SB566: Bill Text

SB566,117,21 179.0409 Standards of conduct for general partners. (1) A general partner owes to the limited partnership and, subject to s. 179.0901, the other partners the duties of loyalty and care stated in subs. (2) and (3).

SB566,117,23 (2) The fiduciary duty of loyalty of a general partner includes all of the following duties:

SB566,118,3 (a) The duty to account to the limited partnership and hold as trustee for it any property, profit, or benefit derived by the general partner in or from any of the following:

SB566,118,4 1. The conduct or winding up of the partnership's activities and affairs.

SB566,118,5 2. A use by the general partner of the partnership's property.

SB566,118,6 3. The appropriation of a partnership opportunity.

SB566,118,9 (b) The duty to refrain from dealing with the partnership in the conduct or winding up of the partnership's activities and affairs as or on behalf of a person having an interest adverse to the partnership.

SB566,118,11 (c) The duty to refrain from competing with the partnership in the conduct or winding up of the partnership's activities and affairs.

SB566,118,15 (3) The duty of care of a general partner in the conduct or winding up of the limited partnership's activities and affairs is to refrain from engaging in grossly negligent or reckless conduct or in conduct for which relief or exoneration from liability is not permitted under s. 179.0105 (3) (h).

SB566,118,18 (4) A general partner shall discharge the duties and obligations under this chapter or under the partnership agreement and exercise any rights thereunder consistently with the contractual obligation of good faith and fair dealing.

SB566,118,21 (5) A general partner does not violate a duty or obligation under this chapter or under the partnership agreement solely because the general partner's conduct furthers the general partner's own interest.

SB566,118,25 (6) All the partners of a limited partnership, or one or more disinterested partners with authority to act in the matter, may authorize or ratify, after full disclosure of all material facts, a specific act or transaction by a general partner that otherwise would violate the duty of loyalty.

SB566,119,2 (7) It is a defense to a claim under sub. (2) (b) and any comparable claim in equity or at common law that the transaction was fair to the limited partnership.

SB566,119,6 (8) If, as permitted by sub. (6) or the partnership agreement, a general partner enters into a transaction with the limited partnership which otherwise would be prohibited by sub. (2) (b), the general partner's rights and obligations arising from the transaction are the same as those of a person that is not a general partner.

SB566,119,7 subchapter V

SB566,119,8 CONTRIBUTIONS AND DISTRIBUTIONS

SB566,119,12 179.0501 Form of contribution. A contribution may consist of money or other property transferred to, services performed for, or another benefit provided to the limited partnership or an agreement to transfer money or property to, perform services for, or provide another benefit to the partnership.

SB566,119,15 179.0502 Liability for contribution. (1) A person's obligation to make a contribution to a limited partnership is not excused by the person's death, disability, termination, or other inability to perform personally.

SB566,119,19 (2) If a person does not fulfill an obligation to make a contribution other than money, the person is obligated at the option of the limited partnership to contribute money equal to the value, as stated in the required information, of the part of the contribution which has not been made.

SB566,119,24 (3) The obligation of a person to make a contribution may be compromised only by the affirmative vote or consent of all the partners. If a creditor of a limited partnership extends credit or otherwise acts in reliance on an obligation described in sub. (1) without knowledge or notice of a compromise under this subsection, the creditor may enforce the obligation.

SB566,120,7 179.0503 Sharing of and right to distributions before dissolution. (1) Any distribution made by a limited partnership before its dissolution and winding up must be shared among the partners on the basis of the value, as stated in the required information when the limited partnership decides to make the distribution, of the contributions the limited partnership has received from each partner, except to the extent necessary to comply with a transfer effective under s. 179.0702 or charging order in effect under s. 179.0703.

SB566,120,10 (2) A person has a right to a distribution before the dissolution and winding up of a limited partnership only if the partnership decides to make an interim distribution. A person's dissociation does not entitle the person to a distribution.

SB566,120,15 (3) A person does not have a right to demand or receive a distribution from a limited partnership in any form other than money. Except as otherwise provided in s. 179.0810 (5), a partnership may distribute an asset in kind only if each part of the asset is fungible with each other part and each person receives a percentage of the asset equal in value to the person's share of distributions.

SB566,120,21 (4) If a partner or transferee becomes entitled to receive a distribution, the partner or transferee has the status of, and is entitled to all remedies available to, a creditor of the limited partnership with respect to the distribution. However, the partnership's obligation to make a distribution is subject to offset for any amount owed to the partnership by the partner or a person dissociated as a partner on whose account the distribution is made.

SB566,120,24 179.0504 Limitations on distributions. (1) A limited partnership may not make a distribution, including a distribution under s. 179.0810, if after the distribution any of the following applies:

SB566,121,2 (a) The partnership would not be able to pay its debts as they become due in the ordinary course of the partnership's activities and affairs.

SB566,121,7 (b) The partnership's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the partnership were to be dissolved and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up of partners and transferees whose preferential rights are superior to the rights of persons receiving the distribution.

SB566,121,9 (2) A limited partnership may base a determination that a distribution is not prohibited under sub. (1) on any of the following:

SB566,121,11 (a) Financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances.

SB566,121,13 (b) A fair valuation or other method that is reasonable under the circumstances.

SB566,121,15 (3) Except as otherwise provided in sub. (5), the effect of a distribution under sub. (1) is measured as follows:

SB566,121,17 (a) In the case of a distribution as described in s. 179.0102 (4) (a) 1. and 2., as of the earlier of the following:

SB566,121,19 1. The date money or other property is transferred or debt is incurred by the limited partnership.

SB566,121,21 2. The date the person entitled to the distribution ceases to own the interest or rights being acquired by the partnership in return for the distribution.

SB566,121,23 (b) In the case of any distribution of indebtedness other than one under par. (a), as of the date the indebtedness is distributed.

SB566,121,24 (c) In all cases other than those under par. (a) or (b), as of the following:

SB566,122,2 1. The date the distribution is authorized, if the payment occurs not later than 120 days after that date.

SB566,122,4 2. The date the payment is made, if the payment occurs more than 120 days after the distribution is authorized.

SB566,122,8 (4) A limited partnership's indebtedness to a partner or transferee incurred by reason of a distribution made in accordance with this section is at parity with the partnership's indebtedness to its general, unsecured creditors, except to the extent subordinated by agreement.

SB566,122,15 (5) A limited partnership's indebtedness, including indebtedness issued as a distribution, is not a liability for purposes of sub. (1) if the terms of the indebtedness provide that payment of principal and interest is made only if and to the extent that a payment of a distribution could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is made.

SB566,122,18 (6) In measuring the effect of a distribution under s. 179.0810, the liabilities of a dissolved limited partnership do not include any claim that has been disposed of under s. 179.0806, 179.0807, or 179.0808.

SB566,122,23 179.0505 Liability for improper distributions. (1) If a general partner consents to a distribution made in violation of s. 179.0504 and in consenting to the distribution fails to comply with s. 179.0409, the general partner is personally liable to the limited partnership for the amount of the distribution which exceeds the amount that could have been distributed without the violation of s. 179.0504.

SB566,123,2 (2) A person that receives a distribution knowing that the distribution violated s. 179.0504 is personally liable to the limited partnership but only to the extent that the distribution received by the person exceeded the amount that could have been properly paid under s. 179.0504.

SB566,123,5 (3) A general partner against which an action is commenced because the general partner is liable under sub. (1) with respect to a distribution may do any of the following:

SB566,123,7 (a) Implead any other person that is liable under sub. (1) with respect to the distribution and seek to enforce a right of contribution from the person.

SB566,123,10 (b) Implead any person that received the distribution in violation of sub. (2) and seek to enforce a right of contribution from the person in the amount the person received in violation of sub. (2).

SB566,123,12 (4) An action under this section is barred unless commenced not later than 2 years after the distribution.

SB566,123,13 subchapter VI

SB566,123,14 DISSOCIATION

SB566,123,17 179.0601 Dissociation as limited partner. (1) A person does not have a right to dissociate as a limited partner before the completion of the winding up of the limited partnership.

SB566,123,19 (2) A person is dissociated as a limited partner when any of the following applies:

SB566,123,22 (a) The limited partnership knows or has notice of the person's express will to withdraw as a limited partner, but, if the person has specified a withdrawal date later than the date the partnership knew or had notice, on that later date.

SB566,123,24 (b) An event stated in the partnership agreement as causing the person's dissociation as a limited partner occurs.

SB566,124,2 (c) The person is expelled as a limited partner pursuant to the partnership agreement.

SB566,124,4 (d) The person is expelled as a limited partner by the affirmative vote or consent of all the other partners if any of the following applies:

SB566,124,6 1. It is unlawful to carry on the limited partnership's activities and affairs with the person as a limited partner.

SB566,124,9 2. There has been a transfer of all of the person's transferable interest in the partnership, other than a transfer for security purposes or the entry of a charging order that is in effect under s. 179.0703 and that has not been foreclosed.

SB566,124,10 3. The person is an entity and all of the following apply:

SB566,124,15 a. The partnership notifies the person that it will be expelled as a limited partner because the person has filed a statement of dissolution or the equivalent, the person has been administratively dissolved, the person's charter or the equivalent has been revoked, or the person's right to conduct activities and affairs has been suspended by the jurisdiction of the person's governing law.

SB566,124,19 b. The statement of dissolution or the equivalent has not been withdrawn, rescinded, or revoked, the person has not been reinstated, or the person's charter or the equivalent or right to conduct activities and affairs has not been reinstated, within 90 days after the notification under subd. 3. a.

SB566,124,21 4. The person is an unincorporated entity that has been dissolved and whose activities and affairs are being wound up.

SB566,124,24 (e) On application by the limited partnership or a partner in a direct action under s. 179.0901, the person is expelled as a limited partner by judicial order because the person has done any of the following:

SB566,125,3 1. Engaged, or is engaging, in wrongful conduct that has affected adversely and materially, or will affect adversely and materially, the partnership's activities and affairs.

SB566,125,6 2. Committed willfully or persistently, or is committing willfully or persistently, a material breach of the partnership agreement or of the contractual obligation of good faith and fair dealing under s. 179.0305 (1).

SB566,125,9 3. Engaged, or is engaging, in conduct relating to the partnership's activities and affairs which makes it not reasonably practicable to carry on the partnership's activities and affairs with the person as a limited partner.

SB566,125,10 (f) In the case of an individual, the individual dies.

SB566,125,13 (g) In the case of a person that is a testamentary or living trust or is acting as a limited partner by virtue of being a trustee of such a trust, the trust's entire transferable interest in the limited partnership is distributed.

SB566,125,16 (h) In the case of a person that is an estate or is acting as a limited partner by virtue of being a personal representative of an estate, the estate's entire transferable interest in the limited partnership is distributed.

SB566,125,18 (i) In the case of a person that is not an individual, the existence of the person terminates.

SB566,125,19 (n) The limited partnership dissolves and completes winding up.

SB566,125,21 179.0602 Effect of dissociation as limited partner. (1) If a person is dissociated as a limited partner, all of the following apply:

SB566,125,23 (a) Subject to s. 179.0704, the person does not have further rights as a limited partner.

SB566,126,3 (b) The person's contractual obligation of good faith and fair dealing as a limited partner under s. 179.0305 (1) ends with regard to matters arising and events occurring after the person's dissociation.

SB566,126,6 (c) Subject to s. 179.0704 and subch. XI, any transferable interest owned by the person in the person's capacity as a limited partner immediately before dissociation is owned by the person solely as a transferee.

SB566,126,9 (2) A person's dissociation as a limited partner does not of itself discharge the person from any debt, obligation, or other liability to the limited partnership or the other partners which the person incurred while a limited partner.

SB566,126,11 179.0603 Dissociation as general partner. A person is dissociated as a general partner when any of the following applies:

SB566,126,14 (1) The limited partnership knows or has notice of the person's express will to withdraw as a general partner, but, if the person has specified a withdrawal date later than the date the partnership knew or had notice, on that later date.

SB566,126,16 (2) An event stated in the partnership agreement as causing the person's dissociation as a general partner occurs.

SB566,126,18 (3) The person is expelled as a general partner pursuant to the partnership agreement.

SB566,126,20 (4) The person is expelled as a general partner by the affirmative vote or consent of all the other partners if any of the following applies:

SB566,126,22 (a) It is unlawful to carry on the limited partnership's activities and affairs with the person as a general partner.

SB566,126,25 (b) There has been a transfer of all of the person's transferable interest in the partnership, other than a transfer for security purposes or the entry of a charging order that is in effect under s. 179.0703 and that has not been foreclosed.

SB566,127,1 (c) The person is an entity and all of the following apply:

SB566,127,6 1. The partnership notifies the person that it will be expelled as a general partner because the person has filed a statement of dissolution or the equivalent, the person has been administratively dissolved, the person's charter or the equivalent has been revoked, or the person's right to conduct its activities and affairs has been suspended by the jurisdiction of the person's governing law.

SB566,127,10 2. The statement of dissolution or the equivalent has not been withdrawn, rescinded, or revoked, the person has not been reinstated, or the person's charter or the equivalent or right to conduct its activities and affairs has not been reinstated, within 90 days after the notification under subd. 1.

SB566,127,12 (d) The person is an unincorporated entity that has been dissolved and whose activities and affairs are being wound up.

SB566,127,15 (5) On application by the limited partnership or a partner in a direct action under s. 179.0901, the person is expelled as a general partner by judicial order because the person has done any of the following:

SB566,127,18 (a) Engaged, or is engaging, in wrongful conduct that has affected adversely and materially, or will affect adversely and materially, the partnership's activities and affairs.

SB566,127,21 (b) Committed willfully or persistently, or is committing willfully or persistently, a material breach of the partnership agreement or a duty or obligation under s. 179.0409.