H*2532 Session 106 (1985-1986)
H*2532(Rat #0625, Act #0533 of 1986) General Bill, By D.M. Beasley,
J.F. Anderson, L.E. Gentry, T.E. Huff, E.C. Lewis, J.I. Rogers, Sheheen,
P.E. Short and J.H. Toal
A Bill to amend Chapter 42, Title 33, Code of Laws of South Carolina, 1976 ,
relating to the Uniform Limited Partnership Act so as to adopt a short form
notice filing certification instead of the long form certificate; expand the
information that must be kept on file in the place of business of the
partnership; expand the "safe harbor" powers of limited partners so as to
enable limited partners to bargain for greater voting powers; to provide that
additional general partners may be added with less than unanimous consent by
the other partners; to provide for a "safe harbor" procedure by which limited
partnerships may be merged; provide a "safe harbor" list of activities a
foreign corporation can conduct in this State without being required to
register as a foreign corporation; to require each limited partnership to keep
a current list and full name and last known mailing address instead of
business address of each partner; to clarify the use of the abgreviation LP or
L.P. by limited partnerships; to require foreign limited partnerships to
register in this State to use a name than can be used by a limited partnership
formed in this State; to provide a revised assumed name filing requirement
applicable to limited partnerships formed in this State; to establish a fee
schedule for filing limited partnership certificates and obtaining copies of
certificates and amendments; and to make technical modification and clarify
ambiguities; to amend Article 1 of Chapter 5 of Title 15 by adding Section
15-5-45 so as to authorize the partners of any partnership formed under the
laws of this State to sue and be sued in their own name; to amend Section
33-41-170, relating to the liability of partners of partnerships formed under
the Uniform Partnership Act, so as to delete the provisions which make
partners jointly and severally liable for everything chargeable to the
partnership under the provisions of Sections 33-41-350 (wrongful act or
ommission) and 33-41-360 (breach of trust) and jointly for all other duties
and obligations of the partnership and the provisions which authorize any
partner to enter into a separate obligation to perform a partnership contract;
and to estblish transition provisions which govern all limited partnerships
formed before June 27, 1984.-amended title
03/06/85 House Introduced and read first time HJ-1135
03/06/85 House Referred to Committee on Judiciary HJ-1136
05/01/85 House Committee report: Favorable with amendment
Judiciary HJ-2810
05/02/85 House Amended HJ-2906
05/02/85 House Read second time HJ-2906
05/03/85 House Read third time and sent to Senate HJ-2930
05/07/85 Senate Introduced and read first time SJ-1943
05/07/85 Senate Referred to Committee on Judiciary SJ-1943
05/13/86 Senate Committee report: Favorable with amendment
Judiciary SJ-2581
05/13/86 Senate Amended SJ-2607
05/13/86 Senate Read second time SJ-2674
05/13/86 Senate Ordered to third reading with notice of
amendments SJ-2674
05/14/86 Senate Read third time SJ-2701
05/14/86 Senate Returned SJ-2701
05/28/86 House Concurred in Senate amendment and enrolled HJ-3450
06/03/86 House Recalled from Legislative Council HJ-3580
06/03/86 House Reconsider vote whereby concurred HJ-3585
06/03/86 House Senate amendment amended HJ-3586
06/03/86 House Returned HJ-3587
06/03/86 Senate Concurred in House amendment and enrolled SJ-3511
06/05/86 Ratified R 625
06/18/86 Signed By Governor
06/26/86 Effective date 09/01/86
06/26/86 Act No. 533
06/26/86 See Act for exceptions to effective date
06/26/86 Copies available
(A533, R625, H2532)
AN ACT TO AMEND CHAPTER 42, TITLE 33, CODE OF LAWS OF SOUTH CAROLINA, 1976,
RELATING TO THE UNIFORM LIMITED PARTNERSHIP ACT SO AS TO ADOPT A SHORT FORM
NOTICE FILING CERTIFICATION INSTEAD OF THE LONG FORM CERTIFICATE; EXPAND THE
INFORMATION THAT MUST BE KEPT ON FILE IN THE PLACE OF BUSINESS OF THE
PARTNERSHIP; EXPAND THE "SAFE HARBOR" POWERS OF LIMITED PARTNERS SO AS
TO ENABLE LIMITED PARTNERS TO BARGAIN FOR GREATER VOTING POWERS; TO PROVIDE THAT
ADDITIONAL GENERAL PARTNERS MAY BE ADDED WITH LESS THAN UNANIMOUS CONSENT BY THE
OTHER PARTNERS; TO PROVIDE FOR A "SAFE HARBOR" PROCEDURE BY WHICH
LIMITED PARTNERSHIPS MAY BE MERGED; PROVIDE A "SAFE HARBOR" LIST OF
ACTIVITIES A FOREIGN CORPORATION CAN CONDUCT IN THIS STATE WITHOUT BEING REQUIRED
TO REGISTER AS A FOREIGN CORPORATION; TO REQUIRE EACH LIMITED PARTNERSHIP TO KEEP
A CURRENT LIST AND FULL NAME AND LAST KNOWN MAILING ADDRESS INSTEAD OF BUSINESS
ADDRESS OF EACH PARTNER; TO CLARIFY THE USE OF THE ABBREVIATION LP OR L.P. BY
LIMITED PARTNERSHIPS; TO REQUIRE FOREIGN LIMITED PARTNERSHIPS TO REGISTER IN THIS
STATE TO USE A NAME THAT CAN BE USED BY A LIMITED PARTNERSHIP FORMED IN THIS
STATE; TO PROVIDE A REVISED ASSUMED NAME FILING REQUIREMENT APPLICABLE TO LIMITED
PARTNERSHIPS FORMED IN THIS STATE; TO ESTABLISH A FEE SCHEDULE FOR FILING LIMITED
PARTNERSHIP CERTIFICATES AND OBTAINING COPIES OF CERTIFICATES AND AMENDMENTS; AND
TO MAKE TECHNICAL MODIFICATIONS AND CLARIFY AMBIGUITIES; TO AMEND ARTICLE 1 OF
CHAPTER 5 OF TITLE 15 BY ADDING SECTION 15-5-45 SO AS TO AUTHORIZE THE PARTNERS
OF ANY PARTNERSHIP FORMED UNDER THE LAWS OF THIS STATE TO SUE AND BE SUED IN
THEIR OWN NAME; TO AMEND SECTION 33-41-170, RELATING TO THE LIABILITY OF PARTNERS
OF PARTNERSHIPS FORMED UNDER THE UNIFORM PARTNERSHIP ACT, SO AS TO DELETE THE
PROVISIONS WHICH MAKE PARTNERS JOINTLY AND SEVERALLY LIABLE FOR EVERYTHING
CHARGEABLE TO THE PARTNERSHIP UNDER THE PROVISIONS OF SECTIONS 33-41-350
(WRONGFUL ACT OR OMISSION) AND 33-41-360 (BREACH OF TRUST) AND JOINTLY FOR ALL
OTHER DUTIES AND OBLIGATIONS OF THE PARTNERSHIP AND THE PROVISIONS WHICH
AUTHORIZE ANY PARTNER TO ENTER INTO A SEPARATE OBLIGATION TO PERFORM A
PARTNERSHIP CONTRACT; AND TO ESTABLISH TRANSITION PROVISIONS WHICH GOVERN ALL
LIMITED PARTNERSHIPS FORMED BEFORE JUNE 27, 1984.
Be it enacted by the General Assembly of the State of South Carolina:
Uniform Limited Partnership Act
SECTION 1. Chapter 42 of Title 33 of the 1976 Code, as amended, is further
amended to read:
"ARTICLE 1
GENERAL PROVISIONS
Section 33-42-10. Short title.
This chapter may be cited as the 'Uniform Limited Partnership Act'.
Comments
1. This chapter is derived from the Revised Uniform Limited Partnership Act
(RULPA) originally approved by the National Conference of Commissioners on
Uniform State Laws in August 1976 (referred to hereafter as the '1976 Uniform
Act') and revised in 1985 (referred to hereafter as the '1985 RULPA Amendments').
RULPA is intended to modernize the Uniform Limited Partnership Act of 1916
(referred to hereafter as the '1916 Uniform Act') while retaining the special
character of limited partnerships as compared with corporations. The draftsman
of a limited partnership agreement has a degree of flexibility in defining the
relations among the partners that is not available in the corporate form.
Moreover, the relationship among partners is consensual, and requires a degree
of privity that forces the general partner to seek approval of the partners
(sometimes unanimous approval) under circumstances that corporate management
would find impractical. The limited partnership was not intended to be an
alternative in all cases where corporate form is undesirable for tax or other
reasons, and the new act was not intended to make it so. The new act clarifies
many ambiguities and fills interstices in the prior uniform law by adding more
detailed language and mechanics. In addition, some important substantive changes
and additions have been made.
Article 1 provides a list of all of the definitions used in the act, integrates
the use of limited partnership names with corporate names, and provides for an
office and agent for service of process in the state of organization. All of
these provisions are new. Article 2 collects in one place all provisions dealing
with execution and filing of certificates of limited partnership and certificates
of amendment and cancellation. Articles 1 and 2 reflect an important change in
the statutory scheme, recognition that the basic document in any partnership,
including a limited partnership, is the partnership agreement. The certificate
of limited partnership is not a constitutive document (except in the sense that
it is a statutory prerequisite to creation of the limited partnership), and
merely reflects matters as to which creditors and other third parties should be
put on notice.
Article 3 deals with the single most difficult issue facing lawyers who use the
limited partnership form of organization: the powers and potential liabilities
of limited partners. Section 303 (Section 33-42-430) lists a number of activities
in which a limited partner may engage without being held to have so participated
in the control of the business that he assumes the liability of a general
partner. Moreover, it goes on to confine the liability of a limited partner who
merely steps over the line of participation in control to persons who actually
know of that participation in control. General liability for partnership debts
is imposed only on those limited partners who are, in effect, 'silent general
partners'. With that exception, the provisions of RULPA that impose liability on
a limited partner who has somehow permitted third parties to be misled to their
detriment as to the limited partner's true status confine that liability to those
who have actually been misled. The provisions relating to general partners are
collected in Article 4.
Article 5, the finance section, makes some important changes from the 1916
Uniform Act. The contribution of services and promises to contribute cash,
property, or services are now explicitly permitted as contributions. And those
who fail to perform promised services are required, in the absence of an
agreement to the contrary, to pay the value of the services stated in the
certificate of limited partnership.
A number of changes from the 1916 Uniform Act are made in Article 6, dealing
with distributions from and the withdrawal of partners from the partnership. For
example, Section 608 (Section 33-42-1080) creates a specific statute of
limitations on the right of a limited partnership to recover all or part of a
contribution that has been returned to a limited partner, whether to satisfy
creditors or otherwise.
The assignability of partnership interests is dealt with in considerable detail
in Article 7. The provisions relating to dissolution appear in Article 8, which,
among other things, imposes a new standard for seeking judicial dissolution of
a limited partnership.
One of the thorniest questions for those who operate limited partnerships in
more than one state has been the status of the partnership in a state other than
the state of organization. Neither existing case law nor administrative practice
makes it clear whether the limited partners continue to possess their limited
liability and which law governs the partnership. Article 9 deals with this
problem by providing for registration of foreign limited partnerships and
specifying choice-of-law rules.
Finally, Article 10 of the new act authorizes derivative actions to be brought
by limited partners.
2. South Carolina has had statutes regulating limited partnerships since 1837.
The original statute, 6 Stat. 578, was amended several times before 1960, when
the 1916 Uniform Act was enacted. See Act No. 848 of 1960. The 1916 Uniform Act
was codified as Chapter 43 of the 1976 South Carolina Code. In 1982 provisions
requiring registration of foreign limited partnerships transacting business in
this state derived from the 1976 Uniform Act were enacted in Act 306 of 1982 and
codified as Sections 33-43-310 through 33-43-380 of the 1976 South Carolina Code.
Act 491 of 1984 enacted the 1976 Uniform Act Official Text with some minor
modifications, most notably Section 33-42-300. Act 491 of 1984 inadvertently
repealed Chapter 41 of Title 33, which is the South Carolina Uniform Partnership
Act, rather than Chapter 43 of Title 33, which contained the 1916 Uniform Act,
as amended by Act 306 of 1982. This error was officially corrected by Act 11 of
1985, which also established June 27, 1984 as the effective date of Act 491 of
1984. This act incorporates the 1985 RULPA Amendments, plus several additional
provisions based on limited partnership statutes from other states that had made
modifications to RULPA. The most significant change made by the 1985 RULPA
Amendments and this act is the use of a new short form certificate of limited
partnership which eliminates the necessity of including in the certificate
information about the limited partners and other matters required by the 1916
Uniform Act and the 1976 Uniform Act Official Text. See the Comments to Section
33-42-210 for further explanation of this concept.
3. The Comments which follow each section incorporate the Official Comments
to RULPA prepared by the RULPA drafting committee (with respect to the 1985 RULPA
Amendments, the Comments incorporate the September 13, 1985 draft of the proposed
changes to the 1976 Uniform Act Official Text Comments), modified to accommodate
the differences between RULPA and this chapter. The portion of the Comments taken
from the Official Comments is reprinted with permission of the National
Conference of Commissioners on Uniform State Laws.
These Comments are intended to assist those who use and interpret this chapter,
including courts, to determine the intention of the drafters and the
interrelation between the various sections, the 1916 Uniform Act and other
statutory provisions. As such, the Comments serve basically the same function and
purpose as the Comments to the Uniform Commercial Code. See Farnsworth and
Honnold, Commercial Law (3rd ed. 1976), pp. 8-10. They can be particularly useful
in a state like South Carolina because we have virtually no case law on limited
partnerships. The Comments, however, are not part of the statutory law and
therefore are not binding on any court or other adjudicatory body.
4. For persons wishing to conduct research on limited partnerships, a good
starting point is Volume 6 of the Uniform Laws Annotated, which contains the
Official Text of the 1916 Uniform Act, the 1976 Uniform Act as amended by the
1985 RULPA Amendments and case and law review citations. A selected bibliography
of partnership resource materials is found in Walthall, Rheubam, Rollinson &
Talley, Partnership Law: A Selected Bibliography, 35 Bus. Law. 659 (1980); and
Morgenstern and Kempin, Partnership Bibliography: 1980-1984, 41 Bus. Law. 705
(1986). A very instructive analysis of Act 491 of 1984, which enacted the 1976
Uniform Act Official Text is found in Knight, The Revised Uniform Limited
Partnership Act in South Carolina: A Topical Review of Salient Features, 36
S.C.L. Rev. 531 (1985).
5. In 1983, the Internal Revenue Service amended Treasury Regulations Section
301.7701-2 in three respects, the most important of which is the amendment to
Section 301. 7701-2(a)(5) granting limited partnerships formed under the 1976
Uniform Act Official Text the same status under the tax classification
regulations as limited partnerships formed under the 1916 Uniform Act. See
T.D.7889, 48 F.R.18804 (1983). The Internal Revenue Service has not issued any
opinion on the tax effect of the 1985 RULPA Amendments as of the time these
Comments were written, but based on Revenue Rulings involving limited partnership
statutes from states having one or more of the provisions included in the 1985
RULPA Amendments, it seems that the 1985 Amendments can be classified as being
tax neutral. Competent tax counsel should be consulted on the tax classification
issue as well as all other tax issues relating to limited partnerships.
Derivation: Section 1102 of RULPA.
Section 33-42-20. Definitions.
As used in this chapter, unless the context otherwise requires:
(1) 'Certificate of limited partnership' means the certificate referred to in
Section 33-42-210, any certificate of limited partnership filed with the office
of the Secretary of State in connection with the formation of a limited
partnership under any applicable statute of this State prior to the effective
date of this chapter, and any such certificate as amended, or restated.
(2) 'Contribution' means any cash, property, services rendered, or a
promissory note or other binding obligation to contribute cash or property or to
perform services, which a partner contributes to a limited partnership in his
capacity as a partner.
(3) 'Event of withdrawal of a general partner' means an event that causes a
person to cease to be a general partner as provided in Section 33-42-620.
(4) 'Foreign limited partnership' means a partnership formed under the laws
of any state other than this State and having as partners one or more general
partners and one or more limited partners.
(5) 'General partner' means a person who has been admitted to a limited
partnership as a general partner in accordance with the partnership agreement and
named in the certificate of limited partnership as a general partner.
(6) 'Limited partner' means a person who has been admitted to a limited
partnership as a limited partner in accordance with the partnership agreement.
(7) 'Limited partnership' and 'domestic limited partnership' mean a
partnership formed by two or more persons under the laws of this State and having
one or more general partners and one or more limited partners.
(8) 'Partner' means a limited or general partner.
(9) 'Partnership agreement' means any valid agreement, written or oral, of the
partners as to the affairs of a limited partnership and the conduct of its
business.
(10) 'Partnership interest' means a partner's share of the profits and losses
of a limited partnership and the right to receive distributions of partnership
assets.
(11) 'Person' means a natural person, partnership, limited partnership
(domestic or foreign), trust, estate, association, or corporation.
(12) 'State' means a state, territory, or possession of the United States, the
District of Columbia, or the Commonwealth of Puerto Rico.
Comments
This section contains several definitions not found in the 1916 Uniform Act.
The definitions in this section clarify a number of uncertainties in existing law
and make certain changes. The following Comments explain important technical
points with respect to several of the definitions.
Contribution. This definition makes it clear that a present contribution of
services and a promise to make a future payment of cash, contribution of
property, or performance of services are permissible forms for a contribution.
When the form of contribution is a promise to make a future payment, such promise
is only enforceable when set out in a writing signed by the limited partner. See
Section 33-42-820. Accordingly, the present services or promise must be accorded
a value in the partnership agreement or the partnership records required to be
kept pursuant to Section 33-42-60, and, in the case of a promise, that value may
determine the liability of a partner who fails to honor his agreement. Section
3 of the 1916 Uniform Act did not permit a limited partner's contribution to be
in the form of services, although the prohibition did not apply to general
partners.
Foreign limited partnership. This chapter only deals with foreign limited
partnerships formed under the laws of another 'State' of the United States [see
subdivision (12)]. The exclusion of entities formed under the laws of foreign
countries from this chapter was not intended to suggest that their 'limited
partners' should not be accorded limited liability by the courts of this State.
That question would be resolved by the choice of law rules of the forum State.
General partner. This definition recognizes the separate functions of the
partnership agreement and the certificate of limited partnership. The partnership
agreement establishes the basic grant of management power to the persons named
as general partners; but because of the passive role played by the limited
partners, the separate, formal step of embodying that grant of power in the
certificate of limited partnership has been preserved to emphasize its
importance.
Limited partner. Unlike the case of general partners, this definition provides
for admission of limited partners through the partnership agreement and does not
require mention of such limited partners in the certificate of limited
partnership. The 1916 Uniform Act and the 1976 Uniform Act text required the
naming of a limited partner in the certificate of limited partnership as a
prerequisite for limited partner status. The elimination of the requirement that
limited partners be named in the certificate of limited partnership makes
unnecessary the need to amend the certificate of limited partnership with the
admission or withdrawal of each limited partner. Thus, the risk of exposure to
general liability of any limited partner who is erroneously excluded from the
certificate of limited partnership is also eliminated.
Partnership agreement. The prior uniform law did not refer to the partnership
agreement, assuming that all important matters affecting limited partners would
be set forth in the certificate of limited partnership. Under modern practice,
however, it has been common for the partners to enter into a comprehensive
partnership agreement, only part of which was required to be included in the
certificate of limited partnership. As reflected in Section 201 (Section
33-42-210), the certificate of limited partnership is confined principally to
matters respecting the addition and withdrawal of general partners and other
important issues are left to the partnership agreement.
Partnership interest. This definition is new and is intended to define what it
is that is transferred when a partnership interest is assigned.
Derivation: Section 101 of RULPA.
Section 33-42-30. Name.
The name of each limited partnership as set forth in its certificate of limited
partnership:
(1) shall contain the words 'limited partnership' or the abbreviation 'LP';
or 'L.P';
(2) may not contain the name of a limited partner unless (i) it is also the
name of a general partner or the corporate name of a corporate general partner,
or (ii) the business of the limited partnership had been carried on under the
name before the admission of that limited partner;
(3) may not be the same as, or deceptively similar to, the name of any
corporation or limited partnership organized under the laws of this State or
licensed or registered as a foreign corporation or limited partnership in this
State; and
(4) which complies with subsection (1) is not in violation of the prohibition
of Section 33-5-10(e) against the use of the word 'limited' or any abbreviation
thereof in the name of a limited partnership.
Comments
1. Subdivision (2) of this section has been carried over from Section 5 of the
1916 Uniform Act with certain editorial changes. The remainder of this section
is new and primarily reflects the intention to integrate the registration of
limited partnership names with that of corporate names. Cf. Section 33-5-10 of
the 1976 Code. See also subdivision (4) of this Section. Accordingly, Section
33-42-210 provides for central, statewide filing of certificates of limited
partnership, and subdivisions (2) and (3) of this section contain standards to
be applied by the Secretary of State in determining whether the certificate
should be filed.
2. The RULPA Official Text requires the use of the words 'Limited partnership'
without abbreviation. Several states that have adopted RULPA authorize the use
of the abbreviation 'LP' or 'L.P.' These abbreviations are widely used in
practice and authorizing their use will facilitate registration of foreign
limited partnerships in this State. See Section 33-42-1640.
Derivation: Section 102 of RULPA.
Section 33-42-40. Reservation of name.
(a) The exclusive right to the use of a name may be reserved by:
(1) any person intending to organize a limited partnership under this
chapter and to adopt that name;
(2) any domestic limited partnership or any foreign limited partnership
registered in this State which, in either case, intends to adopt that name;
(3) any foreign limited partnership intending to register in this State and
adopt that name;
(4) any person intending to organize a foreign limited partnership and
intending to have it registered in this State and adopt that name.
(b) The reservation shall be made by filing with the Secretary of State an
application, executed by the applicant, to reserve a specified name. If the
Secretary of State finds that the name is available for use by a domestic or
foreign limited partnership, he shall reserve the name for the exclusive use of
the applicant for a period of one-hundred-twenty-days. Once having so reserved
a name, the same applicant may not again reserve the same name until more than
sixty days after the expiration of the last one-hundred-twenty-day period for
which that applicant reserved that name. The right to the exclusive use of a
reserved name may be transferred to any other person by filing in the office of
the Secretary of State a notice of transfer, executed by the applicant for whom
the name was received and specifying the name and address of the transferee.
Comments
This section parallels a similar provision applicable to corporations. See
Section 33-5-20. The 1916 Uniform Act did not provide for registration of names.
Derivation: Section 103 of RULPA.
Section 33-42-45. Assumed Name.
(a) This section rather than Section 39-13-10 through 39-13-40 of the 1976
Code govern the registration of assumed names of limited partnerships formed or
transacting business in South Carolina.
(b) A limited partnership that conducts or intends to conduct business in this
State under a name other than the name shown in its certificate of limited
partnership (or in the case of a foreign limited partnership that has registered
in this State, the name shown in its certificate of registration to transact
business in this State) shall file with the Secretary of State an assumed name
certificate which shall state the name shown on its certificate of limited
partnership (or certificate of registration in the case of a foreign limited
partnership), the name under which the limited partnership's business is to be
conducted, which assumed name shall not be deceptively similar to the name of any
domestic or foreign limited partnership authorized to transact business in this
State or to any reserved name pursuant to Section 33-42-40 and the address of the
partnership's registered office required to be maintained in this State.
(c) Such filing shall be effective, unless sooner terminated by the filing of
a certificate of termination or by the cancellation of the certificate of limited
partnership (or in the case of foreign limited partnership by cancellation of the
certificate of registration to transact business in this State), for a period
expiring on December thirty-first of the fifth full calendar year following the
year in which it is filed. It may be extended for additional consecutive periods
of five full calendar years each by the filing of a new assumed name certificate
not earlier than ninety days preceding the expiration of any such period. The
Secretary of State shall notify a limited partnership of the impending expiration
of its assumed name, by first-class mail addressed to the partnership's
registered office as shown on the partnership's certificate of limited
partnership (or certificate of registration in the case of a foreign limited
partnership that has registered in this State), no later than three calendar
months before the initial or subsequent five year period will expire.
(d) The Secretary of State shall maintain current lists, alphabetically
arranged, of the partnership registrants and assumed names permitted hereunder.
(e) The failure of any limited partnership to file the assumed name
certificate required by subsection (b) does not:
(i) impair the validity of any contract or act of the limited partnership;
(ii) prevent the limited partnership from maintaining or defending any
action, suit, or proceeding in any court of this State; or
(iii) result in any limited partner becoming liable as a general partner
solely by reason of the failure of the limited partnership to file the required
assumed name certificate.
Comments
This section is not part of RULPA; but it is consistent with RULPA's intention
to integrate the registration of limited partnership names with that of
corporation names. See Comment 1 to Section 33-42-30. It tracks the assumed name
statute in the South Carolina Business Corporation Act. See Section 33-5-35. The
South Carolina Code contains an assumed name statute that technically applies to
'all mercantile and industrial' limited partnerships (see Sections 39-13-10
through 39-13-40) that requires filing in the office of the clerk of court of the
county in which the partnership's principal place of business is located and also
requires the posting of a sign containing the name of each partner 'alongside the
entrance of each place of business'. In addition to a fine of one dollar and
imprisonment for five days for each day of noncompliance, Section 39-13-40 states
that 'each partner shall be severally liable' for violations. Most lawyers are
unaware of these provisions and noncompliance is widespread. This section, which
replaces Sections 39-13-10 through 39-13-40 with respect to all limited
partnerships formed in South Carolina and all foreign limited partnerships
registered in this State (See Article 9 of this chapter) that operate under an
assumed name, will require a simple one page form that will be readily accessible
to creditors and other persons wishing to determine the official legal name of
a limited partnership.
Derivation: No RULPA counterpart. See Comment.
Section 33-42-50. Specified office and agent.
Each limited partnership shall continuously maintain in this State:
(1) an office in this State, which may but need not be a place of its business
in this State, at which shall be kept the records required by Section 33-42-60
to be maintained;
(2) an agent for service of process on the limited partnership, which agent
must be an individual resident of this State, a domestic corporation, or a
foreign corporation authorized to do business in this State.
Comments
This section requires that a limited partnership have certain minimum contacts
with the state of organization, i.e., an office at which the constitutive
documents and basic financial information is kept and an agent for service of
process. It parallels similar provisions applicable to corporations. See Section
33-5-40.
Derivation: Section 104 of RULPA.
Section 33-42-60. Records.
(a) Each limited partnership shall keep at the office referred to in Section
33-42-50(1) the following:
(1) a current list of the full name and last known mailing address of each
partner separately identifying the general partners (in alphabetical order) and
the limited partners (in alphabetical order);
(2) a copy of the certificate of limited partnership and all certificates
of amendment thereto, together with executed copies of any powers of attorney
pursuant to which any certificate has been executed;
(3) copies of the limited partnership's federal, state, and local income tax
returns and reports, if any, for the three most recent years;
(4) copies of any then effective written partnership agreements and of any
financial statements of the limited partnership for the three most recent years;
and
(5) unless contained in a written partnership agreement, a writing setting
out:
(i) the amount of cash and a description and statement of the agreed value
of the other property or services contributed by each partner and which each
partner has agreed to contribute;
(ii) the times at which or events on the happening of which any additional
contributions agreed to be made by each partner are to be made;
(iii) any right of a partner to receive, or of a general partner to make,
distributions to a partner which include a return of all or any part of the
partner's contribution; and
(iv) any events upon the happening of which the limited partnership is to
be dissolved and its affairs wound up.
(b) Records required to be kept under this section are subject to inspection
and copying at the reasonable request, and at the expense, of any partner during
ordinary business hours.
(c) A person who is not a partner is entitled to the information required by
paragraphs (1) and (5) of subsection (a) if he gives the limited partnership
written notice of his demand at least five business days before the date on which
he wishes to inspect and copy the information to which he is entitled by this
subsection and his demand is made in good faith and for a proper purpose. The
limited partnership may impose a reasonable charge, covering the costs of labor
and material for copies of any documents provided pursuant to this subsection.
The charge may not exceed the estimated cost of production or reproduction of the
records.
Comments
1. This section was not in the 1916 Uniform Act. In view of the passive nature
of the limited partner's position, it has been widely felt that limited partners
are entitled to access to certain basic documents, including the certificate of
limited partnership, any partnership agreement, and a writing setting forth
certain basic terms and conditions of the limited partnership, which, under the
1916 Uniform Act and the 1976 Uniform Act Official Text, were required to be in
the certificate of limited partnership. It is in the partnership records required
to be kept pursuant to this section that much of the information previously
required to be set forth in the certificate of limited partnership is now to be
kept. The names of the limited partners and information concerning partner
capital contributions were, for example, required to be included in the
certificate.
2. In view of the great diversity among limited partnerships, it was thought
inappropriate to require a standard form of financial report, and this section
does no more than require retention of tax returns and any other financial
statements that have been prepared for the three most recent years.
3. This section differs from the RULPA Official Text in that it requires a
'mailing' address rather 'business' address for all partners. A mailing address
is a broader term and several states that enacted RULPA have adopted this
variation. Cf. Section 36-9-402 (1) (UCC Article 9 financing statements must
provide 'a mailing address' of the debtor).
4. Subsection (c) is not part of the RULPA Official Text. This subsection
authorizes an existing or future creditor or litigant to obtain basic information
about the limited partners. The requirement that the demand be made in good faith
and for a proper purpose is designed to prevent, for example, a member of the
public from seeking information about the limited partners in order to solicit
the limited partners with respect to other investments. Cases interpreting
similar shareholder inspection rights provisions should be relevant authority by
analogy.
Derivation: Section 105 of RULPA.
Section 33-42-70. Nature of business.
A limited partnership may carry on any business that a partnership without
limited partners may carry on.
Comments
This section is identical to Section 3 of the 1916 Uniform Act. Ethical rules
and other regulations may prohibit some businesses that can legally operate as
a general partnership from being a limited partnership. Lawyers, for example,
cannot practice law in a limited partnership.
Derivation: Section 106 of RULPA.
Section 33-42-80. Business transactions of partner with partnership.
Except as provided in the partnership agreement, a partner may lend money to
and transact other business with the limited partnership and, subject to other
applicable law, has the same rights and obligations with respect thereto as a
person who is not a partner.
Comments
This section makes a number of important changes in Section 13 of the 1916
Uniform Act. Section 13, in effect, created a special fraudulent conveyance
provision applicable to the making of secured loans by limited partners and the
repayment by limited partnerships of loans from limited partners. This section
leaves that question to a State's general fraudulent conveyance statute. In
addition, it eliminates the prior prohibition against a general partner (as
opposed to a limited partner) sharing prorata with general creditors in the case
of an unsecured loan. Of course, other doctrines developed under bankruptcy and
insolvency laws may require the subordination of loans by partners under
appropriate circumstances.
Derivation: Section 107 of RULPA.
ARTICLE 2
FORMATI0N: CERTIFICATE 0F LIMITED PARTNERSHIP
Section 33-42-210. Certificate of limited partnership.
(a) In order to form a limited partnership, a certificate of limited
partnership must be executed and filed in the office of the Secretary of State.
The certificate shall set forth:
(1) the name of the limited partnership;
(2) the address of the office and the name and address of the agent for
service of process required to be maintained by Section 33-42-50;
(3) the name and a mailing address of each general partner;
(4) The latest date upon which the limited partnership is to dissolve; and
(5) any other matters the partners determine to include therein.
(b) A limited partnership is formed at the time of the filing of the
certificate of limited partnership in the office of the Secretary of State or at
any later time specified in the certificate of limited partnership if, in either
case, there has been substantial compliance with the requirements of this
section.
Comments
1. The matters required to be set forth in the certificate of limited
partnership have been simplified from those required by the 1916 Uniform Act and
by the 1976 Uniform Act Official Text. This simplification recognizes the fact
that the partnership agreement, not the certificate of limited partnership, over
the years has become the authoritative document for most limited partnerships,
and it is to the partnership agreement, not the certificate of limited
partnership, that creditors will refer to obtain facts concerning the capital of
the partnership and the rules regarding additional contributions to and
withdrawals from the partnership.
2. This section incorporates a short form notice filing concept used for
corporations and other purposes. See Section 33-7-30 (articles of incorporation
for a corporation) and Section 36-9-402 (UCC Article 9 financing statements). The
information no longer required to be in the certificate is now required to be
kept at the limited partnership's registered office. See Section 33-42-60. This
provides adequate protection to the limited partners, and actual and potential
creditors. Cf. Section 33-42-45 (assumed name filing requirement).
3. Subparagraph (b), which is based upon Section 2(1)(b) of the 1916 Uniform
Act, has been retained to make it clear that existence of the limited partnership
depends only upon compliance with this section. Its continued existence is not
dependent upon compliance with other provisions of this chapter.
Derivation: Section 201 of RULPA.
Section 33-42-220. Amendment to certificate.
(a) A certificate of limited partnership is amended by filing a certificate
of amendment thereto in the office of the Secretary of State. The certificate
shall set forth:
(1) the name of the limited partnership;
(2) the date of filing the certificate; and
(3) the amendment to the certificate.
(b) Within thirty days after the happening of any of the following events, an
amendment to a certificate of limited partnership reflecting the occurrence of
the event or events shall be filed:
(1) the admission of a new general partner;
(2) the withdrawal of a general partner; or
(3) the continuation of the business under Section 33-42-1410 after an event
of withdrawal of a general partner.
(c) A general partner who becomes aware that any statement in a certificate
of limited partnership was false when made or that any arrangements or other
facts described have changed, making the certificate inaccurate in any respect,
shall promptly amend the certificate.
(d) A certificate of limited partnership may be amended at any time for any
other proper purpose the general partners determine.
(e) No person has any liability because an amendment to a certificate of
limited partnership has not been filed to reflect the occurrence of any event
referred to in subsection (b) of this section if the amendment is filed within
the thirty day period specified in subsection (b).
(f) A restated certificate of limited partnership may be executed and filed
in the same manner as a certificate of amendment.
(g)(1) Each limited partnership formed before June 27, 1984, shall file no
later than January 1, 1988, a certificate of amendment pursuant to this chapter
causing such limited partnership to comply with the requirements of Section
33-42-30 respecting the name of the limited partnership, Section 33-42-50(1)
respecting the office of the limited partnership at which certain records are to
be kept, and Section 33-42-50(2) respecting the agent for service of process on
the limited partnership. However, a limited partnership formed before June 27,
1984, is required to file the certificate of amendment only to the extent it does
not fully comply with Sections 33-42-30 and 33-42-50 on or before January 1,
1988. The certificate of amendment is considered effective under this chapter
upon its execution by a general partner of the limited partnership and its filing
in the office of the Secretary of State.
(2) The failure of any limited partnership formed before June 27, 1984 to
comply with subsection (g)(1) shall result on January 1, 1988, in, but only to
the extent of the failure:
(i) the designation of the principal place of business of the limited
partnership as specified in the limited partnership's certificate of limited
partnership on that date as the office of partnership at which certain records
are to be kept for purposes of Section 33-42-50(1);
(ii) the designation of the Secretary of State as the agent for service
of process on such limited partnership for purposes of Section 33-42-50(2); and
(iii) the limited partnership being prohibited from filing any other
certificate of amendment unless it satisfies the requirements of subsection
(g)(1).
(3) The failure of any limited partnership formed before June 27, 1984 to
file the certificate of amendment required by subsection (g)(1) does not:
(i) impair the validity of any contract or act of the limited partnership;
(ii) prevent the limited partnership from maintaining or defending any
action, suit, or proceeding in any court in this State; or
(iii) result in any limited partner becoming liable as a general partner
solely by reason of the failure of the limited partnership to file the required
certificate of amendment.
Comments
1. This section makes substantial changes in Section 24 of the 1916 Uniform Act
and in Section 202 of the 1976 Uniform Act Official Text. Paragraph (b) lists the
basic events, e.g. the addition or withdrawal of a general partner, that are so
central to the function of the certificate of limited partnership that they
require prompt amendment. With the elimination of the naming of limited partners
as was required under the 1916 Uniform Act and the 1976 Uniform Act Official
Text, it is no longer necessary to amend the certificate upon the admission or
withdrawal of limited partners. This change should greatly reduce the need to
amend the certificate of limited partnership.
2. Paragraph (c) makes it clear, as it was not clear under subdivision (2)(g)
of former Section 24 of the 1916 Uniform Act, that the certificate of limited
partnership is intended to be an accurate description of the facts to which it
relates at all times and does not speak merely as of the date it is executed.
Paragraph (e) provides a 'safe harbor' against claims of creditors or others who
assert that they have been misled by the failure to amend the certificate of
limited partnership to reflect changes in any of the important facts referred to
in paragraph (b); if the certificate of limited partnership is amended within
thirty days of the occurrence of the event, no creditor or other person can
recover for damages sustained during the interim. Additional protection is
afforded by the provisions of Section 33-42-440.
3. Subsection (f) makes explicit that the common practice of restating a
certificate of limited partnership is permitted under this act. Such a restated
certificate is not to be viewed as an amendment to the certificate of limited
partnership, but an integration into one instrument of all the provisions of a
limited partnership's certificate of limited partnership which are then in
effect. A limited partnership may further amend its certificate of limited
partnership by adopting a restated certificate of limited partnership, but any
such amendment is subject to the provisions of this chapter which would apply if
a separate certificate of amendment were filed to effect such amendment.
4. Subsection (g), which is not part of the RULPA Official Text, is a
transition provision that applies to limited partnerships formed before Act 491
of 1984. To be in compliance with this chapter, most of these partnerships will
have to amend their certificates of limited partnership in several respects. The
principal amendments are the appointment of a registered agent, selection of a
registered office, and adding the words 'limited partnership', 'LP', or 'L.P.'
to the partnership name. Paragraph (2) of subsection (g) states what happens if
the requisite amendments are not filed by January 1, 1988.
Derivation: Section 202 of RULPA.
Section 33-42-230. Cancellation of certificate.
A certificate of limited partnership must be cancelled upon the dissolution and
the commencement of winding up of the partnership or at any other time there are
no limited partners. A certificate of cancellation must be filed in the office
of the Secretary of State and set forth:
(1) the name of the limited partnership;
(2) the date of filing of its certificate of limited partnership;
(3) the reason for filing the certificate of cancellation;
(4) the effective date (which shall be a date certain) of cancellation if it
is not to be effective upon the filing of the certificate; and
(5) any other information the general partners filing the certificate
determine.
Comments
This section changes Section 24 of the 1916 Uniform Act by making it clear that
the certificate of cancellation should be filed upon the commencement of winding
up the limited partnership. Section 24 provided for cancellation "when the
partnership is dissolved."
Derivation: Section 203 of RULPA.
Section 33-42-240. Execution of Certificates.
(a) each certificate required by this article to be filed in the office of the
Secretary of State must be executed in the following manner:
(1) an original certificate of limited partnership must be signed by all
general partners named therein;
(2) A certificate of amendment must be signed by at least one general
partner and by each other general partner designated in the certificate as a new
or substitute general partner; and
(3) a certificate of cancellation must be signed by all general partners.
(b) Any person may sign a certificate by an attorney-in-fact, but a power of
attorney to sign a certificate relating to the admission of a general partner
must specifically describe the admission.
(c) The execution of a certificate by a general partner constitutes an
affirmation under the penalties of perjury that the facts stated therein are
true.
Comments
This section collects in one place the formal requirements for the execution of
certificates which were set forth in Sections 2 and 25 of the 1916 Uniform Act,
and modifies some of the provisions of the 1916 Uniform Act and the 1976 Uniform
Act Official Text. Sections 2 and 25 of the 1916 Uniform Act required that each
certificate be signed by all partners, and there developed an unnecessarily
cumbersome practice of having each limited partner sign powers of attorney to
authorize the general partners to execute certificates of amendment on their
behalf. The 1976 Uniform Act Official Text, while simplifying the execution
requirements, nevertheless required that an original certificate of limited
partnership be signed by all partners and a certificate of amendment by all new
partners being admitted to the limited partnership. The formal requirements for
the execution of certificates were changed by the 1985 RULPA Amendments to
reflect the amendments to Section 33-42-210 which eliminate the requirement to
name the limited partners in the certificate of limited partnership. Thus, this
section requires only that all general partners sign the original certificate of
limited partnership. All general partners must also sign certificates of
cancellation. Certificates of amendment are, however, required to be signed by
only one general partner.
Derivation: Section 204 of RULPA.
Section 33-42-250. Execution by judicial act.
If a person required by Section 33-42-240 to execute any certificate fails or
refuses to do so, any other person who is adversely affected by the failure or
refusal may petition the circuit court of the county in which the limited
partnership's office designated pursuant to Section 33-42-50(1) is located to
direct the execution of the certificate. If the court finds that it is proper
for the certificate to be executed and that any person designated has failed or
refused to execute the appropriate certificate, it shall order the Secretary of
State to record an appropriate certificate.
Comments
This section eliminates the restriction under the 1976 Uniform Act Official Text
that only a partner or an assignee of a partnership interest who is adversely
affected by the failure or refusal of the appropriate person to file a
certificate of cancellation or amendment had standing to seek judicial
intervention. Under the 1985 RULPA Amendments, any person adversely affected by
a failure or refusal to file any certificate (not only a certificate of
cancellation or amendment) has standing to seek judicial intervention.
Derivation: Section 205 of RULPA.
Section 33-42-260. Filing in office of Secretary of State.
(a) Two signed copies of the certificate of limited partnership and of any
certificates of amendment or cancellation (or of any judicial decree of amendment
or cancellation) must be delivered to the Secretary of State. A person who
executes a certificate as an agent or fiduciary need not exhibit evidence of his
authority as a prerequisite to filing. Unless the Secretary of State finds that
any certificate does not conform to law, upon receipt of all filing fees required
by law he shall:
(1) endorse on each duplicate original the word 'Filed' and the day, month,
and year of the filing thereof;
(2) file one duplicate original in his office; and
(3) return the other duplicate original to the person who filed it or his
representative.
(b) Upon the filing of a certificate of amendment (or judicial decree of
amendment) in the office of the Secretary of State, the certificate of limited
partnership shall be amended as set forth therein and, upon the effective date
of a certificate of cancellation (or a judicial decree thereof), the certificate
of limited partnership is cancelled.
Comments
1. Unlike the 1960 South Carolina limited partnership statute which required
filing of a certificate of limited partnership in the office of the Secretary of
State and the office of the Clerk of Court for the county in which the
partnership had its principal place of business, this section requires filing of
the certificate only in the office of the Secretary of State. But Cf. Section
33-42-300 (local filing of an affidavit of general partner authority to sign real
property deeds and mortgages).
2. Paragraph (b) changes subdivision (5) of Section 25 of the 1916 Uniform Act
by providing that certificates of cancellation are effective upon their effective
date under Section 33-42-230 rather than being effective automatically on the
date of filing.
Derivation: Section 206 of RULPA.
Section 33-42-270. Liability for false statement in certificate.
If any certificate of limited partnership or certificate of amendment or
cancellation contains a false statement, one who suffers loss by reliance on the
statement may recover damages for the loss from:
(1) any person who executes the certificate, or causes another to execute it
on his behalf, and knew, and any general partner who knew or should have known,
the statement to be false at the time the certificate was executed; and
(2) any general partner who thereafter knows or should have known that any
arrangement or other fact described in the certificate has changed, making the
statement inaccurate in any respect within a sufficient time before the statement
was relied upon reasonably to have enabled that general partner to cancel or
amend the certificate, or to file a petition for its cancellation or amendment
under Section 33-42-250.
Comments
This section changes Section 6 of the 1916 Uniform Act by providing explicitly
for the liability of persons who sign a certificate as agent under a power of
attorney and by confining the obligation to amend a certificate of limited
partnership in light of future events to the general partners.
Derivation: Section 207 of RULPA.
Section 33-42-280. Scope of notice.
The fact that a certificate of limited partnership is on file in the office of
the Secretary of State is notice that the partnership is a limited partnership
and the persons designated therein as general partners are general partners, but
it is not notice of any other fact.
Comments
This section had no counterpart in the 1916 Uniform Act. As amended by the 1985
RULPA Amendments it reflects the elimination of the requirement in Section 201
of the 1976 Uniform Act Official Text that limited partners be named in the
certificate of limited partnership. See the Comments to Section 33-42-210.
It also obviates the concern that third parties may be held to have notice of
special provisions set forth in the certificate. While this section is designed
to preserve the limited liability of limited partners, the notice provided is not
intended to change any liability of a limited partner which may be created by his
action or inaction under the laws of estoppel, agency, fraud, or the like or
pursuant to Section 33-42-430.
Derivation: Section 208 of RULPA.
Section 33-42-290. Delivery of certificates to limited partners.
Upon the return by the Secretary of State pursuant to Section 33-42-260 of a
certificate marked 'Filed', the general partners shall promptly deliver or mail
a copy of the certificate of limited partnership or the certificate of amendment
or cancellation or restated certificate or any judicial decree of any of the
above, as the case may be, to each limited partner unless the partnership
agreement provides otherwise.
Comments
This section, which has no counterpart in the 1916 Uniform Act, requires that
limited partners receive a copy of the certificate of limited partnership and all
amendments thereto. Cf. Section 34-42-60 (records that must be kept at a limited
partnership's registered office in this State).
Derivation: Section 209 of RULPA.
Section 33-42-300. Affidavit of general partners' authority.
(a) A limited partnership that owns real property in South Carolina shall,
prior to selling, conveying, or transferring any interest in the property, file
an affidavit containing the name of the partnership, the place or places where
the partnership's certificate of limited partnership is filed, and the name or
names of the general partners who are authorized to sign documents relating to
the property on behalf of the partnership in the office of the county where the
index to deeds for the property is located. The affidavit required by this
section must be recorded and indexed in the name of the partnership in both the
grantor and grantee indices for deeds. The person or persons executing the
affidavit as an agent or fiduciary of the partnership need not exhibit evidence
of that authority as a prerequisite to its filing.
(b) The existence of the facts described in the affidavit required by
subsection (a) must be conclusively presumed in favor of the limited partnership
and against a grantee from the limited partnership of partnership real property
located in the county in which the affidavit is recorded.
(c) The filing or failure to file the affidavit required by subsection (a) has
no effect on the legal existence of a limited partnership or the liability of any
limited partner.
(d) A limited partnership organized under the laws of another state that files
an affidavit required by subsection (a) shall not have to register in this State
as a foreign limited partnership pursuant to Article 9 of this chapter solely
because of the necessity of filing the affidavit.
Comments
This section, which is not part of RULPA, requires limited partnerships,
including foreign limited partnerships, to file an affidavit designating the
general partners who have authority to sign deeds and other documents prior to
transferring any interest in real property owned by the limited partnership in
South Carolina. The affidavit must be filed in the deed records of the county
where the real property is located. Under subdivision (c) the failure to file
the affidavit has no effect on the legal status of the limited partnership or the
liability of any limited partner.
Derivation: There is no RULPA counterpart to this section. See the Comment.
Section 33-42-310. Status of existing county filings.
Certificates of limited partnership and certificates of amendment filed in any
official county records of this State pursuant to any applicable statute of this
State prior to June 27, 1984, are of no further force or effect for any purpose
under this chapter on or after June 27, 1984. All certificates of amendment,
certificates of cancellation, and restated certificates are fully effective to
amend or cancel the certificates of limited partnership, as the case may be, upon
proper filing thereof with the office of the Secretary of State pursuant to the
requirements of this chapter.
Comments
This is a transition provision made necessary because prior to Act 491 of 1984
dual filing of a certificate of limited partnerships was required. See Comment
1 to Section 33-42-260. Under this section, no county filing is required after
June 27, 1984, even for those partnerships that were formed prior to that date.
Derivation: There is no RULPA counterpart to this section. See the Comment.
Section 33-42-320. Merger and consolidation of limited partnerships.
(a) Pursuant to an agreement, a domestic limited partnership may merge or
consolidate with or into one or more limited partnerships formed under the laws
of this state or any other state with such limited partnership as the agreement
shall provide being the surviving or resulting limited partnership.
(b) A domestic limited partnership that is not the surviving or resulting
limited partnership in the merger or consolidation shall file a certificate of
cancellation, which shall have an effective date not later than the effective
date of the merger or consolidation.
(c) If following a merger or consolidation of one or more domestic limited
partnerships and one or more limited partnerships formed under the laws of any
other state, the surviving or resulting limited partnership is not a domestic
limited partnership, there shall be attached to the certificate of cancellation
filed pursuant to Section 33-42-230 for each such domestic limited partnership
a certificate executed by the surviving or resulting limited partnership, stating
that the surviving or resulting limited partnership agrees that it may be served
with process in the State of South Carolina in any action, suit, or proceeding
involving such domestic limited partnership as a party, irrevocably appointing
the Secretary of State as its agent to accept service of process in any such
action, suit, or proceeding and specifying the address to which a copy of such
process shall be mailed to it by the Secretary of State.
(d) When the certificate of cancellation required by Section 33-42-230 shall
have become effective, for all purposes of the laws of this state, all of the
rights, privileges, and powers of the limited partnerships that have merged or
consolidated, and all property, real, personal, and mixed, and all debts due to
any of said limited partnerships, as well as all other things and causes of
action belonging to each of such limited partnerships, shall be vested in the
surviving or resulting limited partnership, and shall thereafter be the property
of the surviving or resulting limited partnership as they were of each of the
limited partnerships that have merged or consolidated, and the title to any real
property vested by deed or otherwise, in any of such limited partnerships shall
not revert or be in any way impaired by reason of this section; but all rights
of creditors and all liens upon any property of any of said limited partnerships
shall be preserved unimpaired, and all debts, liabilities, and duties of each of
the limited partnerships that have merged or consolidated shall thenceforth
attach to the surviving or resulting limited partnership, and may be enforced
against it to the same extent as if said debts, liabilities, and duties have been
incurred or contracted by it.
(e) This section shall have no legal effect on any other method of combining
two or more limited partnerships made prior or subsequent to its enactment.
Comments
This section is new and is not part of the RULPA Official Text. It is derived
from the 1985 Delaware Limited Partnership Act and is designed to provide a
statutory 'safe harbor' method of combining two or more limited partnerships.
Such transactions are occurring with increased frequency. Subdivision (e) states
that this section has no legal effect on other forms of limited partnership
combinations. This provision, which is not included in the Delaware Limited
Partnership Act, is desirable because there are many methods other than a
statutory merger or consolidation under which limited partnerships may combine.
Derivation: There is no RULPA counterpart to this section. See the Comment.
ARTICLE 3
LIMITED PARTNERS
Section 33-42-410. Admission of additional limited partners.
(a) A person becomes a limited partner on the later of:
(1) the date the original certificate of limited partnership is filed; or
(2) the date stated in the records of the limited partnership as the date
that person becomes a limited partner.
(b) After the filing of a limited partnership's original certificate of
limited partnership, a person may be admitted as an additional limited partner:
(1) in the case of a person acquiring a partnership interest directly from
the limited partnership, upon the compliance with the partnership agreement or,
if the partnership agreement does not provide, upon the written consent of all
partners; and
(2) in the case of an assignee of a partnership interest of a partner who
has the power, as provided in Section 33-42-1240, to grant the assignee the right
to become a limited partner, upon the exercise of that power and compliance with
any conditions limiting the grant or exercise of the power.
Comments
Subsection (a) is part of the 1985 RULPA Amendments; no counterpart is found
in the 1916 Uniform Act or the 1976 Uniform Act Official Text. This section
imposes on the partnership an obligation to maintain in its records the date each
limited partner became a limited partner. Under the 1976 Uniform Act Official
Text, one could not become a limited partner until an appropriate certificate was
filed naming such person as a limited partner. With the elimination of the
naming of limited partners in the certificate by the 1985 RULPA Amendments, it
was necessary to create a mechanism to evidence a limited partner's admission
into a limited partnership. Subject to the limitation that no person may become
a limited partner before the partnership is formed, which cannot be before a
certificate is filed, the date set out in the limited partnership's records
establishes the date of the limited partner's admission.
Subdivision (1) of subsection (b) adds to Section 8 of the 1916 Uniform Act an
explicit recognition of the fact that unanimous consent of all partners is
required for admission of new limited partners unless the partnership agreement
provides otherwise. Subdivision (2) is derived from Section 19 of the 1916
Uniform Act but abandons the former terminology of "substituted limited
partner."
Derivation: Section 301 of RULPA.
Section 33-42-420. Voting.
Subject to Section 33-42-430, the partnership agreement may grant to all or a
specified group of the limited partners the right to vote (on a per capita or
other basis) upon any matter.
Comments
This section has no counterpart in the 1916 Uniform Act, and must be read
together with subdivision (b) (6) of Section 33-42-430. Although the 1916
Uniform Act did not speak specifically of the voting powers of limited partners,
it has long been common for partnership agreements to grant such powers to
limited partners, subject to the control test in Section 7 of the 1916 Uniform
Act and Section 303 of RULPA (Section 33-42-420). For further information on
limited partner voting rights, see the comments to Section 33-42-430.
Derivation: Section 302 of RULPA.
Section 33-42-430. Liabilities to third parties.
(a) Except as provided in subsection (d), a limited partner is not liable for
the obligations of a limited partnership unless he is also a general partner or,
in addition to the exercise of his rights and powers as a limited partner, he
takes part in the control of the business. However, if the limited partner's
participation in the control of the business is not substantially the same as the
exercise of the powers of a general partner, he is liable only to persons who
transact business with the limited partnership with actual knowledge of his
participation in control.
(b) A limited partner does not participate in the control of the business
within the meaning of subsection (a) solely by doing one or more of the
following:
(1) being a contractor for or an agent or employee of the limited
partnership or of a general partner or being an officer, director, or shareholder
of a general partner that is a corporation;
(2) consulting with and advising a general partner with respect to the
business of the limited partnership;
(3) acting as surety for the limited partnership or guaranteeing or assuming
one or more specific obligations of the limited partnership;
(4) taking any action required or permitted by law to bring or pursue a
derivative action in the right of the limited partnership;
(5) requesting or attending a meeting of partners;
(6) proposing, approving, or disapproving, by voting or otherwise, one or
more of the following matters:
(i) the dissolution and winding up of the limited partnership;
(ii) the sale, exchange, lease, mortgage, pledge, or other transfer of all
or substantially all of the assets of the limited partnership;
(iii) the incurrence of indebtedness by the limited partnership other than
in the ordinary course of its business;
(iv) a change in the nature of the business;
(v) the admission or removal of a general partner;
(vi) the admission or removal of a limited partner;
(vii) a transaction involving an actual or potential conflict of interest
between a general partner and the limited partnership or the limited partners;
(viii) an amendment to the partnership agreement or certificate of limited
partnership;
(7) winding up the limited partnership pursuant to Section 33-42-1430; or
(8) exercising any right or power permitted to limited partners under this
chapter and not specifically enumerated in this subsection (b).
(c) The enumeration in subsection (b) does not mean that the possession or
exercise of any other powers by a limited partner constitutes participation by
him in the control of the business of the limited partnership.
(d) A limited partner who knowingly permits his name to be used in the name
of the limited partnership, except under circumstances permitted by Section
33-42-30 (2) is liable to creditors who extend credit to the limited partnership
without actual knowledge that the limited partner is not a general partner.
Comments
1. This section makes several important changes in Section 7 of the 1916
Uniform Act. The first sentence of subsection (a) carries over the basic test
from former Section 7 -whether the limited partner 'takes part in the control of
the business'-in order to insure that judicial decisions under the prior uniform
law remain applicable to the extent not expressly changed. The second sentence
of subsection (a) reflects a wholly new concept. Because of the difficulty of
determining when the 'control' line has been overstepped, it was thought unfair
to impose general partner liability on a limited partner except to the extent
that a third party had knowledge of his participation in control of the business.
On the other hand, in order to avoid permitting a limited partner to exercise all
of the powers of a general partner while avoiding any direct dealings with third
parties, the 'is not substantially the same as' test was introduced.
2. Subsection (b) is intended to provide a nonexclusive 'safe harbor' by
enumerating certain activities which a limited partner may carry on for the
partnership without being deemed to have taken part in control of the business.
This list has been expanded by the 1985 RULPA Amendments beyond those actions
enumerated in the 1976 Uniform Act Official Text to reflect case law which has
developed over the years.
3. Subsection (d) is derived from Section 5 of the 1916 Uniform Act, but adds
as a condition to the limited partner's liability the fact that a limited partner
must have knowingly permitted his name to be used in the name of the limited
partnership.
Derivation: Section 303 of RULPA, but subsection (a) follows the 1976 Uniform
Act Official Text and subsection (b) differs somewhat from the 1985 RULPA
Amendments.
Section 33-42-440. Person erroneously believing himself limited partner.
(a) Except as provided in subsection (b), a person who makes a contribution
to a business enterprise and erroneously but in good faith believes that he has
become a limited partner in the enterprise is not a general partner in the
enterprise and is not bound by its obligations by reason of making the
contribution, receiving distributions from the enterprise, or exercising any
rights of a limited partner, if, on ascertaining the mistake, he:
(1) causes an appropriate certificate of limited partnership or a
certificate of amendment to be executed and filed; or
(2) withdraws from future equity participation in the enterprise by
executing and filing in the office of the Secretary of State a certificate
declaring withdrawal under this section.
(b) A person who makes a contribution of the kind described in subsection (a)
is liable as a general partner to any third party who transacts business with the
enterprise (i) before the person withdraws and an appropriate certificate is
filed to show withdrawal, or (ii) before an appropriate certificate is filed to
show that he is not a general partner, but in either case only if the third party
actually believed in good faith that the person was a general partner at the time
of the transaction.
Comments
This section is derived from Section 11 of the 1916 Uniform Act. The 'good
faith' requirement has been added in the first sentence of subsection (a). The
provisions of subdivision (2) of subsection (a) are intended to clarify an
ambiguity in the prior law by providing that a person who chooses to withdraw
from the enterprise in order to protect himself from liability is not required
to renounce any of his then current interest in the enterprise so long as he has
no further participation as an equity participant. Subsection (b) preserves the
liability of the equity participant to any third party who has transacted
business with that person believing in good faith that he was a general partner
for any partnership liability incurred prior to withdrawal by that person from
the limited partnership or amendment to the certificate demonstrating that such
person is not a general partner.
Derivation: Section 304 of RULPA.
Section 33-42-450. Information.
Each limited partner has the right to:
(1) inspect and copy any of the partnership records required to be maintained
by Section 33-42-60;
(2) obtain from the general partners from time to time upon reasonable demand
(i) true and full information regarding the state of the business and financial
condition of the limited partnership, (ii) promptly after becoming available, a
copy of the limited partnership's federal, state, and local income tax returns
from each year, and (iii) other information regarding the affairs of the limited
partnership as is just and reasonable.
Comments
This section changes and restates the rights of limited partners to information
about the partnership formerly provided by Section 10 of the 1916 Uniform Act.
Derivation: Section 305 of RULPA.
ARTICLE 4
GENERAL PARTNERS
Section 33-42-610. Admission of additional or substitute general partners.
After the filing of a limited partnership's original certificate of limited
partnership, additional or substitute general partners may be admitted as
provided in writing in the partnership agreement, or if the partnership agreement
does not provide in writing for the admission of additional or substitute general
partners, with the written consent of all partners.
Comments
1. This section as revised by the 1985 RULPA Amendment is similar to Section
9(1) (e) of the 1916 Uniform Act. It provides that the partnership agreement is
to determine the procedure for authorizing the admission of additional general
partners. Only when the partnership agreement is silent does this section
provide for an admission procedure requiring the written consent of all partners.
Under the wording of this section in the 1976 Uniform Act Official Text, many
authorities believed that it was not permissible to have a provision in the
partnership agreement authorizing less than unanimous consent for admission of
a general partner.
2. This section specifically refers to substitute and additional general
partners whereas RULPA only refers to additional general partners. See also
Section 33-42-1410. Using both terms avoids the possibility of legal problems
that might result from interpreting the word 'additional' as only applying to an
increase in the total number of general partners and therefore excluding a new
general partner that replaces a general partner who has died or has retired.
Derivation: Section 401 of RULPA.
Section 33-42-620. Events of withdrawal.
Except as approved by the specific written consent of all partners at the time,
a person ceases to be a general partner of a limited partnership upon the
happening of any of the following events:
(1) the general partner withdraws from the limited partnership as provided in
Section 33-42-1020;
(2) the general partner ceases to be a member of the limited partnership as
provided in Section 33-42-1220;
(3) the general partner is removed as a general partner in accordance with the
partnership agreement;
(4) unless otherwise provided in writing in the limited partnership agreement,
the general partner:
(i) makes an assignment for the benefit of creditors;
(ii) files a voluntary petition in bankruptcy;
(iii) is adjudicated a bankrupt or insolvent;
(iv) files a petition or answer seeking for himself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any statute, law, or regulation;
(v) files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against him in any proceeding of this
nature; or
(vi) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver, or liquidator of the general partner or of all or any substantial part
of his properties;
(5) unless otherwise provided in writing in the limited partnership agreement,
one hundred twenty days after the commencement of any proceeding against the
general partner seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any statute, law, or
regulation, the proceeding has not been dismissed, or if within ninety days after
the appointment without his consent or acquiescence of a trustee, receiver, or
liquidator of the general partner or of all or any substantial part of his
properties, the appointment is not vacated or stayed or within ninety days after
the expiration of any such stay, the appointment is not vacated;
(6) in the case of a general partner who is a natural person,
(i) his death; or
(ii) the entry of an order by a court of competent jurisdiction adjudicating
him incompetent to manage his person or his estate;
(7) in the case of a general partner who is acting as a general partner by
virtue of being a trustee of a trust, the termination of the trust (but not
merely the substitution of a new trustee);
(8) in the case of a general partner that is a separate partnership, the
dissolution and commencement of winding up of the separate partnership;
(9) in the case of a general partner that is a corporation, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; or
(10) in the case of an estate, the distribution by the fiduciary of the
estate's entire interest in the partnership.
Comments
This section expands considerably the provisions of Section 20 of the 1916
Uniform Act which provided for dissolution in the event of the retirement, death,
or insanity of a general partner. Subdivisions (1), (2), and (3) recognize that
the general partner's agency relationship is terminable at will, although it may
result in a breach of the partnership agreement giving rise to an action for
damages. Subdivisions (4) and (5) reflect a judgment that, unless the limited
partners agree otherwise, they ought to have the power to rid themselves of a
general partner who is in such dire financial straits that he is the subject of
proceedings under the National Bankruptcy Act or a similar provision of law.
Subdivisions (6) through (10) simply elaborate on the notion of death in the case
of a general partner who is not a natural person. Of course, the addition of the
words 'and in the partnership agreement' was not intended to suggest that
liabilities to third parties could be affected by provisions in the partnership
agreement. Subdivisions (4) and (5) of the 1976 Uniform Act Official Text were
amended by the 1985 RULPA Amendments to conform with the changes made in RULPA
Section 201 (Section 33-42-210) which eliminated the requirement for certain
information in the certificate of limited partnership.
Derivation: Section 402 of RULPA.
Section 33-42-630. General powers and liabilities.
(a) Except as provided in this chapter or in the partnership agreement, a
general partner of a limited partnership has the rights and powers and is subject
to the restrictions of a partner in a partnership without limited partners.
(b) Except as provided in this chapter, a general partner of a limited
partnership has the liabilities of a partner in a partnership without limited
partners to persons other than the partnership and the other partners. Except
as provided in this chapter or in the partnership agreement, a general partner
of a limited partnership has the liabilities of a partner in a partnership
without limited partners to the partnership and to the other partners.
Comments
This section is derived from Section 9(1) of the 1916 Uniform Act. It states
the powers and liabilities of a partner who is a general partner in a limited
partnership. See also Section 33-42-2020.
Derivation: Section 403 of RULPA.
Section 33-42-640. Contributions by general partner.
A general partner of a limited partnership may make contributions to the
partnership and share in the profits and losses of, and in distributions from,
the limited partnership as a general partner. A general partner also may make
contributions to and share in profits, losses, and distributions as a limited
partner. A person who is both a general partner and a limited partner has the
rights and powers, and is subject to the restrictions and liabilities, of a
general partner and, except as provided in the partnership agreement, also has
the powers, and is subject to the restrictions, of a limited partner to the
extent of his participation in the partnership as a limited partner.
Comments
This section is derived from Section 12 of the 1916 Uniform Act and makes clear
that the partnership agreement may provide that a general partner who is also a
limited partner may exercise all of the powers of a limited partner, but
nevertheless is subject to the same liability as a general partner who is not a
limited partner.
Derivation: Section 404 of RULPA.
Section 33-42-650. Voting.
The partnership agreement may grant to all or certain identified general
partners the right to vote (on a per capita or any other basis), separately or
with all or any class of the limited partners, on any matter.
Comments
This section has no counterpart in the 1916 Uniform Act and is intended to make
clear that this chapter does not require that the limited partners have any
automatic right to vote on matters as a separate class. At the same time, this
section authorizes the general partners to vote on issues independently of or in
conjunction with the limited partners on any basis set forth in the partnership
agreement. Cf. Section 33-42-430(b) (6) for a list of issues on which limited
partners may be given voting rights without exposure to the unlimited liability
of general partners.
Derivation: Section 405 of RULPA.
ARTICLE 5
FINANCE
Section 33-42-810. Form of contribution.
The contribution of a partner may be in cash, property, or services rendered,
or a promissory note or other obligation to contribute cash or property or to
perform services.
Comments
As noted in the comments on the defined term 'contribution' in Section
33-42-20, this explicit permission to make contributions of services expands
Section 4 of the 1916 Uniform Act. See also Section 33-42-820.
Derivation: Section 501 of RULPA.
Section 33-42-820. Liability for contributions.
(a) A promise by a limited partner to contribute to the limited partnership
is not enforceable unless set out in a writing signed by the limited partner.
(b) Except as provided in the partnership agreement, a partner is obligated
to the limited partnership to perform any enforceable promise to contribute cash
or property or to perform services, even if he is unable to perform because of
death, disability, or any other reason. If a partner does not make the required
contribution of property or services, he is obligated at the option of the
limited partnership to contribute cash equal to that portion of the value (as
stated in the partnership records required to be kept pursuant to Section
33-42-60) of the stated contribution that has not been made.
(c) Unless otherwise provided in the partnership agreement, the obligation of
a partner to make a contribution or return money or other property paid or
distributed in violation of this chapter may be compromised only by consent of
all the partners. Notwithstanding the compromise, a creditor of a limited
partnership who extends credit or otherwise acts in reliance on that obligation
after the partner signs a writing which reflects the obligation, and before the
amendment or cancellation thereof to reflect the compromise, may enforce the
original obligation.
Comments
1. This section is new and reflects the need for a promise of capital
contributions to be in writing to be enforceable against a limited partner since
the certificate of limited partnership no longer indicates capital contributions;
Under the 1916 Uniform Act and the 1976 Uniform Act Official Text, a promise in
writing was unnecessary since future capital contributions were indicated on the
certificate of limited partnership which was signed by all limited partners.
2. Although Section 17(1) of the 1916 Uniform Act required a partner to
fulfill his promise to make contributions, the addition of contributions in the
form of a promise to render services means that a partner who is unable to
perform those services because of death or disability as well as because of an
intentional default is required to pay the cash value of the services unless the
partnership agreement otherwise provides.
3. Subdivision (c) is derived, in part, from Section 17(3) of the 1916 Uniform
Act, but expands prior law by allowing not only a creditor who extends credit
after a partner signs an obligation to enforce the obligation prior to any filing
of a certificate of amendment or cancellation to reflect a compromise of such
obligation, but also extends this right to any creditor who otherwise acts in
reliance on such obligation before such obligation is compromised.
Derivation: Section 502 of RULPA.
Section 33-42-830. Sharing of profits and losses.
The profits and losses of a limited partnership must be allocated among the
partners, and among classes of partners, in the manner provided in writing in the
partnership agreement. If the partnership agreement does not so provide in
writing profits and losses shall be allocated on the basis of the value (as
stated in the partnership records required to be kept pursuant to Section
34-42-60) of the contributions made by each partner to the extent they have been
received by the partnership and have not been returned.
Comments
This section is new. The 1916 Uniform Act did not provide for the basis on
which partners share profits and losses in the absence of agreement. As amended
by the 1985 RULPA Amendments, this section also amends the 1976 Uniform Act
Official Text by requiring that any agreement allocating profits and losses be
in writing; previously such information was required to be described in the
certificate of limited partnership.
Derivation: Section 503 of RULPA.
Section 33-42-840. Sharing of distributions.
Distributions of cash or other assets of a limited partnership must be
allocated among the partners, and among classes of partners, in the manner
provided in writing in the partnership agreement. If the partnership agreement
does not so provide in writing distributions shall be made on the basis of the
value (as stated in the partnership records required to be kept pursuant to
Section 34-42-60) of the contributions made by each partner to the extent they
have been received by the partnership and have not been returned.
Comments
This section is new. The 1916 Uniform Act did not provide for the basis on
which partners share distributions in the absence of agreement. As amended by
the 1985 RULPA Amendments, this section also amends the 1976 Uniform Act Official
Text by requiring that any agreement allocating distributions be in writing;
previously such information was required to be described in the certificate of
limited partnership. This section also recognizes that partners may choose to
share in distributions on a different basis than they share in profits and
losses.
Derivation: Section 504 of RULPA
"ARTICLE 6"
DISTRIBUTIONS AND WITHDRAWAL
Section 33-42-1010. Interim distributions.
Except as provided in this chapter, a partner is entitled to receive
distributions from a limited partnership before his withdrawal from the limited
partnership and before the dissolution and winding up thereof to the extent and
at the times, or upon the happenings of the events specified in the partnership
agreement.
Comments
This section has no counterpart in the 1916 Uniform Act. The 1976 Uniform Act
Official Text has been amended by the 1985 RULPA Amendments to reflect the
changes made in RULPA Section 201 (Section 33-42-210).
Derivation: Section 601 of RULPA.
Section 33-42-1020. Withdrawal of general partner.
A general partner may withdraw from a limited partnership at any time by giving
written notice to the other partners, but if the withdrawal violates the
partnership agreement, the limited partnership may recover from the withdrawing
general partner damages for breach of the partnership agreement and offset the
damages against the amount otherwise distributable to him.
Comments
This section is new but is generally derived from Section 38 of the Uniform
Partnership Act (Section 33-41-1040).
Derivation: Section 602 of RULPA.
Section 33-42-1030. Withdrawal of limited partner.
A limited partner may withdraw from a limited partnership at the time or upon
the happening of events specified in writing in the partnership agreement. If
the agreement does not specify in writing the time or the events upon the
happening of which a limited partner may withdraw or a definite time for the
dissolution and winding up of the limited partnership, a limited partner may
withdraw upon not less than six months' prior written notice to each general
partner at his address on the books of the limited partnership at its office
required to be maintained pursuant to Section 33-42-50(1) in this State.
Comments
This section is derived from Section 16(c) of the 1916 Uniform Act. The 1976
Uniform Act Official Text has been amended by the 1976 RULPA Amendment to reflect
the changes made in RULPA Section 201 (Section 33-42-210).
Derivation: Section 603 of RULPA.
Section 33-42-1040. Distribution upon withdrawal.
Except as provided in this chapter, upon withdrawal any withdrawing partner is
entitled to receive any distribution to which he is entitled under the
partnership agreement and, if not otherwise provided in the agreement, he is
entitled to receive, within a reasonable time after withdrawal, the fair value
of his interest in the limited partnership as of the date of withdrawal based
upon his right to share in distributions from the limited partnership.
Comments
This section has no counterpart in the 1916 Uniform Act. It fixes the
distributive share of a withdrawing partner in the absence of an agreement among
the partners.
Derivation: Section 604 of RULPA.
Section 33-42-1050. Distribution in kind.
Except as provided in writing in the partnership agreement, a partner,
regardless of the nature of his contribution, has no right to demand and receive
any distribution from a limited partnership in any form other than cash. Except
as provided in writing in the partnership agreement, a partner may not be
compelled to accept a distribution of any asset in kind from a limited
partnership to the extent that the percentage of the asset distributed to him
exceeds a percentage of that asset which is equal to the percentage in which he
shares in distributions from the limited partnership.
Comments
The first sentence of this section is derived from Section 16(3) of the 1916
Uniform Act. The 1976 Uniform Act Official Text has been amended by the 1985
RULPA Amendments to reflect the changes made in RULPA Section 201 (Section
33-42-210). The second sentence is new, and is intended to protect a limited
partner (and the remaining partners) against a distribution in kind of more than
his share of particular assets.
Derivation: Section 605 of RULPA.
Section 33-42-1060. Right to distribution.
At the time a partner becomes entitled to receive a distribution, he has the
status of, and is entitled to all remedies available to a creditor of the limited
partnership with respect to the distribution.
Comments
This section, which has no counterpart in the 1916 Uniform Act, is intended to
make it clear that the right of a partner to receive a distribution, as between
the partners, is not subject to the equity risks of the enterprise. On the other
hand, since partners entitled to distributions have creditor status, there did
not seem to be a need for the extraordinary remedy of Section 16(4) of the 1916
Uniform Act, which granted a limited partner the right to seek dissolution of the
partnership if he was unsuccessful in demanding the return of his contribution.
It is more appropriate for the partner to simply sue as an ordinary creditor and
obtain a judgment.
Derivation: Section 606 of RULPA.
Section 33-42-1070. Limitations on distribution.
A partner may not receive a distribution from a limited partnership to the
extent that, after giving effect to the distribution, all liabilities of the
limited partnership, other than liabilities to partners on account of their
partnership interests, exceed the fair value of the partnership assets.
Comments
This section is derived from Section 16(1) (a) of the 1916 Uniform Act.
Derivation: Section 607 of RULPA.
Section 33-42-1080. Liability upon return of contribution.
(a) If a partner has received the return of any part of his contribution
without violation of the partnership agreement or this chapter, he is liable to
the limited partnership for a period of one year thereafter for the amount of the
returned contribution, but only to the extent necessary to discharge the limited
partnership's liabilities to creditors who extended credit to the limited
partnership during the period the contribution was held by the partnership.
(b) If a partner has received the return of any part of his contribution in
violation of the partnership agreement or this chapter, he is liable to the
limited partnership for a period of six years thereafter for the amount of the
contribution wrongfully returned.
(c) A partner receives a return of his contribution to the extent that a
distribution to him reduces his shares of the fair value of the net assets of the
limited partnership below the value (as set forth in the partnership records
required to be kept pursuant to Section 33-42-60) of his contribution which has
not been distributed to him.
Comments
Paragraph (a) is derived from Section 17(4) of the 1916 Uniform Act, but the
one year statute of limitations has been added. Paragraph (b) is derived from
Section 17(2)(b) of the 1916 Uniform Act but, again, a statute of limitations has
been added. Paragraph (c) is new. The provisions of Section 17(2) of the 1916
Uniform Act that referred to the partner holding as "trustee" any money
or specific property wrongfully returned to him have been eliminated. Paragraph
(c) of the 1976 Uniform Act Official Text has been amended by the 1985 RULPA
Amendments to reflect the changes made in RULPA Section 201 (Section 33-42-210).
Derivation: Section 608 of RULPA.
ARTICLE 7
ASSIGNMENT OF PARTNERSHIP INTERESTS
Section 33-42-1210. Nature of partnership interest.
A partnership interest is personal property.
Comments
This section is derived from Section 18 of the 1916 Uniform Act.
Derivation: Section 701 of RULPA.
Section 33-42-1220. Assignment of partnership interest.
Except as provided in the partnership agreement, a partnership interest is
assignable in whole or part. An assignment of a partnership interest does not
dissolve a limited partnership or entitle the assignee to become or to exercise
any rights of a partner. An assignment entitles the assignee to receive, to the
extent assigned, only the distribution to which the assignor would be entitled.
Except as provided in the partnership agreement, a partner ceases to be a partner
upon assignment of all his partnership interest.
Comments
Section 19(1) of the 1916 Uniform Act provided simply that 'a limited partner's
interest is assignable,' raising a question whether any limitations on the right
of assignment were permitted. While the first sentence of this section
recognizes that the power to assign may be restricted in the partnership
agreement, there is no intention to affect in any way the usual rules regarding
restraints on alienation of personal property. The second and third sentences
of this section are derived from Section 19(3) of the 1916 Uniform Act. The last
sentence is new.
Derivation: Section 702 of RULPA.
Section 33-42-1230. Rights of creditor.
On application to a court of competent jurisdiction by any judgment creditor
of a partner, the court may charge the partnership interest of the partner with
payment of the unsatisfied amount of the judgment with interest. To the extent
so charged, the judgment creditor has only the rights of an assignee of the
partnership interest. This chapter does not deprive any partner of the benefit
of any exemption laws applicable to his partnership interest.
Comments
This section is derived from Section 22 of the 1916 Uniform Act but has not
carried over some provisions that were thought to be superfluous. For example,
references in Sections 22(1) to specific remedies have been omitted, as has a
prohibition in Section 22(2) against discharge of the lien with partnership
property. Ordinary rules governing the remedies available to a creditor and the
fiduciary obligations of general partners will determine these matters.
Derivation: Section 703 of RULPA.
Section 33-42-1240. Right of assignee to become limited partner.
(a) An assignee of a partnership interest, including an assignee of a general
partner, may become a limited partner if and to the extent that (i) the assignor
gives the assignee that right in accordance with authority described in the
partnership agreement, or (ii) all other partners consent.
(b) An assignee who has become a limited partner has, to the extent assigned,
the rights and powers, and is subject to the restrictions and liabilities, of a
limited partner under the partnership agreement and this chapter. An assignee
who becomes a limited partner also is liable for the obligations of his assignor
to make and return contributions as provided in Articles 5 and 6. However the
assignee is not obligated for liabilities unknown to the assignee at the time he
became a limited partner.
(c) If an assignee of a partnership interest becomes a limited partner, the
assignor is not released from his liability to the limited partnership under
Section 33-42-270 and Section 33-42-820.
Comments
This section is derived from Section 19 of the 1916 Uniform Act but paragraph
(b) defines more narrowly than Section 19 the obligations of the assignor that
are automatically assumed by the assignee. The 1976 Uniform Act Official Text
has been amended by the 1985 RULPA Amendments to reflect the changes made in
RULPA Section 201 (Section 33-42-210).
Section 33-42-1250. Power of estate of deceased or incompetent partner.
If a partner who is an individual dies or a court of competent jurisdiction
adjudges him to be incompetent to manage his person or his property, the
partner's executor, administrator, guardian, conservator, or other legal
representative may exercise all the partner's rights for the purpose of settling
his estate or administering his property, including any power the partner had to
give an assignee the right to become a limited partner. If a partner is a
corporation, trust, or other entity and is dissolved or terminated, the powers
of that partner may be exercised by its legal representative or successor.
Comments
This section is derived from Section 21(1) of the 1916 Uniform Act. Former
Section 21(2), making a deceased limited partner's estate liable for his
liabilities as a limited partner was deleted as superfluous, with no intention
of changing the liability of the estate.
Derivation: Section 705 of RULPA.
ARTICLE 8
DISSOLUTION
Section 33-42-1410. Nonjudicial dissolution.
A limited partnership is dissolved and its affairs must be wound up upon the
happening of the first to occur of the following:
(1) at the time specified in the certificate of limited partnership;
(2) upon the happening of events specified in writing in the partnership
agreement;
(3) written consent of all partners;
(4) an event of withdrawal of a general partner unless (a) at the time there
is at least one other general partner and the written provisions of the
partnership agreement permit the business of the limited partnership to be
carried on by the remaining general partner and that partner does so, or (b)
within ninety days after the withdrawal, all remaining partners agree in writing
to continue the business of the limited partnership and pursuant to Section
33-42-610 to the admission of one or more additional or substitute general
partners if necessary or desired; or
(5) entry of a decree of judicial dissolution under Section 33-42-1420.
Comments
This section merely collects in one place all of the events causing nonjudicial
dissolution. Paragraph (3) is derived from Sections 9(1)(g) and 20 of the 1916
Uniform Act, but adds the ninety-day grace period. The 1976 Uniform Act Official
Text has been amended by the 1985 RULPA Amendments to reflect the changes made
in RULPA Section 201 (Section 33-42-21). See also Comment 2 to Section
33-42-210.
Derivation: Section 801 of RULPA.
Section 33-42-1420. Judicial dissolution.
On application by or for a partner the circuit court of the county in which the
limited partnership's office designated pursuant to Section 33-42-50(1) is
located may decree dissolution of a limited partnership whenever it is not
reasonably practicable to carry on the business in conformity with the
partnership agreement.
Comments
This section has no counterpart in the 1916 Uniform Act. Cf. Section
33-42-250, which establishes the venue for suits to compel execution of a
certificate of limited partnership and Section 33-42-1430, which establishes the
venue in a winding-up case. All three sections set the venue as the circuit
court of the county in which the partnership's registered office in this State
is located.
Derivation: Section 802 of RULPA.
Section 33-42-1430. Winding up.
Except as provided in the partnership agreement, the general partners who have
not wrongfully dissolved a limited partnership or, if none, the limited partners,
may wind up the limited partnership's affairs; but the circuit court of the
county in which the limited partnership's office designated pursuant to Section
33-42-50 (1) is located may wind up the limited partnership's affairs upon
application of any partner, his legal representative, or assignee.
Comments
This section is new and is derived in part from Section 37 of the Uniform
Partnership Act (Section 33-41-1030).
Derivation: Section 803 of RULPA.
Section 33-42-1440. Distribution of assets.
Upon the winding up of a limited partnership, the assets must be distributed
as follows:
(1) to creditors, including partners who are creditors, to the extent
permitted by law, in satisfaction of liabilities of the limited partnership other
than liabilities for distributions to partners under Section 33-42-1010 or
Section 33-42-1040;
(2) except as provided in the partnership agreement, to partners and former
partners in satisfaction of liabilities for distributions under Section
33-42-1010 or Section 33-42-1040; and
(3) except as provided in the partnership agreement, to partners first for the
return of their contributions and secondly respecting their partnership
interests, in the proportions in which the partners share in distributions.
Comments
This section revises Section 23 of the 1916 Uniform Act by providing that (1)
to the extent partners are also creditors, other than in respect to their
interests in the partnership, they share with other creditors, (2) once the
partnership's obligation to make a distribution accrues, it must be paid before
any other distributions of an 'equity' nature are made, and (3) general and
limited partners rank on the same level except as otherwise provided in the
partnership agreement.
Derivation: Section 804 of RULPA.
ARTICLE 9
FOREIGN LIMITED PARTNERSHIPS
Section 33-42-1610. Law governing.
(a) Subject to the Constitution of this State, (1) the laws of the state under
which a foreign limited partnership is organized govern its organization and
internal affairs and the liability of its limited partners, and (2) a foreign
limited partnership may not be denied registration by reason of any difference
between those laws and the laws of this State.
(b) A foreign limited partnership may transact any business in this State that
a limited partnership formed in this State may carry on.
Comments
This section and the remaining sections in this article have no counterparts
in the 1916 Uniform Act. Their purpose is to require registration of limited
partnerships formed in another state that are transacting business in this State
along the lines of foreign corporation registration statutes in business
corporation statutes. See Section 33-23-10 through Section 33-23-150 of the 1976
South Carolina Code. Most of the provisions in this article were first enacted
in South Carolina in Act 306 of 1982, two years before the passage of Act 491 of
1984, which enacted the entire 1976 Uniform Act.
Derivation: Section 901 of RULPA.
Section 33-42-1620. Registration.
Before transacting business in this State, a foreign limited partnership shall
register with the Secretary of State. In order to register, a foreign limited
partnership shall submit to the Secretary of State, in duplicate, an application
for registration as a foreign limited partnership, signed and sworn to by a
general partner and setting forth:
(1) the name of the foreign limited partnership and, if different, the name
under which it proposes to register and transact business in this State;
(2) the state and date of its formation;
(3) the name and address of any agent for service of process on the foreign
limited partnership whom the foreign limited partnership elects to appoint; the
agent must be an individual resident of this State, a domestic corporation, or
a foreign corporation having a place of business in, and authorized to do
business in, this State;
(4) a statement that the Secretary of State is appointed the agent of the
foreign limited partnership for service of process if no agent has been appointed
under subsection (3) or, if appointed, the agent's authority has been revoked or
if the agent cannot be found or served with the exercise of reasonable diligence;
(5) the address of the office required to be maintained in the state of its
organization by the laws of that state or, if not so required, of the principal
office of the foreign limited partnership;
(6) the name and a mailing address of each general partner; and
(7) the address of the office at which is kept a list of the names and
addresses of the limited partners and their capital contributions, together with
an undertaking by the foreign limited partnership to keep those records until the
foreign limited partnership's registration in this State is cancelled or
withdrawn.
Comments
This section is new. See the Comment to Section 33-42-1610. It was thought
that requiring a full copy of the certificate of limited partnership and all
amendments thereto to be filed in each state in which the partnership does
business would impose an unreasonable burden on interstate limited partnerships
and that the information on file was sufficient to tell interested persons where
they could write to obtain copies of those basic documents. As amended by the
1985 RULPA Amendments, subsections (6) and (7) vary from the 1976 Uniform Act
Official Text in that, as is the case with a certificate of limited partnership
for a domestic partnership, the application for registration of a foreign limited
partnership need not set out the names, addresses, or capital contributions of
the limited partners provided an appropriate undertaking is made by the general
partners to maintain adequate records of such information while the partnership's
registration is in effect.
Derivation: Section 902 of RULPA.
Section 33-42-1630. Issuance of registration.
(a) If the Secretary of State finds that an application for registration
conforms to law and all requisite fees have been paid, he shall:
(1) endorse on the application the word 'Filed', and the month, day, and
year of the filing thereof;
(2) file in his office a duplicate original of the application; and
(3) issue a certificate of registration to transact business in this State.
(b) The certificate of registration, together with a duplicate original of the
application, shall be returned to the person who filed the application or his
representative.
Comments
This section is new. See the Comment to Section 33-42-1610.
Derivation: Section 903 of RULPA.
Section 33-42-1640. Name.
(a) A foreign limited partnership may register with the Secretary of State
under any name (whether or not it is the name under which it is registered in its
state of organization) that could be registered by a domestic limited partnership
under Section 33-42-30.
(b) A foreign limited partnership transacting business in this State under a
name other than the name shown on the certificate of registration shall comply
with provisions of Section 33-42-45.
Comments
This section is new. See the Comment to Section 33-42-1610. Paragraph (b),
which requires foreign limited partnerships transacting business in South
Carolina under an assumed name to comply with the assumed name filing requirement
applicable to limited partnerships formed in South Carolina, is not part of the
RULPA Official Text. See also Comment 2 to Section 33-42-30.
Derivation: Section 904 of RULPA.
Section 33-42-1650. Changes and amendments.
If any statement in the application for registration of a foreign limited
partnership was false when made or any arrangements or other facts described have
changed, making the application inaccurate in any respect, the foreign limited
partnership shall promptly file in the office of the Secretary of State a
certificate, signed and sworn to by a general partner, correcting such statement.
Comments
This section is new. See the Comment to Section 33-42-1610.
Derivation: Section 905 of RULPA.
Section 33-42-1660. Cancellation of registration.
A foreign limited partnership may cancel its registration by filing with the
Secretary of State a certificate of cancellation signed and sworn to by a general
partner. A cancellation does not terminate the authority of the Secretary of
State to accept service of process on the foreign limited partnership with
respect to causes of action arising out of the transactions of business in this
State.
Comment
This section is new. See the Comment to Section 33-42-1610.
Derivation: Section 906 of RULPA.
Section 33-42-1670. Transaction of business without registration.
(a) A foreign limited partnership transacting business in this State may not
maintain any action, suit, or proceeding in any court of this State until it has
registered in this State.
(b) The failure of a foreign limited partnership to register in this State
does not impair the validity of any contract or act of the foreign limited
partnership or prevent the foreign limited partnership from defending any action,
suit, or proceeding in any court of this State.
(c) A limited partner of a foreign limited partnership is not liable as a
general partner of the foreign limited partnership solely by reason of having
transacted business in this State without registration.
(d) A foreign limited partnership, by transacting business in this State
without registration, appoints the Secretary of State as its agent for service
of process with respect to causes of action arising out of the transaction of
business in this State.
Comments
This section is new. See the Comment to Section 33-42-1610. See also Section
33-42-1690 for a nonexclusive list of activities that are not deemed to involve
the 'transaction of business.'
Derivation: Section 907 of RULPA.
Section 33-42-1680. Action of Attorney General.
The Attorney General may bring an action to restrain a foreign limited
partnership from transacting business in this State in violation of this chapter.
Comments
This section is new. See the Comment to Section 33-42-1610.
Derivation: Section 907 of RULPA.
Section 33-42-1690. Activities not deemed transacting business.
(a) Without excluding other activities which may not constitute transacting
business in this state, a foreign limited partnership shall not be deemed to be
transacting business in this State, for purposes of this chapter, solely by
reason of carrying on in this State any one or more of the following activities:
(1) maintaining, defending, or participating in any action, suit, or
proceeding whether judicial, administrative, arbitrative, or otherwise, or
effecting the settlement thereof or the settlement of claims or disputes;
(2) holding meetings of its partners or of committees thereof or carrying
on other activities concerning its internal affairs;
(3) maintaining bank accounts;
(4) maintaining offices or agencies for the transfer, exchange, and
registration of its securities, or appointing and maintaining trustees;
(5) borrowing or lending or acquiring indebtedness or mortgages or other
security interests in real or personal property;
(6) securing or collecting debts or enforcing any rights in property
securing the same;
(7) effecting a transaction in interstate or foreign commerce;
(8) owning or controlling a corporation incorporated in or transacting
business within this State;
(9) conducting within this State an isolated transaction which is completed
within a period of one hundred and eighty days and which is not in the course of
a series or number of repeated transactions;
(10) effecting sales through independent contractors; or
(11) soliciting or procuring orders, whether by mail or through employees
or agents or otherwise, where such orders require acceptance without this State
before becoming binding contracts.
(b) The provisions of this section shall not be deemed to establish a standard
for activities which may subject a foreign limited partnership to service of
process, suit, taxation, or regulation under this chapter or any other statute
of this State.
Comments
This section, which contains a nonexclusive list of activities which are not
deemed to be 'transacting business' in this State, has no counterpart in the
RULPA Official Text. It tracks Section 33-23-l0(b) which contains a similar list
applicable to foreign corporations operating in this State, and similar statutes
adopted by other states applicable to foreign limited partnerships.
Derivation: There is no RULPA counterpart to this section. See the Comment.
ARTICLE 10
DERIVATIVE ACTIONS
Section 33-42-1810. Right of action.
A limited partner may bring an action in the right of a limited partnership to
recover a judgment in its favor if general partners with authority to do so have
refused to bring the action or if an effort to cause those general partners to
bring the action is not likely to succeed.
Comment
This section and the remaining Sections in this article have no counterpart in
the 1916 Uniform Act. The uncertainty in the case law concerning the legal
authority of a limited partner to bring a derivative action justifies these
provisions, which are modeled on corporate derivative action statutes. See
Section 33-11-290 of the 1976 South Carolina Code.
Derivation: Section 1001 of RULPA.
Section 33-42-1820. Proper plaintiff.
In a derivative action, the plaintiff must be a partner at the time of bringing
the action and (1) must have been a partner at the time of the transaction of
which he complains or (2) his status as a partner must have devolved upon him by
operation of law or pursuant to the terms of the partnership agreement from a
person who was a partner at the time of the transaction.
Comment
This section is new. See the Comment to Section 33-42-1810.
Derivation: Section 1002 of RULPA.
Section 33-42-1830. Pleading.
In a derivative action, the complaint shall set forth with particularity the
effort of the plaintiff to secure initiation of the action by a general partner
or the reasons for not making the effort.
Comment
This section is new. See the Comment to Section 33-42-1810.
Derivation: Section 1003 of RULPA.
Section 33-42-1840. Expenses.
If a derivative action is successful, in whole or in part, or if anything is
received by the plaintiff as a result of a judgment, compromise, or settlement
of an action or claim, the court may award the plaintiff reasonable expenses,
including reasonable attorney's fees, and shall direct him to remit to the
limited partnership the remainder of those proceeds received by him.
Comment
This section is new. See the Comment to Section 33-42-1810.
Derivation: Section 1004 of RULPA.
ARTICLE 11
MISCELLANEOUS
Section 33-42-2010. Construction and application.
This chapter must be so applied and construed to effectuate its general purpose
to make uniform the law with respect to the subject of this chapter among states
enacting it.
Comment
The rule that statutes in derogation of the common law are to be strictly
construed has no application to this chapter.
Derivation: Section 1101 of RULPA.
Section 33-42-2020. Rules for cases not provided for in this chapter.
In any case not provided for in this chapter the provisions of the Uniform
Partnership Act govern.
Comment
This section is derived from Section 6(2) of the Uniform Partnership Act,
Section 33-41-210 of the 1976 South Carolina Code.
Derivation: Section 1105 of RULPA.
Section 33-42-2030. Severability.
If any provision of this chapter or its application to any person or
circumstance is held invalid, the invalidity does not affect other provisions or
applications of the chapter which can be given effect without the invalid
provision or application, and to this end the provisions of this chapter are
severable.
Comments
This section is a standard boilerplate statutory provision that expresses
legislative intent to guard against a court order holding an entire statute
invalid just because one of its provisions is invalid.
Derivation: Section 1103 of RULPA.
Section 33-42-2040. Filing Fees.
(a) The Secretary of State shall charge ten dollars for filing any document
required to be filed pursuant to this chapter. This charge shall include the cost
of sending to the person requesting the filing, or that person's designee, a
duplicate copy of the document submitted with the original showing the date of
filing.
(b) In all other cases of requests for copies of documents filed pursuant to
this chapter, the Secretary of State shall charge one dollar for the first page,
fifty cents for each additional page, and two dollars for furnishing a
certificate under seal.
Comments
This section, which has no counterpart in the RULPA Official Text, supercedes
Section 8-21-110 of the 1976 South Carolina Code as far as limited partnership
filing fees are concerned.
Derivation: There is no RULPA counterpart to this section. See the
Comment."
Analysis lines not part of section
SECTION 2. The analysis lines following the code sections in this act are not
intended as part of the sections but are only for purposes of identification.
Comments not part of sections
SECTION 3. The comments following each code section in Section 1 are included
for analytical and information purposes only and must not be considered to be
part of the sections themselves.
Partnership may sue and be sued as separate entity
SECTION 4. Article 1 of Chapter 5 of Title 15 of the 1976 Code is amended by
adding:
"Section 15-5-45. Any partnership formed under the laws of this State or
of another jurisdiction shall have the capacity with or without the joinder of
one or more of its partners, to sue and be sued in the courts and agencies of
this State as a separate entity under the name specified in any recorded
certificate of partnership, or, if the partnership conducts business under an
assumed name or there is no recorded certificate, under the name by which it does
business. All judgments and executions against any such partnership shall bind
its real and personal property. Its partners shall also be liable for judgment
and be subject to execution to the extent and in the manner provided by
law."
Liability of partners
SECTION 5. Section 33-41-370 of the 1976 Code is amended to read:
"Section 33-41-370. All partners are liable jointly and severally for
everything chargeable to the partnership."
Time effective
SECTION 6. Except as otherwise set forth in Section 33-42-220(g) in Section 1
of this act and subsections (1), (2), and (3) below, this act shall take effect
on September 1, 1986, and shall govern all limited partnerships formed in this
State before or after its effective date.
(1) Section 33-42-45 in Section 1 of this act shall only be mandatory with
respect to limited partnerships formed after its effective date.
(2) Unless agreed otherwise by the partners, the applicable provisions of
Chapter 43 of Title 33 of the 1976 Code, the repeal of which was confirmed by Act
11 of 1985 which corrected a clerical error in Section 3 of Act 491 of 1984,
governing allocation of profits and losses (rather than the provisions of Section
33-42-830), distributions to a withdrawing partner (rather than the provisions
of Section 33-42-1040), and distribution of assets upon the winding up of a
limited partnership (rather than the provisions of Section 33-42-1440) shall
govern limited partnerships formed before June 27, 1984.
(3) The repeal of any statutory provision by this act, Act 491 of 1984, or by
Act 11 of 1985 does not impair, or otherwise affect, the organization or the
continued existence of a limited partnership existing at the effective date of
these acts, nor does the repeal of any existing statutory provision by those acts
impair any contract or affect any right accrued before the effective date of this
act." |