|SB 0496||Enacts provisions of Revised Uniform Partnership Act|
|LR Number:||S1927.01I||Fiscal Note:||1927-01|
|Committee:||Financial and Governmental Organization|
|Last Action:||03/03/99 - Referred S Financial & Governmental Organization||Journal page:||S401|
|Effective Date:||August 28, 1999|
SB 496 - This act enacts the Revised Uniform Partnership Act (RUPA) as recommended by the National Conference of Commissioners of Uniform State Laws. The provisions are effective January 1, 2000, but are not mandatory until January 1, 2005. Partnerships formed after January 1, 2000, have the option of proceeding under the revised law or the previous partnership provisions, but partnerships formed after January 1, 2005, must proceed under the revised law.
One of the most significant changes from existing law is the conceptual nature of the partnership itself. Current law contains provisions which sometimes view partnerships as just a collection of the partners and sometimes as a legal entity itself. RUPA clarifies that a general partnership is a legal entity that can own and convey property and sue and be sued in its own name; the partnership continues in existence even when one of more of the partners leave. Property acquired by the partnership does not belong to the partners individually; the act specifies the conditions under which property is acquired by the partnership.
The act redefines "conveyance" as "transfer" and contains new definitions for distribution, partnership, partnership agreement, partnership at will, property, state and statement. The act explicitly states the default rules which, with some exceptions, can be varied or restricted by the partnership agreement. Areas in which the partnership agreement are not permitted to override the default rule include not allowing the partnership agreement to eliminate a partner's duty of loyalty or obligation of good faith and fair dealing and not allowing the agreement to unreasonably reduce a partner's duty of care.
Requirements are specified for filing, amending and canceling partnership statements. The act allows centralized filing in the Secretary of State's office. Five types of authorized statements are specified: a statement of partnership authority; a statement of denial of partnership authority; a statement of dissociation; a statement of dissolution; and a statement of merger.
The act clarifies that the partnership is liable for all actionable misconduct of a partner. The partnership is liable for property belonging to a third party that is taken improperly by a partner even if the partnership never actually receives the property. Partners are jointly and severally liable for all partnership obligations "unless otherwise agreed by the claimant or provided by law".
The act specifically authorizes a partnership to sue and be sued in the partnership name. A partnership has no mandatory duty to have any books and records, but if it does, it must keep them at the partnership's chief executive office.
A partner has two fiduciary duties to the other partners and the partnership, a duty of loyalty and a duty of care, which is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law. A partner also has an obligation of good faith and fair dealing to the other partners and the partnership in discharging the partner's duties and exercising any rights under the law or the partnership agreement. The partnership is given a right of action against a partner for breach of the partnership agreement or for violation of any other duty owed to the partnership.
The act states that partners are not co-owners of partnership property. The only transferable interest of a partner is the right to transfer the partner's profits and losses and right to distributions.
The act also authorizes a non-exclusive safe harbor method
of converting a general partnership into a limited partnership
and specifies the responsibilities of a general partner who
becomes a limited partner. A similar provision covers the
conversion of a limited partnership into a general partnership
and the corresponding responsibilities of a limited partner who
becomes a general partner. In addition, a general partnership
may merge with one or more general or limited partnerships. A
partnership may also become a limited liability partnership; a
foreign limited liability partnership is authorized with a
statement of foreign qualification.