5) except as prohibited by other law, all of the rights, privileges, immunities, powers, and purposes of the domesticating limited liability partnership remain vested in the domesticated limited liability partnership;

(6) except as otherwise provided in the plan of domestication, the terms and conditions of the plan of domestication take effect; and

(7) except as otherwise agreed, the domestication does not dissolve a domesticating limited liability partnership for the purposes of [Article] 8.

(b) A domesticated limited liability partnership that is a foreign limited liability partnership consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability owed by the domesticating limited liability partnership, if, before the domestication, the domesticating limited liability partnership was subject to suit in this state on the debt, obligation, or other liability. A domesticated limited liability partnership that is a foreign limited liability partnership and not authorized to transact business in this state appoints the [Secretary of State] as its agent for service of process for purposes of enforcing a debt, obligation, or other liability under this subsection. Service on the [Secretary of State] under this subsection of any process, notice, or demand as agent for a domesticated limited liability partnership that is a foreign limited liability partnership may be made by delivering to the [Secretary of State] duplicate copies of the process, notice, or demand. If a process, notice, or demand is served upon the [Secretary of State], the [Secretary of State] shall forward one of the copies by registered or certified mail, return receipt requested, to the organization at its registered office. Service is effected under this subsection at the earliest of:

(1)       the date the domesticated foreign limited liability partnership receives the process, notice, or demand;

(2)       the date shown on the return receipt, if signed on behalf of the limited liability partnership; or

(3)       five days after the process, notice, or demand is deposited with the United States Postal Service, if correctly addressed and with sufficient postage.

(c) If a limited liability partnership has adopted and approved a plan of domestication under Section 910 providing for the limited liability partnership to be domesticated in a foreign jurisdiction, a statement pursuant to section 1001(d) cancelling the limited liability partnership’s statement of qualification must be delivered to the [Secretary of State] for filing setting forth:

(1) the name of the limited liability partnership;

(2) a statement that the limited liability partnership’s statement of qualification is being cancelled in connection with the domestication of the limited liability partnership in a foreign jurisdiction;

(3) a statement the domestication was approved as required by this [act]; and

(4) the jurisdiction of formation of the domesticated foreign limited liability partnership.

 

SECTION 914. RESTRICTIONS ON APPROVAL OF MERGER, CONVERSION, AND DOMESTICATION.

(a) If a partner of a constituent or converting partnership, or domesticating limited liability partnership will have personal liability with respect to a surviving, converted, or domesticated organization, approval or amendment of a plan of merger, conversion, or domestication are ineffective without the consent of the partner, unless:

(1) the partnership’s partnership agreement provides for approval of a merger, conversion, or domestication with the consent of fewer than all the partners; and

(2) the partner has consented to the provision of the partnership agreement.

(b) A partner does not give the consent required by subsection (a) merely by consenting to a provision of the partnership agreement that permits the partnership agreement to be amended with the consent of fewer than all the partners.

 

SECTION 915. AMENDMENT OR ABANDONMENT OF PLAN OF MERGER, CONVERSION, DOMESTICATION.[54]

(a) A plan of merger, domestication, or conversation of a partnership may be amended, subject to Section 914:

(1) in the same manner as the plan was approved, if the plan does not provide for the manner in which it may be amended; or

(2) by the partners of the partnership in the manner provided in the plan, but a member that was entitled to vote on or consent to approval of the plan is entitled to vote on or consent to any amendment of the plan that will change:

(A) the amount or kind of interests, securities, obligations, rights to acquire interests or securities, cash, or other property, or any combination of the foregoing, to be received by the members of any party to the plan;

(B) the organizational documents of the surviving, converted, or domesticated organization that will be in effect immediately after the merger, conversion, or domestication becomes effective, except for changes that, under the governing statute of the organization, do not require approval of the persons considered by the governing statute to be owners of the organization; or

(C) any other terms or conditions of the plan, if the change would adversely affect the partner in any material respect.

(b) After a plan of merger, conversion, or domestication has been approved by a partnership and before a statement of merger, conversion, or domestication becomes effective, the plan may be abandoned:

(1) as provided in the plan; or

(2) unless prohibited by the plan, in the same manner as the plan was approved.

(c) If a plan of merger is abandoned after a statement of merger, conversion, or domestication has been filed with the [Secretary of State] and before the filing becomes effective, a statement of abandonment, signed on behalf of a constituent organization, converting organization, or domesticating organization, must be filed with the [Secretary of State] before the time the statement of merger, conversion, or domestication becomes effective. The statement of abandonment takes effect upon filing, and the merger, conversion, or domestication is abandoned and does not become effective. The statement of abandonment must contain:

(1) the name of each constituent organization that is authorized [registered] to do business in this state or whose governing statute is a statute of this statute;

(2) the date on which the statement of merger, conversion, or domestication was filed; and

(3) a statement that the merger, conversion, or domestication has been abandoned in accordance with this Section.

 

SECTION 916. [ARTICLE] NOT EXCLUSIVE. This [article] does not preclude an entity from being merged, converted, or domesticated under law other than this [act].

This [article] is not exclusive. Partnerships or limited partnerships may be converted or merged in any other manner provided by law.

[ARTICLE] 10

LIMITED LIABILITY PARTNERSHIP

 

SECTION 1001. STATEMENT OF QUALIFICATION.

(a) A partnership may become a limited liability partnership pursuant to this section.

(b) The terms and conditions on which a partnership becomes a limited liability partnership must be approved by the vote necessary to amend the partnership agreement except, in the case of a partnership agreement that expressly considers obligations to contribute to the partnership, the vote necessary to amend those provisions.

(c) After the approval required by subsection (b), a partnership may become a limited liability partnership by filing a statement of qualification. The statement must contain:

(1) the name of the partnership;

(2) the street address of the partnership’s chief executive office and, if different, the street address of an office in this State, if any;

(3) if the partnership does not have an office in this State, the name and street address of the partnership’s agent for service of process;[55]

(4) a statement that the partnership elects to be a limited liability partnership; and

(5) a deferred effective date, if any.

(d) The agent of a limited liability partnership for service of process must be an individual who is a resident of this State or other person authorized to do business in this State.[56]

(e) The status of a partnership as a limited liability partnership is effective on the later of the filing of the statement or a date specified in the statement. The status remains effective, regardless of changes in the partnership, until it is canceled pursuant to Section 105(d) or revoked pursuant to Section 1003.

(f) The status of a partnership as a limited liability partnership and the liability of its partners is not affected by errors or later changes in the information required to be contained in the statement of qualification under subsection (c).

(g) The filing of a statement of qualification establishes that a partnership has satisfied all conditions precedent to the qualification of the partnership as a limited liability partnership.

(h) An amendment or cancellation of a statement of qualification is effective when it is filed or on a deferred effective date specified in the amendment or cancellation.

 

SECTION 1001A.  CHANGE OF OFFICE OR AGENT FOR SERVICE OF PROCESS.[57]

(a) A partnership or foreign partnership may change its office, its agent for service of process, or the address of its agent for service of process by delivering to the [Secretary of State] for filing a statement of change containing:

(1) the name of the partnership;

(2) the street and mailing addresses of its current office;

(3) if the current office is to be changed, the street and mailing addresses of the new office;

(4) the name and street and mailing addresses of its current agent for service of process; and

(5) if the current agent for service of process or an address of the agent is to be changed, the new information.

(b) A statement of change is effective when filed by the [Secretary of State].

 

SECTION 1001B. RESIGNATION OF AGENT FOR SERVICE OF PROCESS.[58]

(a) To resign as an agent for service of process of a partnership or foreign partnership, the agent must deliver to the [Secretary of State] for filing a statement of resignation containing the partnership name and stating that the agent is resigning.

(b) The [Secretary of State] shall file a statement of resignation delivered under subsection (a) and mail or otherwise provide or deliver a copy to the office of the partnership or foreign partnership.

(c) An agency for service of process terminates on the earlier of:

(1) the 31st day after the [Secretary of State] files the statement of resignation;

(2) when a record designating a new agent for service of process is delivered to the [Secretary of State] for filing on behalf of the partnership and becomes effective.

 

 

SECTION 1001C. SERVICE OF PROCESS.[59]

(a) An agent for service of process appointed by a partnership or foreign partnership is an agent of the partnership for service of any process, notice, or demand required or permitted by law to be served on the partnership.

(b) If a partnership or foreign partnership does not appoint or maintain an agent for service of process in this state or the agent for service of process cannot with reasonable diligence be found at the agent’s street address, the [Secretary of State] is an agent of the company upon whom process, notice, or demand may be served.

(c) Service of any process, notice, or demand on the [Secretary of State] as agent for a partnership or foreign partnership may be made by delivering to the [Secretary of State] duplicate copies of the process, notice, or demand. If a process, notice, or demand is served on the [Secretary of State], the [Secretary of State] shall forward one of the copies by registered or certified mail, return receipt requested, to the company at its office.

(d) Service is effected under subsection (c) at the earliest of:

(1) the date the partnership or foreign partnership receives the process, notice, or demand;

(2) the date shown on the return receipt, if signed on behalf of the partnership; or

(3) five days after the process, notice, or demand is deposited with the United States Postal Service, if correctly addressed and with sufficient postage.

(e) The [Secretary of State] shall keep a record of each process, notice, and demand served pursuant to this section and record the time of, and the action taken regarding, the service.

(f) This section does not affect the right to serve process, notice, or demand in any other manner provided by law.

 

SECTION 1002. NAME. The name of a limited liability partnership must end with “Registered Limited Liability Partnership”, “Limited Liability Partnership”, “R.L.L.P.”, “L.L.P.”, “RLLP,” or “LLP”.

 

SECTION 1003. ANNUAL REPORT.[60]

(a) A limited liability partnership and a foreign limited liability partnership authorized to transact business in this State shall file an annual report in the office ofdeliver to the [Secretary of State] for filing and annual report that sets forth:which contains:

(1) the name of the limited liability partnership and the State or other jurisdiction under whose laws the foreign limited liability partnership is formed;

(2) the street and mailing address of the partnership’s chief executive office and, if different, the street address of an office of the partnership in this State, if any; and

(3) if the partnership does not have an office in this State, the name and street address of the partnership’s current agent for service of process.

(b) Information in an annual report under this section must be current as of the date the report is signed on behalf of the limited liability partnership or foreign limited liability company authorized to transact business in this State.

(c) The first annual report must be delivered to the [Secretary of State] after [January 1] and before [April 1] of the year following the calendar year in which a limited liability partnership was formed or a foreign limited liability partnership is authorized to do business in this state. Subsequent annual reports must be delivered to the [Secretary of State] after [January 1] and before [April 1] of each calendar year thereafterAn annual report must be filed between [January 1 and April 1] of each year following the calendar year in which a partnership files a statement of qualification or a foreign partnership becomes authorized to transact business in this State.

(d) If an annual report under this section does not contain the information required by subsection (b), the [Secretary of State] shall promptly notify the reporting limited liability partnership or foreign limited liability partnership in a record and return the report for correction.

(e) If an annual report under this section contains an address of an office or the name or address of an agent for service of process which differs from the information shown in the records of the [Secretary of State] immediately before the annual report becomes effective, the differing information in the annual report is considered a statement of change under Section 1001A.

(c) The [Secretary of State] may revoke the statement of qualification of a partnership that fails to file an annual report when due or pay the required filing fee. To do so, the [Secretary of State] shall provide the partnership at least 60 days’ written notice of intent to revoke the statement. The notice must be mailed to the partnership at its chief executive office set forth in the last filed statement of qualification or annual report. The notice must specify the annual report that has not been filed, the fee that has not been paid, and the effective date of the revocation. The revocation is not effective if the annual report is filed and the fee is paid before the effective date of the revocation.[61]

(d) A revocation under subsection (c) only affects a partnership’s status as a limited liability partnership and is not an event of dissolution of the partnership.

(e) A partnership whose statement of qualification has been revoked may apply to the [Secretary of State] for reinstatement within two years after the effective date of the revocation.  The application must state:

(1) the name of the partnership and the effective date of the revocation; and

(2) that the ground for revocation either did not exist or has been corrected.

(f) A reinstatement under subsection (e) relates back to and takes effect as of the effective date of the revocation, and the partnership’s status as a limited liability partnership continues as if the revocation had never occurred.

[ARTICLE] 11

FOREIGN LIMITED LIABILITY PARTNERSHIP

 

SECTION 1101. LAW GOVERNING FOREIGN LIMITED LIABILITY PARTNERSHIP.[62]

(a) The law under which a foreign limited liability partnership is formed governs:

(1) the internal affairs of the limited liability partnership; and

(2) the liability of a partner as partner for the debts, obligations, or other liabilities of the partnership.[63]

relations among the partners and between the partners and the partnership and the liability of partners for obligations of the partnership.

(b) A foreign limited liability company may not be precluded from registering to do business in this state because of any difference between the law of the limited liability partnership’s jurisdiction of formation and the laws of this stateA foreign limited liability partnership may not be denied a statement of foreign qualification by reason of any difference between the law under which the partnership was formed and the law of this State.

(c) Registration as a foreign limited liability partnership to do business in this state does not authorize that partnership to engage in any business or exercise any power that a limited liability partnership may not engage in or exercise in this stateA statement of foreign qualification does not authorize a foreign limited liability partnership to engage in any business or exercise any power that a partnership may not engage in or exercise in this State as a limited liability partnership.

 

SECTION 1102.  STATEMENT OF FOREIGN QUALIFICATIONREGISTRATION TO DO BUSINESS IN THIS STATE.[64]

(a) A foreign limited liability partnership may not do business in this state until it registers with the [Secretary of State] under this [article].

(b) A foreign limited liability partnership doing business in this state may not maintain an action or proceeding in this state unless it has registered to do business in this state.

(c) The failure of a foreign limited liability partnership to register to do business in this state does not impair the validity of a contract or act of the foreign limited liability partnership or preclude it from defending an action or proceeding in this state.

(d) A partner of a foreign limited liability partnership is not liable for the debts, obligations, or other liabilities of a limited liability partnership solely because the partnership transacted business in this state without registering to do business in this state.

(e) Section 1101(a) and (b) apply even if a foreign limited liability partnership fails to register under this [article].

 

SECTION 1103. APPLICATION FOR CERTIFICATE OF AUTHORITY.[65] To register to do business in this state, a foreign limited liability partnership must deliver a foreign registration statement to the [Secretary of State] for filing. The application must set forth:

(1) the name of the partnership and, if the name does not comply with Section 1002, an alternate name adopted pursuant to Section ___;

(2) the name of the jurisdiction under whose law the partnership is formed;

(3) the street and mailing addresses of the partnership’s office and, if the law of the jurisdiction under which the partnership is formed requires the partnership to maintain an office in that jurisdiction, the street and mailing addresses of the required office; and

(4) the name and street and mailing addresses of the partnership” initial agent for service of process in this state.

 

SECTION 1104. AMENDMENT OF FOREIGN REGISTRATION STATEMENT.[66]

(a) A foreign limited liability partnership registered to do business in this state shall deliver to the [Secretary of State] for filing an amendment to its foreign registration statement if there is a change in:

(1) the name of the entity;

(2) the name the jurisdiction under whose law the limited liability partnership is formed;

(3) the address required by Section 1103; and

(4) the name and street and mailing addresses of the limited liability partnership’s agent for service of process in this state.

(b) The requirements of Section 1103 for an original foreign registration statement apply to an amendment of a foreign registration statement under this section.

 

SECTION 1104. ACTIVITIES NOT CONSTITUTING DOING BUSINESS.[67]

(a) Activities of a foreign limited liability partnership which do not constitute doing business in this state under the meaning of this [article] include:

(1) maintaining, defending, mediating, arbitrating or settling an action or proceeding;

(2) carrying on any activity concerning its internal affairs, including holding meetings of its members or managers;

(3) maintaining accounts in financial institutions;

(4) maintaining offices or agencies for the transfer, exchange, and registration of the company’s membership interests or maintaining trustees or depositories with respect to those membership interests;

(5) selling through independent contractors;

(6) soliciting or obtaining orders, by any means if the orders require acceptance outside this state before they become contracts;

(7) creating or acquiring indebtedness, mortgages, or security interests in property;

(8) securing or collecting debts or enforcing mortgages or other security interests in property securing the debts and holding, protecting, or maintaining property;

(9) conducting an isolated transaction that is not in the course of similar transactions; and

(10) doing business in interstate commerce.

(b) This section does not apply in determining the contacts or activities that may subject a foreign limited liability partnership to service of process, taxation, or regulation under law of this state other than this [act].

SECTION 1105. NONCOMPLYING NAME OF FOREIGN LIMITED LIABILITY PARTNERSHIP.

(a) A foreign limited liability partnership whose name does not comply with Section 1002 may not register to do business in this state until it adopts, for the purpose of doing business in this state, an alternate name that complies with Section 1002. A foreign limited liability partnership that registers under an alternate name under this subsection need not comply with [this state’s fictitious or assumed name statute]. After registering to do business in this state with an alternate name, a foreign limited liability partnership may do business in this state under:

(1) the alternate name;

(2) the name in the jurisdiction under whose law the partnership is formed, with that jurisdiction clearly identified; or

(3) an assumed or fictitious name the partnership is authorized to use under [this state’s fictitious or assumed name statute].

(b) If a foreign limited liability partnership registered to transact business in this state changes its name to one that does not comply with Section 1102, it may not do business in this state until it complies with subsection (a) by amending its registration to adopt an alternate name that complies with Section 1102.

 

SECTION 1106. TERMINATION OF REGISTRATION.[68]

(a) The registration of a foreign limited liability partnership to do business in this state may be terminated by the [Secretary of State] in the manner provided in subsections (b) and (c) if the partnership does not:

(1) pay, not later than 60 days after the due date, any fee, tax, or penalty required to be paid to the [Secretary of State] under this [act] or law other than this [act];

(2) deliver, not later than 60 days after the due date, its annual report required under Section 1003;

(3) appoint and maintain an agent for service of process as required by Section 1003; or

(4) deliver for filing a statement of a change under Section 1003 within 30 days after a change has occurred in the name or address of the agent.

(b) The [Secretary of State] may terminate the registration of a foreign limited liability partnership by filing a notice of termination or noting the termination in the record of the [Secretary of State] and by by delivering a copy of the notice or the information in the notation to the partnership’s agent for service of process in this state, or if the partnership does not appoint and maintain a proper agent in this state, to the partnership’s office. The notice must state:

(1) the effective date of the termination, which must be at least [60 days] after the date the [Secretary of State] delivers the copy; and

(2) the grounds for termination under subsection (a).

(c) The authority of a foreign limited liability partnership to do business in this state ceases on the effective date of the notice of termination unless before that date the partnership cures each ground for termination stated in the notice filed under subsection (b). If the partnership cures each ground, the [Secretary of State] shall file a record so stating.

 

SECTION 1107. WITHDRAWAL OF REGISTRATION OF REGISTERED FOREIGN ENTITY.[69]

(a) A foreign entity registered to do business in this state may withdraw its registration by delivering a statement of withdrawal to the [Secretary of State] for filing. The statement of withdrawal must set forth:

(1) the name of the foreign entity and the name of the jurisdiction under whose

law it is formed;

(2) that the entity is not doing business in this state and that it withdraws its

registration to do business in this state;

(3) that the entity revokes the authority of its registered agent to accept service on its behalf; and

(4) an address to which service of process may be made under subsection (b).

(b) After the withdrawal of the registration of an entity, service of process in any

proceeding based on a cause of action arising during the time it was registered to do business in this state may be made by registered or certified mail, return receipt requested, or by similar commercial delivery service, addressed to the entity at its principal office in accordance with any applicable judicial rules and procedures and with the envelope conspicuously marked “important legal notice” or with words of similar import. Service is effected under this subsection on the earliest of:

(1) the date the entity receives the mail or delivery by a similar commercial delivery service;

(2) the date shown on the return receipt, if signed on behalf of the entity; or

(3) five days after its deposit with the United States Postal Service, or similar commercial delivery service, if correctly addressed and with sufficient postage or payment.

(c) If process, notice, or demand cannot be served on a foreign limited liability partnership pursuant to subsection (b), service may be made by handing a copy to a manager, clerk, or other individual in charge of any regular place of business or activity of the partnership if the individual served is not a plaintiff in the action.

(a) Before transacting business in this State, a foreign limited liability partnership must file a statement of foreign qualification. The statement must contain:

(1) the name of the foreign limited liability partnership which satisfies the requirements of the State or other jurisdiction under whose law it is formed and ends with “Registered Limited Liability Partnership”, “Limited Liability Partnership”, “R.L.L.P.”, “L.L.P.”, “RLLP,” or “LLP”;

(2) the street address of the partnership’s chief executive office and, if different, the street address of an office of the partnership in this State, if any;

(3) if there is no office of the partnership in this State, the name and street address of the partnership’s agent for service of process; and

(4) a deferred effective date, if any.

(b) The agent of a foreign limited liability company for service of process must be an individual who is a resident of this State or other person authorized to do business in this State.

(c) The status of a partnership as a foreign limited liability partnership is effective on the later of the filing of the statement of foreign qualification or a date specified in the statement.  The status remains effective, regardless of changes in the partnership, until it is canceled pursuant to Section 105(d) or revoked pursuant to Section 1003.

(d) An amendment or cancellation of a statement of foreign qualification is effective when it is filed or on a deferred effective date specified in the amendment or cancellation.

 

SECTION 1103. EFFECT OF FAILURE TO QUALIFY.

(a) A foreign limited liability partnership transacting business in this State may not maintain an action or proceeding in this State unless it has in effect a statement of foreign qualification.

(b) The failure of a foreign limited liability partnership to have in effect a statement of foreign qualification does not impair the validity of a contract or act of the foreign limited liability partnership or preclude it from defending an action or proceeding in this State.

(c) A limitation on personal liability of a partner is not waived solely by transacting business in this State without a statement of foreign qualification.

(d) If a foreign limited liability partnership transacts business in this State without a statement of foreign qualification, the [Secretary of State] is its agent for service of process with respect to a right of action arising out of the transaction of business in this State.

 

SECTION 1104. ACTIVITIES NOT CONSTITUTING TRANSACTING BUSINESS.

(a) Activities of a foreign limited liability partnership which do not constitute transacting business for the purpose of this [article] include:

(1) maintaining, defending, or settling an action or proceeding;

(2) holding meetings of its partners or carrying on any other activity concerning its internal affairs;

(3) maintaining bank accounts;

(4) maintaining offices or agencies for the transfer, exchange, and registration of the partnership’s own securities or maintaining trustees or depositories with respect to those securities;

(5) selling through independent contractors;

(6) soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this State before they become contracts;

(7) creating or acquiring indebtedness, with or without a mortgage, or other security interest in property;

(8) collecting debts or foreclosing mortgages or other security interests in property securing the debts, and holding, protecting, and maintaining property so acquired;

(9) conducting an isolated transaction that is completed within 30 days and is not one in the course of similar transactions; and

(10) transacting business in interstate commerce.

(b) For purposes of this [article], the ownership in this State of income-producing real property or tangible personal property, other than property excluded under subsection (a), constitutes transacting business in this State.

(c) This section does not apply in determining the contacts or activities that may subject a foreign limited liability partnership to service of process, taxation, or regulation under any other law of this State.

 

SECTION 1108. ACTION BY [ATTORNEY GENERAL]. The [Attorney General] may maintain an action to restrain a foreign limited liability partnership from transacting business in this State in violation of this [article].

[ARTICLE] 12

MISCELLANEOUS PROVISIONS

 

SECTION 1201. UNIFORMITY OF APPLICATION AND CONSTRUCTION. In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.This [Act] shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this [Act] among States enacting it.

 

SECTION 1202. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT. This [act] modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b).SECTION 1202. SHORT TITLE. This [Act] may be cited as the Uniform Partnership Act (1997).

 

SECTION 1203. SEVERABILITY CLAUSE. If any provision of this [Act] or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this [Act] which can be given effect without the invalid provision or application, and to this end the provisions of this [Act] are severable.

 

SECTION 1204. EFFECTIVE DATE. This [Act] takes effect . . . . . . . . . . . . . .

 

SECTION 1205. REPEALS. Effective January 1, ___, the following acts and parts of acts are repealed: [the State Partnership Act as amended and in effect immediately before the effective date of this [Act]].

 

SECTION 12036. TO EXISTING RELATIONSHIPSAPPLICABILITY.

(a) Before [all-inclusive date], this [act] governs only:

(1) a partnership formed on or after [the effective date of this act]; and

(2) a partnership formed before [the effective date of this act] which elects, in the manner provided in its partnership agreement or by law for amending the partnership agreement, to be subject to this [act].

(b) On and after [all-inclusive date] this [act] governs all partnerships.

(a) Before January 1, ___, this [Act] governs only a partnership formed:

(1) after the effective date of this [Act], except a partnership that is continuing the business of a dissolved partnership under [Section 41 of the superseded Uniform Partnership Act]; and

(2) before the effective date of this [Act], that elects, as provided by subsection (c), to be governed by this [Act].

(b)  On and after January 1, ___, this [Act] governs all partnerships.

(c) Before January 1, ___, a partnership voluntarily may elect, in the manner provided in its partnership agreement or by law for amending the partnership agreement, to be governed by this [Act]. The provisions of this [Act] relating to the liability of the partnership’s partners to third parties apply to limit those partners’ liability to a third party who had done business with the partnership within one year before the partnership’s election to be governed by this [Act] only if the third party knows or has received a notification of the partnership’s election to be governed by this [Act].

 

SECTION 12047. SAVINGS CLAUSE. This [Act] does not affect an action commenced, or proceeding commenced brought, or right accrued before this [Act] takes effect.

 

 [Sections 1208 through 1211 are necessary only for jurisdictions adopting Uniform Limited Liability Partnership Act Amendments after previously adopting Uniform Partnership Act (1994)]

 

SECTION 12058. EFFECTIVE DATE. These [Amendments] take effect on........................................ .

 

SECTION 12069. REPEALS. Effective January 1, __,[all-inclusive date], the following acts and parts of acts are repealed: [the Limited Liability Partnership amendments to the Statestate pPartnership aAct, as amended, and in effect immediately before the effective date of this actese [Amendments]].

 

SECTION 1210. APPLICABILITY.

(a) Before January 1, __, these [Amendments] govern only a limited liability partnership formed:

(1) on or after the effective date of these [Amendments], unless that partnership is continuing the business of a dissolved limited liability partnership; and

(2) before the effective date of these [Amendments], that elects, as provided by subsection (c), to be governed by these [Amendments].

(b) On and after January 1, __, these [Amendments] govern all partnerships.

(c) Before January 1, __, a partnership voluntarily may elect, in the manner provided in its partnership agreement or by law for amending the partnership agreement, to be governed by these [Amendments]. The provisions of these [Amendments] relating to the liability of the partnership’s partners to third parties apply to limit those partners’ liability to a third party who had done business with the partnership within one year before the partnership’s election to be governed by these [Amendments], only if the third party knows or has received a notification of the partnership’s election to be governed by these [Amendments].

(d) The existing provisions for execution and filing a statement of qualification of a limited liability partnership continue until either the limited liability partnership elects to have this [Act] apply or January 1, ____.

 

SECTION 1211. SAVINGS CLAUSE. These [Amendments] do not affect an action or proceeding commenced or right accrued before these [Amendments] take effect.