By Wolens H.B. No. 273
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to partnerships and securities.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. The Texas Revised Partnership Act is enacted to
1-5 read as follows:
1-6 TEXAS REVISED PARTNERSHIP ACT
1-7 Table of Contents
1-8 ARTICLE I GENERAL PROVISIONS ...............................
1-9 Sec. 1.01. Definitions ..................................
1-10 Sec. 1.02. Knowledge And Notice .........................
1-11 Sec. 1.03. Effect Of Partnership Agreement;
1-12 Nonwaivable Provisions .....................
1-13 Sec. 1.04. Supplemental Principals Of Law ...............
1-14 Sec. 1.05. Law Governing Internal Affairs
1-15 And Partner's Liability ....................
1-16 Sec. 1.06. Partnership Subject To
1-17 Amendment Or Repeal Of Act .................
1-18 ARTICLE II NATURE OF PARTNERSHIP ............................
1-19 Sec. 2.01. Partnership As Entity ........................
1-20 Sec. 2.02. Partnership Defined; Application
1-21 To Joint Ventures And Limited
1-22 Partnerships ...............................
1-23 Sec. 2.03. Rules For Determining Whether
2-1 A Partnership Is Created ...................
2-2 Sec. 2.04. Partnership Property .........................
2-3 Sec. 2.05. When Property Is Partnership
2-4 Property ...................................
2-5 Sec. 2.06. Partnership Continues Until
2-6 Terminated .................................
2-7 ARTICLE III RELATIONS OF PARTNERS TO PERSONS
2-8 DEALING WITH PARTNERSHIP .......................
2-9 Sec. 3.01. General Powers Of A Partnership ..............
2-10 Sec. 3.02. Partner Agent Of Partnership
2-11 As To Partnership Business .................
2-12 Sec. 3.03. Partnership Liable For Partner's
2-13 Actionable Conduct .........................
2-14 Sec. 3.04. Nature of Partner's Liability
2-15 In Partnerships That Are or Are
2-16 Not Registered Limited Liability
2-17 Partnerships ...............................
2-18 Sec. 3.05. Enforcement Of Partnership And
2-19 Partner Liability ..........................
2-20 Sec. 3.06. False Representations of
2-21 Partnership ................................
2-22 Sec. 3.07. Liability Of Incoming Partner ................
2-23 Sec. 3.08. Liability In and Registration
2-24 Of Registered Limited
2-25 Partnerships ...............................
3-1 ARTICLE VI RELATIONS OF PARTNERS TO EACH
3-2 OTHER AND TO PARTNERSHIP .......................
3-3 Sec. 4.01. Partner's Rights And Duties ..................
3-4 Sec. 4.02. Distributions In-Kind ........................
3-5 Sec. 4.03. Information Regarding The
3-6 Partnership ................................
3-7 Sec. 4.04. General Standards Of Partner's
3-8 Conduct ....................................
3-9 Sec. 4.05. Partner's Liability To
3-10 Partnership ................................
3-11 Sec. 4.06. Remedies Of Partnership And
3-12 Partners ...................................
3-13 Sec. 4.07. Continuation Of Partnership ..................
3-14 ARTICLE V TRANSFEREES OF PARTNER ...........................
3-15 Sec. 5.01. Partner's Interest In Partnership
3-16 Property Not Transferable ..................
3-17 Sec. 5.02. Nature Of Partner's Partnership
3-18 Interest ...................................
3-19 Sec. 5.03. Transfer Of Partner's Partnership
3-20 Interest ...................................
3-21 Sec. 5.04. Effect Of Death Or Divorce On
3-22 Partnership Interest .......................
3-23 ARTICLE VI EVENTS OF WITHDRAWAL .............................
3-24 Sec. 6.01. Events Of Withdrawal .........................
3-25 Sec. 6.02. Wrongful Withdrawal ..........................
4-1 ARTICLE VII PARTNER'S WITHDRAWAL WHEN BUSINESS
4-2 NOT WOUND UP ...................................
4-3 Sec. 7.01. Redemption Of A Withdrawing
4-4 Partner's or Transferee's Interest
4-5 When Partnership Is Not
4-6 Wound Up ...................................
4-7 Sec. 7.02. Withdrawn Partner's Power To
4-8 Bind The Partnership .......................
4-9 Sec. 7.03. Effect Of Withdrawal On Partner's
4-10 Existing Liability .........................
4-11 ARTICLE VIII WINDING UP PARTNERSHIP BUSINESS ..................
4-12 Sec. 8.01. Events That Require A Winding
4-13 Up Of The Partnership ......................
4-14 Sec. 8.02. Partnership Continues After The
4-15 Occurrence Of An Event
4-16 Requiring Winding Up .......................
4-17 Sec. 8.03. Conduct Of Winding Up ........................
4-18 Sec. 8.04. Partner's Liability To Other
4-19 Partners After Occurrence Of
4-20 An Event Requiring Winding Up ..............
4-21 Sec. 8.05. Partner's Power To Bind
4-22 Partnership After Occurrence
4-23 Of Event Requiring Winding Up ..............
4-24 Sec. 8.06. Rules For Distribution On
4-25 Winding Up .................................
5-1 ARTICLE IX PARTNERSHIP CONVERSIONS, MERGERS
5-2 AND EXCHANGES ..................................
5-3 Sec. 9.01. Conversions ..................................
5-4 Sec. 9.02. Mergers ......................................
5-5 Sec. 9.03. Exchange .....................................
5-6 ARTICLE X MISCELLANEOUS PROVISIONS ...........................
5-7 Sec. 10.01. Short Title .................................
5-8 Sec. 10.02. Severability ................................
5-9 Sec. 10.03. Effective Date ..............................
5-10 Sec. 10.04. Application To Existing
5-11 Relationships .............................
5-12 TEXAS REVISED PARTNERSHIP ACT
5-13 ARTICLE I
5-14 GENERAL PROVISIONS
5-15 Sec. 1.01. Definitions.
5-16 As used in this Act, the term:
5-17 (1) "Business" means every trade, occupation, profession or
5-18 other commercial activity.
5-19 (2) "Capital Account" means the amount of a partner's
5-20 original contribution to a partnership, which consists of cash and
5-21 the agreed value of any other contribution to the partnership,
5-22 increased by the amount of additional contributions made by that
5-23 partner and by allocations to that partner of profits, and
5-24 decreased by the amount of distributions to that partner and by
5-25 allocations to that partner of partnership losses.
6-1 (3) "Court" means a court and judge having jurisdiction in
6-2 the case.
6-3 (4) "Debtor in bankruptcy" means a person who is the subject
6-4 of:
6-5 (a) an order for relief under Title 11 of the U.S.
6-6 Code or a comparable order under a successor
6-7 statute of general application; or
6-8 (b) a comparable order under federal or state law
6-9 governing insolvency.
6-10 (5) "Distribution" means a transfer of cash or other
6-11 property from a partnership to a partner in the partner's capacity
6-12 as a partner, or to the partner's transferee.
6-13 (6) "Event of withdrawal" or "withdrawal" means an event
6-14 specified in Section 6.01(b).
6-15 (7) "Event requiring a winding up" means an event specified
6-16 in Section 8.01.
6-17 (8) "Foreign limited partnership" means a partnership formed
6-18 under the laws of another state and having as partners one or more
6-19 general partners and one or more limited partners.
6-20 (9) "Majority-in-interest" means, as to all or any specified
6-21 group of partners, partners who own more than fifty percent of the
6-22 then current interest in the profits of the partnership owned by
6-23 all of the partners or by the partners in the specified group, as
6-24 appropriate.
6-25 (10) "Partnership" means an entity created as described in
7-1 Section 2.01(a).
7-2 (11) "Partnership agreement" means any agreement, written or
7-3 oral, of the partners concerning the partnership.
7-4 (12) "Partnership interest" means a partner's interest in a
7-5 partnership, including the partner's share of profits and losses,
7-6 or similar items, and the right to receive distributions. A
7-7 partner's partnership interest does not include the partner's right
7-8 to participate in management.
7-9 (13) "Person" includes an individual, corporation, business
7-10 trust, estate, trust, custodian, trustee, executor, administrator,
7-11 nominee, partnership (including a registered limited liability
7-12 partnership), limited partnership, association, limited liability
7-13 company, government, governmental subdivision, agency,
7-14 instrumentality, or other legal or commercial entity, in its own or
7-15 representative capacity.
7-16 (14) "Property" means all property, real, personal or mixed,
7-17 tangible or intangible, or any interest therein.
7-18 (15) "Registered limited liability partnership" means a
7-19 partnership registered under Section 3.08(b) and complying with
7-20 Sections 3.08 (c) and (d)(1).
7-21 (16) "State" means a state of the United States, the
7-22 District of Columbia, the Commonwealth of Puerto Rico, or any
7-23 territory or insular possession subject to the jurisdiction of the
7-24 United States.
7-25 (17) "Transfer" includes an assignment, conveyance, lease,
8-1 mortgage, deed, encumbrance, or creation of a security interest.
8-2 (18) "Withdrawn partner" means a partner with respect to
8-3 whom an event of withdrawal has occurred. A partner "withdraws"
8-4 when an event of withdrawal has occurred with respect to that
8-5 partner under Section 6.01.
8-6 Sec. 1.02. Knowledge And Notice.
8-7 (a) Definition. "Knowledge" means actual knowledge. A
8-8 person knows of a fact only if the person has knowledge of it.
8-9 (b) When Person Has Knowledge or Notice. A person has
8-10 notice of a fact if the person:
8-11 (1) knows of it;
8-12 (2) has received a notice of it; or
8-13 (3) reasonably should have concluded that it exists,
8-14 from all the facts known to that person at the
8-15 time in question.
8-16 (c) Giving Notice. A person notifies or gives a notice to
8-17 another of a fact by taking steps reasonably required to inform the
8-18 other person in the ordinary course of business, regardless of
8-19 whether the other person actually comes to know of it.
8-20 (d) Receiving Notice. A person is notified or receives a
8-21 notice of a fact when the fact is duly communicated to the person
8-22 or to the person's place of business or to any other place held out
8-23 by that person as the place for receipt of communications.
8-24 (e) When Notice To Partner Is Notice To
8-25 Partnership. Receipt of notice by a partner of a fact relating to
9-1 the partnership is effective immediately as notice to the
9-2 partnership, but is not effective in the case of fraud on the
9-3 partnership committed by or with the consent of the partner who
9-4 received the notice.
9-5 Sec. 1.03. Effect of Partnership Agreement; Nonwaivable
9-6 Provisions.
9-7 (a) Partnership Agreement Controls. Except as provided in
9-8 Subsection (b), a partnership agreement governs the relations of
9-9 the partners and between the partners and the partnership. To the
9-10 extent that the partnership agreement does not otherwise provide,
9-11 this Act governs the relations of the partners and between the
9-12 partners and the partnership.
9-13 (b) Statutory Provisions That Cannot Be Varied By Agreement.
9-14 A partnership agreement or the partners may not:
9-15 (1) unreasonably restrict a partner's right of access
9-16 to books and records under Section 4.03(b);
9-17 (2) eliminate the duty of loyalty under
9-18 Section 4.04(b), but the partners may by agreement
9-19 identify specific types or categories of
9-20 activities that do not violate the duty of
9-21 loyalty, if not manifestly unreasonable;
9-22 (3) eliminate the duty of care under Section 4.04(c),
9-23 but the partners may by agreement determine the
9-24 standards by which the performance of the
9-25 obligation is to be measured, if the standards are
10-1 not manifestly unreasonable;
10-2 (4) eliminate the obligation of good faith under
10-3 Section 4.04(d), but the partners may by agreement
10-4 determine the standards by which the performance
10-5 of the obligation is to be measured, if the
10-6 standards are not manifestly unreasonable;
10-7 (5) vary the power to withdraw as a partner under
10-8 Section 6.01(b)(1), (7) or (8), except to require
10-9 the notice to be in writing;
10-10 (6) vary the right to expel a partner by a court in
10-11 the events specified in Section 6.01(b)(5);
10-12 (7) vary the requirement to wind up the partnership
10-13 business in the events specified in
10-14 Section 8.01(c), (d), or (e);
10-15 (8) restrict rights of third parties under this Act;
10-16 or
10-17 (9) select a governing law not permitted under
10-18 Section 1.05(a)(1).
10-19 Sec. 1.04. Supplemental Principles Of Law.
10-20 (a) Supplemented By Law And Equity. Unless displaced by
10-21 particular provisions of this Act, the principles of law and equity
10-22 supplement this Act.
10-23 (b) No Strict Construction As Derogation of Common Law. The
10-24 rule that statutes in derogation of the common law are to be
10-25 strictly construed has no application to this Act.
11-1 (c) Interest Rate. If an obligation to pay interest arises
11-2 under this Act and the rate is not specified, the rate is that
11-3 specified by Tex. Rev. Civ. Stat. Ann. art. 5069-1.03 (Vernon
11-4 1987) or any successor statute.
11-5 Sec. 1.05. Law Governing Internal Affairs and Partner's Liability.
11-6 (a) Internal Affairs. The partnership's internal affairs
11-7 and the relations of the partners to one another is governed by:
11-8 (1) the law of the state chosen by the parties to
11-9 govern if that state bears a reasonable relation
11-10 to the partners or to the partnership business and
11-11 affairs under principles that apply to a contract
11-12 among the partners other than the partnership
11-13 agreement, or
11-14 (2) if the partners do not choose a governing law
11-15 under paragraph (1), the law of the state in which
11-16 the partnership has its chief executive office.
11-17 (b) Liability To Third Parties. Subject to Section 1.03(a),
11-18 the law governing a partnership's internal affairs also governs the
11-19 liability of its partners to third parties.
11-20 Sec. 1.06. Partnership Subject To Amendment Or Repeal Of Act.
11-21 A partnership governed by this Act is subject to any
11-22 amendment or repeal of this Act.
11-23 ARTICLE II
11-24 NATURE OF PARTNERSHIP
11-25 Sec. 2.01. Partnership As Entity.
12-1 A partnership is an entity distinct from its partners.
12-2 Sec. 2.02. Partnership Defined; Application To Joint Ventures And
12-3 Limited Partnerships.
12-4 (a) Association To Carry On Business For Profit. Except as
12-5 provided in Subsection (c), the association of two or more persons
12-6 to carry on a business for profit as owners creates a partnership,
12-7 regardless whether the persons intend to create a partnership and
12-8 whether called "partnership" or "joint venture" or another name.
12-9 (b) Associations That Are Not Partnerships. An association
12-10 created pursuant to a statute other than (1) this Act, (2) Vernon's
12-11 Texas Civil Statutes article 6132b, (3) Texas Revised Limited
12-12 Partnership Act (Vernon's Texas Civil Statutes article 6132a-1), or
12-13 (4) a statute of another jurisdiction comparable to this Act or the
12-14 Texas Revised Limited Partnership Act, is not a partnership.
12-15 (c) Any Person With Capacity. Any person may be a partner
12-16 unless the person lacks capacity apart from this Act.
12-17 Sec. 2.03. Rules For Determining Whether A Partnership Is Created.
12-18 (a) Factors Indicating Creation Of Partnership. The factors
12-19 indicating that persons have created a partnership include:
12-20 (1) Their receipt or right to receive a share of
12-21 profits of the business;
12-22 (2) Their expression of an intent to be a partner in
12-23 the business;
12-24 (3) Their participation or right to participate in
12-25 control of the business;
13-1 (4) Their sharing or agreeing to share (A) losses of
13-2 the business or (B) liability for claims by third parties against
13-3 the business; or
13-4 (5) Their contributing or agreeing to contribute money
13-5 or property to the business.
13-6 (b) Factors Not Indicating Creation Of A Partnership. None
13-7 of the following circumstances, by itself, indicates that a person
13-8 is a partner in the business:
13-9 (1) The receipt or right to receive a share of
13-10 profits:
13-11 (A) As repayment of a debt, by installments or
13-12 otherwise;
13-13 (B) As payment of wages or other compensation to
13-14 an employee or independent contractor;
13-15 (C) As payment of rent;
13-16 (D) As payment to a former partner, surviving
13-17 spouse or representative of a deceased or disabled partner or
13-18 transferee of a partnership interest;
13-19 (E) As payment of interest or other charge on a
13-20 loan even if the amount of the payment varies with the profits of
13-21 the business, including a direct or indirect present or future
13-22 ownership interest in the collateral, or rights to income,
13-23 proceeds, or increase in value derived from the collateral; or
13-24 (F) As payment of consideration for the sale of
13-25 a business or other property by installments or otherwise.
14-1 (2) Co-ownership of property, whether in the form of
14-2 joint tenancy, tenancy in common, tenancy by the entireties, joint
14-3 property, community property or part ownership, even when combined
14-4 with sharing of profits from the property;
14-5 (3) Sharing or having a right to share gross returns
14-6 or revenues, even when the persons who are sharing them have a
14-7 common or joint interest in the property from which the returns or
14-8 reveneues are derived; or
14-9 (4) Ownership of mineral property under a joint
14-10 operating agreement.
14-11 (c) Additional Rules. In determining whether persons have
14-12 created a partnership under Section 2.02, these rules apply:
14-13 (1) An agreement to share losses by the owners of a
14-14 business is not necessary to create a partnership;
14-15 (2) Except as provided in Section 3.06 and in
14-16 Section 7.03, a person who is not a partner in a partnership under
14-17 the rules of Section 2.02 is not a partner as to third persons and
14-18 is not liable to third persons pursuant to this Act.
14-19 Sec. 2.04. Partnership Property.
14-20 Partnership property is not property of the partners.
14-21 Sec. 2.05. When Property Is Partnership Property.
14-22 (a) Partnership Property. Property is partnership property
14-23 if acquired:
14-24 (1) in the name of the partnership; or
14-25 (2) in the name of one or more partners with an
15-1 indication in the instrument transferring title to the property of
15-2 the person's capacity as a partner or of the existence of a
15-3 partnership, even without an indication of the name of the
15-4 partnership.
15-5 (b) Property In Partnership Name. Property is acquired in
15-6 the name of the partnership by a transfer to:
15-7 (1) the partnership in its name; or
15-8 (2) one or more partners in the capacity as partners
15-9 in the partnership, if the name of the partnership is indicated in
15-10 the instrument transferring title to the property.
15-11 (c) Property Acquired With Partnership Property. Property
15-12 is presumed to be partnership property if acquired with partnership
15-13 property, even if not acquired in the name of the partnership or of
15-14 one or more partners with an indication in the instrument
15-15 transferring title to the property of the person's capacity as a
15-16 partner or of the existence of a partnership.
15-17 (d) Property Acquired In Partner's Name. Property acquired
15-18 in the name of one or more of the partners, without an indication
15-19 in the instrument transferring title to the property of the
15-20 person's capacity as a partner or of the existence of a partnership
15-21 and without use of partnership property, is presumed to be the
15-22 partner's property, even if used for partnership purposes.
15-23 Sec. 2.06. Partnership Continues Until Terminated.
15-24 (a) Continuation Of Partnership After Event Of
15-25 Withdrawal. A partnership continues after an event of withdrawal,
16-1 but the event of withdrawal has the effects on the relationships
16-2 among the withdrawn partner, the partnership and the continuing
16-3 partners that are provided in Sections 6.02, 7.01, 7.02 and 7.03.
16-4 (b) Effect Of Occurrence Of Event Requiring A Winding
16-5 Up. On the occurrence of an event requiring a winding up of a
16-6 partnership under Section 8.01, the partnership continues as
16-7 provided in Section 8.03, but the relationship among the partners
16-8 is changed as provided in Sections 8.02, 8.03, 8.04, 8.05 and 8.06.
16-9 (c) Effect Of Withdrawal On Relation Between Partner
16-10 And Partnership. Relationships between a partnership and its
16-11 creditors are not affected by the withdrawal of a partner or by the
16-12 addition of a new partner.
16-13 ARTICLE III
16-14 RELATIONS OF PARTNERS TO PERSONS DEALING WITH PARTNERSHIP
16-15 Sec. 3.01. General Powers Of A Partnership.
16-16 Unless restricted by applicable law, every partnership has
16-17 the same powers as an individual or corporation to do all things
16-18 necessary or convenient to carry out its business and affairs,
16-19 including, without limitation, the power:
16-20 (1) to sue and be sued, complain and defend in its
16-21 partnership name;
16-22 (2) to purchase, receive, lease or otherwise acquire, and
16-23 own, hold, improve, use, and otherwise deal with, real
16-24 or personal property, or any legal or equitable interest
16-25 in property, wherever located;
17-1 (3) to sell, convey, mortgage, pledge, lease, exchange, and
17-2 otherwise dispose of all or any part of its property;
17-3 (4) to purchase, receive, subscribe for, or otherwise
17-4 acquire; own, hold, vote, use, sell, mortgage, lend,
17-5 pledge, or otherwise dispose of; and deal in and with
17-6 shares or other interests in, or obligations of, any
17-7 other entity;
17-8 (5) to make contracts and guarantees, incur liabilities,
17-9 borrow money, issue its notes, bonds, and other
17-10 obligations (which may be convertible into or include
17-11 the option to purchase other securities of the
17-12 partnership), and secure any of its obligations by
17-13 mortgage or pledge of any of its property, franchises,
17-14 or income;
17-15 (6) to lend money, invest and reinvest its funds, and
17-16 receive and hold real and personal property as security
17-17 for repayment;
17-18 (7) to be a promoter, partner, member, associate, or manager
17-19 of any partnership, joint venture, trust, or other
17-20 entity;
17-21 (8) to conduct its business, locate offices, and exercise
17-22 the powers granted by this Act within or without this
17-23 state;
17-24 (9) to appoint employees and agents of the partnership,
17-25 define their duties, fix their compensation and lend
18-1 them money or credit;
18-2 (10) to pay pensions and establish pension plans, pension
18-3 trusts, profit sharing plans, share bonus plans, share
18-4 option plans, and benefit or incentive plans for any or
18-5 all of its current or former partners, employees, and
18-6 agents;
18-7 (11) to make donations for the public welfare or for
18-8 charitable, scientific, or educational purposes;
18-9 (12) to transact any lawful business that will aid
18-10 governmental policy;
18-11 (13) to make payments or donations, or do any other act, not
18-12 inconsistent with law, that furthers the business and
18-13 affairs of the partnership;
18-14 (14) to enter into mergers and similar transactions to the
18-15 extent permitted by applicable law;
18-16 (15) to indemnify a person who was, is or is threatened to
18-17 be made a defendant or respondent in a proceeding and
18-18 to purchase and maintain liability insurance for those
18-19 persons.
18-20 Sec. 3.02. Partner Agent Of Partnership As To Partnership
18-21 Business.
18-22 (a) Mutual Agency. Each partner is an agent of the
18-23 partnership for the purpose of its business. Any act of a partner,
18-24 including the execution of an instrument in the partnership name,
18-25 for apparently carrying on in the usual way
19-1 (1) the partnership business, or
19-2 (2) business of the kind carried on by the
19-3 partnership,
19-4 binds the partnership, unless the partner has no authority to act
19-5 for the partnership in the particular matter and the person with
19-6 whom the partner is dealing knows that the partner lacks authority.
19-7 (b) Acts Outside Scope Of Business. An act of a partner
19-8 that is not apparently for carrying on in the usual way
19-9 (1) the partnership business, or
19-10 (2) business of the kind carried on by the
19-11 partnership,
19-12 does not bind the partnership unless authorized by the other
19-13 partners.
19-14 Sec. 3.03. Partnership Liable For Partner's Actionable Conduct.
19-15 (1) A partnership is liable for loss or injury caused to a
19-16 person, including a partner, by, or for a penalty incurred as a
19-17 result of, a wrongful act or omission, or other actionable conduct,
19-18 of a partner acting in the ordinary course of business of the
19-19 partnership or with the authority of the partnership.
19-20 (2) If in the course of its business a partnership receives
19-21 money or property of a person not a partner that is misapplied by a
19-22 partner while it is in the custody of the partnership, the
19-23 partnership is liable for the loss.
19-24 Sec. 3.04. Nature of Partner's Liability in Partnerships That Are
19-25 or Are Not Registered Limited Liability Partnerships.
20-1 Except as provided by Section 3.08(a), all partners are
20-2 liable jointly and severally for all debts and obligations of the
20-3 partnership unless otherwise agreed by the claimant or provided by
20-4 law.
20-5 Sec. 3.05. Enforcement Of Partnership And Partner Liability.
20-6 (a) Partnership As Party. A partnership may sue and be sued
20-7 in the name of the partnership.
20-8 (b) Action Against Partnership And Partners. An action may
20-9 be brought against the partnership and any or all of the partners
20-10 in the same action or in separate actions.
20-11 (c) Judgments. A judgment against the partnership is not by
20-12 itself a judgment against any partner, but a judgment may be
20-13 entered against any partner who has been served with process in a
20-14 suit against the partnership.
20-15 (d) Limitation On Creditor's Pursuit Of Partner's Property.
20-16 Except as provided in Section 3.05(e), a creditor may proceed
20-17 against one or more partners or their property to satisfy a
20-18 judgment based on a claim that could have been successfully
20-19 asserted against the partnership only if:
20-20 (1) a judgment is also obtained against the partner;
20-21 and
20-22 (2) a judgment based on the same claim is obtained
20-23 against the partnership and remains unsatisfied for 90 days
20-24 following entry of the judgment and, if the judgment is
20-25 contested by appropriate proceedings, and execution on the
21-1 judgment has been stayed, 90 days following the expiration or
21-2 termination of the stay, unless in either case the judgment
21-3 has been reversed or vacated.
21-4 (e) Creditor's Direct Pursuit Of Partner's Property.
21-5 Section 3.05(d) does not prohibit a creditor from proceeding
21-6 directly against one or more partners or their property without
21-7 first seeking satisfaction from partnership property if:
21-8 (1) the partnership is a debtor in bankruptcy;
21-9 (2) the creditor and the partnership have agreed that
21-10 the creditor need not comply with Section 3.05(d);
21-11 (3) a court orders otherwise based on a finding that
21-12 partnership property subject to execution within the state
21-13 are clearly insufficient to satisfy the judgment or that
21-14 compliance with Section 3.05(d) is excessively burdensome; or
21-15 (4) liability is imposed on the partner by law
21-16 independently of the person's status as a partner.
21-17 Sec. 3.06. False Representations Of Partnership.
21-18 (a) Representation Of Partnership. A representation or
21-19 other conduct indicating that a person is a partner with another
21-20 person, when that is not the case, does not of itself create a
21-21 partnership.
21-22 (b) Representation Of Membership In Partnership. A
21-23 representation or other conduct indicating that a person is a
21-24 partner in an existing partnership, when that is not the case, does
21-25 not of itself make that person a partner in the partnership.
22-1 (c) Creditor's Rights Governed By Other Law. The rights of
22-2 a person extending credit in reliance on a representation described
22-3 in Subsections (a) or (b) are determined by law other than this
22-4 Act, including the law of estoppel, agency, negligence, fraud, or
22-5 unjust enrichment.
22-6 (d) Legal Status Of Person Making Misrepresentations. The
22-7 rights and duties of persons held liable under Section 3.06(c) are
22-8 also determined by the law other than this Act, including the law
22-9 of estoppel, agency, negligence, fraud, or unjust enrichment.
22-10 Sec. 3.07. Liability Of Incoming Partner.
22-11 A person admitted as a partner into an existing partnership
22-12 has no personal liability under Section 3.04 for obligations of the
22-13 partnership that:
22-14 (1) arose before the partner's admission to the
22-15 partnership;
22-16 (2) relate to actions or omissions taken before the
22-17 partner's admission to the partnership; or
22-18 (3) arise before or after the partner's admission
22-19 under contracts or commitments entered into before the
22-20 partner's admission to the partnership.
22-21 Sec. 3.08. Liability In And Registration Of Registered Limited
22-22 Partnerships.
22-23 (a) Liability of Partner.
22-24 (1) A partner in a registered limited liability
22-25 partnership is not individually liable for debts and obligations of
23-1 the partnership arising from errors, omissions, negligence,
23-2 incompetence, or malfeasance committed while the partnership is a
23-3 registered limited liability partnership and in the course of the
23-4 partnership business by another partner or a representative of the
23-5 partnership not working under the supervision or direction of the
23-6 first partner unless the first partner:
23-7 (A) was directly involved in the specific
23-8 activity in which the errors, omissions, negligence, incompetence
23-9 or malfeasance were committed by the other partner or
23-10 representative, or
23-11 (B) had notice or knowledge of the errors,
23-12 omissions, negligence, incompetence, or malfeasance by the other
23-13 partner or representative at the time of occurrence and then failed
23-14 to take reasonable steps to prevent or cure the errors, omissions,
23-15 negligence, incompetence, or malfeasance.
23-16 (2) Section 3.08(a)(1) does not affect:
23-17 (A) the joint and several liability of a partner
23-18 for debts and obligations of the partnership arising from any cause
23-19 other than those specified in Section 3.08(a)(1),
23-20 (B) the liability of a partnership to pay its
23-21 debts and obligations out of partnership property, or
23-22 (C) the persons on whom citation or other civil
23-23 process may be served in an action against a partnership.
23-24 (3) In this Section 3.08(a), "representative" includes
23-25 an agent, servant, or employee of a registered limited liability
24-1 partnership.
24-2 (b) Registration.
24-3 (1) To be a registered limited liability partnership,
24-4 a partnership must, in addition to complying with Sections 3.08(c)
24-5 and (d)(1), file with the secretary of state an application stating
24-6 the name of the partnership, the federal tax identification number
24-7 of the partnership, the street address of the partnership's
24-8 principal office in this state and outside this state, as
24-9 applicable, the number of partners at the date of application, and
24-10 a brief statement of the partnership's business.
24-11 (2) The application must be executed by a
24-12 majority-in-interest of the partners or by one or more partners
24-13 authorized by a majority-in-interest of the partners.
24-14 (3) Two copies of the application must be filed,
24-15 accompanied by a fee of $200 for each partner.
24-16 (4) A partnership is registered as a registered
24-17 limited liability partnership on filing a completed initial or
24-18 renewal application in duplicate with the required fee, or on a
24-19 later date specified in the application. A registration is not
24-20 affected by later changes in the partners of the partnership.
24-21 (5) An initial application filed under this Subsection
24-22 and registered by the secretary of state expires one year after the
24-23 date of registration or later effective date unless earlier
24-24 withdrawn or revoked or unless renewed in accordance with Section
24-25 3.08(b)(7).
25-1 (6) A registration may be withdrawn by filing in
25-2 duplicate with the secretary of state a written withdrawal notice
25-3 executed by a majority-in-interest of the partners or by one or
25-4 more partners authorized by a majority-in-interest of the partners.
25-5 A withdrawal notice must include the name of the partnership, the
25-6 federal tax identification number of the partnership, the date of
25-7 registration of the partnership's last application under this
25-8 section, and a current street address of the partnership's
25-9 principal office in this state and outside this state, if
25-10 applicable. A withdrawal notice terminates the status of the
25-11 partnership as a registered limited liability partnership as of the
25-12 date of filing the notice or on a later date specified in the
25-13 notice (but not later than the expiration date under Section
25-14 3.08(b)(5)).
25-15 (7) An effective registration may be renewed before
25-16 its expiration by filing in duplicate with the secretary of state
25-17 an application containing current information of the kind required
25-18 in an initial application and the most recent date of registration
25-19 of the partnership. The renewal application must be accompanied by
25-20 a fee of $200 for each partner on the date of renewal. A renewal
25-21 application filed under this section continues an effective
25-22 registration for one year from the date the effective registration
25-23 would otherwise expire.
25-24 (8) The secretary of state may remove from its active
25-25 records the registration of a partnership whose registration has
26-1 been withdrawn or revoked, or has expired and not been renewed.
26-2 (9) The secretary of state may revoke the filing of a
26-3 document filed under this Subsection if the secretary of state
26-4 determines that the filing fee for the document was paid by an
26-5 instrument that was dishonored when presented by the state for
26-6 payment. The secretary of state shall return the document and give
26-7 notice of revocation to the filing party by regular mail. Failure
26-8 to give or receive notice does not invalidate the revocation. A
26-9 revocation of a filing does not affect any prior filing.
26-10 (10) The secretary of state may provide forms for
26-11 application for or renewal of registration.
26-12 (11) A document filed under this Subsection may be
26-13 amended or corrected by filing in duplicate with the secretary of
26-14 state articles of amendment executed by a majority-in-interest of
26-15 the partners or by one or more partners authorized by a
26-16 majority-in-interest of the partners. The articles of amendment
26-17 must contain the name of the partnership, the tax identification
26-18 number of the partnership, the identity of the document being
26-19 amended, the date on which the document being amended was filed,
26-20 the part of the document being amended and the amendment or
26-21 correction. Two copies of the articles of amendment must be filed,
26-22 accompanied by a fee of $10, and if the amendment increases the
26-23 number of partners, $200 for each partner added by amendment of the
26-24 number of partners.
26-25 (12) Any document filed under this Subsection may be a
27-1 photographic, facsimile, or similar reproduction of a signed
27-2 document. Any signature on a document filed under this section may
27-3 be a facsimile.
27-4 (13) A person commits an offense if the person signs a
27-5 document the person knows is false in any material respect with the
27-6 intent that the document be delivered on behalf of a partnership to
27-7 the secretary of state for filing. An offense under this section
27-8 is a Class A misdemeanor.
27-9 (14) The secretary of state is not responsible for
27-10 determining whether a partnership is in compliance with Section
27-11 3.08(d)(1).
27-12 (15) The secretary of state may promulgate procedural
27-13 rules regarding the filing of documents under this Subsection.
27-14 (c) Name. A registered limited liability partnership's name
27-15 must contain the words "registered limited liability partnership"
27-16 or the abbreviation "L.L.P." as the last words or letters of its
27-17 name.
27-18 (d) Insurance or Financial Responsibility.
27-19 (1) A registered limited liability partnership must:
27-20 (A) carry at least $100,000 of liability
27-21 insurance of a kind that is designed to cover the kinds of errors,
27-22 omissions, negligence, incompetence, or malfeasance for which
27-23 liability is limited by Section 3.08(a)(1), or
27-24 (B) provide $100,000 of funds specifically
27-25 designated and segregated for the satisfaction of judgments against
28-1 the partnership based on the kinds of errors, omissions,
28-2 negligence, incompetence, or malfeasance for which liability is
28-3 limited by Section 3.08(a)(1), which funds may be provided:
28-4 (i) by deposit in trust or in bank escrow
28-5 of cash, bank certificates of deposit or United States Treasury
28-6 obligations, or
28-7 (ii) by bank letter of credit or insurance
28-8 company bond.
28-9 (2) If the registered limited liability partnership is
28-10 in compliance with Section 3.08(d)(1) of this section, the
28-11 requirements of this Subsection shall not be admissible or in any
28-12 way be made known to the jury in determining the issue(s) of
28-13 liability for or extent of the debt or obligation or damages in
28-14 question.
28-15 (3) If compliance with Section 3.08(d)(1) of this
28-16 section is disputed:
28-17 (A) compliance must be determined separately
28-18 from the trial or proceeding to determine the partnership debt or
28-19 obligation in question, its amount, or partner liability therefor,
28-20 (B) the burden of proof of compliance is on the
28-21 person claiming limitation of liability by Section 3.08(a)(1), and
28-22 (C) compliance must be determined by the court
28-23 sitting without a jury unless all parties to the proceeding agree
28-24 that compliance will be determined by a jury.
28-25 (e) Limited Partnerships. A limited partnership may become
29-1 a registered limited liability partnership by complying with
29-2 applicable provisions of the Texas Revised Limited Partnership Act.
29-3 ARTICLE IV
29-4 RELATIONS OF PARTNERS TO EACH OTHER AND TO PARTNERSHIP
29-5 Sec. 4.01. Partner's Rights And Duties.
29-6 (a) Capital Credits And Charges. Each partner is credited
29-7 with an amount equal to the cash plus the value of any property the
29-8 partner contributes to the partnership and the partner's share of
29-9 the partnership's profits. Each partner is charged with an amount
29-10 equal to the cash plus the value of any other property distributed
29-11 by the partnership to the partner and the partner's share of the
29-12 partnership's losses.
29-13 (b) Profits And Losses. Each partner is credited with an
29-14 equal share of the profits of the partnership and is charged with a
29-15 share of the losses, whether capital or operating, of the
29-16 partnership in proportion to the partner's share of the profits.
29-17 (c) Disproportionate Payment Or Advance. A partner who, in
29-18 the proper conduct of the business of the partnership or for the
29-19 preservation of its business or property, reasonably makes a
29-20 payment or advance beyond the amount the partner agreed to
29-21 contribute, or reasonably incurs a liability, is entitled to be
29-22 repaid and is entitled to receive interest from the date of the
29-23 payment or advance or the incurrence of the liability.
29-24 (d) Participation In Management. Each partner has equal
29-25 rights in the management and conduct of the business of the
30-1 partnership. A partner's right to participate in the management
30-2 and conduct of the business is not community property.
30-3 (e) Partnership Property. A partner may use or possess
30-4 partnership property only on behalf of the partnership.
30-5 (f) Compensation. A partner is not entitled to compensation
30-6 for services performed for the partnership, except reasonable
30-7 compensation for services rendered in winding up the business of
30-8 the partnership.
30-9 (g) New Partner. A person may become a partner only with
30-10 the consent of all of the partners.
30-11 (h) Majority Decision On Ordinary Matters. A difference
30-12 arising as to a matter in the ordinary course of the business of
30-13 the partnership may be decided by a majority-in-interest of the
30-14 partners. An act outside the ordinary course of business of the
30-15 partnership may be undertaken only with the consent of all the
30-16 partners.
30-17 (i) Amendment Of Agreement. An amendment to the partnership
30-18 agreement may be effected only with the consent of all the
30-19 partners.
30-20 (j) Partnership Obligations. This section does not limit
30-21 the partnership's obligations to other persons under Section 3.02.
30-22 (k) Partner Transaction Of Business With Partnership. A
30-23 partner may lend money to and transact other business with the
30-24 partnership and, subject to other applicable law, have the same
30-25 rights and obligations with respect to those matters as a person
31-1 who is not a partner.
31-2 (l) Classes Or Groups Of Partners. A written partnership
31-3 agreement may establish classes or groups of one or more partners
31-4 having certain expressed relative rights, powers, and duties,
31-5 including voting rights, and may provide for the future creation of
31-6 additional classes or groups of partners having certain relative
31-7 rights, powers, and duties, including voting rights, expressed in
31-8 the partnership agreement or at the time of creation of the class
31-9 or group. The rights, powers or duties of a class or group may be
31-10 senior to those of one or more existing classes or groups of
31-11 partners.
31-12 (m) Voting Rights. A written partnership agreement that
31-13 grants or make provision for granting to any of its partners a
31-14 right to vote may contain provisions relating to (1) giving notice
31-15 of the time, place, or purposes of a meeting at which a matter is
31-16 to be voted on by any partners, (2) waiver of a notice, (3) action
31-17 by consent without a meeting, (4) the establishment of a record
31-18 date, (5) quorum requirements, (6) voting in person or by proxy, or
31-19 (7) any other matter relating to the exercise of the right to vote.
31-20 (n) Notice Of Non-Unanimous Action.
31-21 (1) Prompt notice of the taking of an action under an
31-22 agreement that requires consent of fewer than all of the partners
31-23 and that may be taken without a meeting shall be given to the
31-24 partners who have not consented in writing to the action.
31-25 (2) For the purposes of this section, the taking of an
32-1 action includes amending the partnership agreement or creating,
32-2 under provisions of the partnership agreement, a class of partner
32-3 that did not previously exist.
32-4 Sec. 4.02. Distributions In Kind.
32-5 A partner has no right to receive, and may not be required to
32-6 accept, a distribution in kind.
32-7 Sec. 4.03. Information Regarding The Partnership.
32-8 (a) Books And Records At Chief Executive Office. A
32-9 partnership shall keep its books and records, if any, at its chief
32-10 executive office.
32-11 (B) Access To Books And Records. A partnership shall
32-12 provide access to its books and records to partners and their
32-13 agents and attorneys. The partnership shall provide former
32-14 partners and their agents and attorneys access to books and records
32-15 pertaining to the period during which they were partners or for any
32-16 other proper purpose with respect to any other period of time. The
32-17 right of access provides the opportunity to inspect and copy books
32-18 and records during ordinary business hours. A partnership may
32-19 impose a reasonable charge, covering the costs of labor and
32-20 material, for copies of documents furnished.
32-21 (c) Information Concerning The Partnership. Each partner
32-22 and the partnership shall furnish, on request and to the extent
32-23 just and reasonable, to a partner and the legal representative of a
32-24 deceased partner or partner under legal disability or an assignee,
32-25 complete and accurate information concerning the partnership. A
33-1 legal representative of a deceased partner or a partner under legal
33-2 disability and an assignee are subject to the same duties as a
33-3 partner with respect to information made available.
33-4 Sec. 4.04. General Standards Of Partner's Conduct.
33-5 (a) Duties. A partner owes to the partnership and the other
33-6 partners:
33-7 (1) A duty of loyalty, and
33-8 (2) A duty of care.
33-9 (b) Loyalty. A partner's duty of loyalty includes:
33-10 (1) Accounting to the partnership and holding for it
33-11 any property, profit, or benefit derived by the partner in the
33-12 conduct and winding up of the partnership business or from use by
33-13 the partner of partnership property;
33-14 (2) Refraining from dealing with the partnership on
33-15 behalf of a party having an interest adverse to the partnership;
33-16 and
33-17 (3) Refraining from competing with the partnership or
33-18 dealing with the partnership in a manner adverse to the
33-19 partnership.
33-20 (c) Care. A partner's duty of care to the partnership and
33-21 the other partners is to act in the conduct and winding up of the
33-22 partnership business with the care an ordinarily prudent person
33-23 would exercise in similar circumstances. An error in judgment does
33-24 not by itself constitute a breach of this duty of care. A partner
33-25 is presumed to satisfy this duty if the partner acts on an informed
34-1 basis and in compliance with Section 4.04(d).
34-2 (d) Method of Discharge. A partner shall discharge the
34-3 duties to the partnership and the other partners under this Act or
34-4 under the partnership agreement, and exercise any rights and powers
34-5 in the conduct or winding up of the partnership business:
34-6 (1) In good faith, and
34-7 (2) In a manner the partner reasonably believes to be
34-8 in the best interest of the partnership.
34-9 (e) Effect of Partner Benefit. A partner does not violate a
34-10 duty or obligation under this Act or under the partnership
34-11 agreement merely because the partner's conduct furthers the
34-12 partner's own interest.
34-13 (f) Trustee Standard Inapplicable. A partner as such is not
34-14 a trustee and is not held to the same standards as a trustee.
34-15 (g) Application to Nonpartner Winding Up. This Section
34-16 applies to a person winding up the partnership business as the
34-17 personal or legal representative of the last surviving partner as
34-18 if the person were a partner.
34-19 Sec. 4.05. Partner's Liability to Partnership.
34-20 A partner is liable to the partnership and the other partners
34-21 for a breach of the partnership agreement, or for the violation of
34-22 any duty to the partnership or the other partners under this Act,
34-23 that causes harm to the partnership or the other partners.
34-24 Sec. 4.06. Remedies Of Partnership And Partners.
34-25 (a) Action By Partnership. A partnership may maintain
35-1 an action against a partner for a breach of the partnership
35-2 agreement, or for the violation of any duty to the partnership,
35-3 causing harm to the partnership.
35-4 (b) Action By Partner. A partner may maintain an
35-5 action against the partnership or another partner for legal or
35-6 equitable relief, including an accounting as to a partnership
35-7 business, to:
35-8 (1) enforce a right under the partnership
35-9 agreement;
35-10 (2) enforce a right under this Act, including:
35-11 (A) the partner's rights under Sections
35-12 4.01, 4.03, and 4.04;
35-13 (B) the partner's right on withdrawal to
35-14 have the partner's interest in the partnership redeemed pursuant to
35-15 Section 7.01 or enforce any other right under Article 6 or 7; or
35-16 (C) the partner's rights under Article 8;
35-17 or
35-18 (3) enforce the rights and otherwise protect the
35-19 interests of the partner, including rights and interests arising
35-20 independently of the partnership relationship.
35-21 (c) Accrual Of Actions. The accrual of, and any time
35-22 limitation on, a right of action for a remedy under this section is
35-23 governed by other law.
35-24 (d) No Revival By Accounting. A right to an
35-25 accounting does not revive a claim barred by law.
36-1 Sec. 4.07. Continuation Of Partnership.
36-2 (a) Continuation By Express Agreement. If all the partners
36-3 in a partnership for a definite term or a particular undertaking,
36-4 or in a partnership the partnership agreement of which provides for
36-5 winding up on a specified event, agree to continue the business of
36-6 the partnership despite the expiration of the term, the completion
36-7 of the undertaking, or the occurrence of the event (other than the
36-8 withdrawal of a partner), the partnership agreement is deemed
36-9 amended to provide that the expiration, the completion, or the
36-10 occurrence of the event did not result in an event requiring the
36-11 winding up of the partnership business.
36-12 (b) Continuation By Action. A continuation of the business
36-13 for 90 days by the partners or those who habitually acted in the
36-14 business during the term or undertaking or preceding the event,
36-15 without any settlement or liquidation of the partnership business,
36-16 and without objection from any partner, is prima facie evidence of
36-17 agreement by all partners to continue the business.
36-18 ARTICLE V
36-19 TRANSFEREES OF PARTNER
36-20 Sec. 5.01. Partner's Interest In Partnership Property Not
36-21 Transferable.
36-22 A partner is not a co-owner of partnership property and has
36-23 no interest that can be transferred, either voluntarily or
36-24 involuntarily, in partnership property.
36-25 Sec. 5.02. Nature Of Partner's Partnership Interest.
37-1 (a) Personal Property. A partner's partnership interest is
37-2 personal property for all purposes. A partner's partnership
37-3 interest may be community property under applicable law.
37-4 (b) Certificate Evidencing Interest. A written partnership
37-5 agreement may provide that a partner's partnership interest may be
37-6 evidenced by certificate of partnership interest issued by the
37-7 partnership, may provide for the assignment or transfer of a
37-8 partnership interest represented by the certificate, and may make
37-9 other provisions with respect to the certificate.
37-10 Sec. 5.03. Transfer Of Partner's Partnership Interest.
37-11 (a) Act of Transfer. A transfer of a partner's partnership
37-12 interest:
37-13 (1) is permissible, in whole or in part;
37-14 (2) is not an event of withdrawal;
37-15 (3) does not by itself cause a winding up of the
37-16 partnership business; and
37-17 (4) does not, as against the other partners or the
37-18 partnership, entitle the transferee, during the continuance of the
37-19 partnership, to participate in the management or conduct of the
37-20 partnership business.
37-21 (b) Basic Rights of Transferee. A transferee of a partner's
37-22 partnership interest is entitled to receive, to the extent
37-23 transferred, distributions to which the transferor otherwise would
37-24 be entitled. After transfer, the transferor continues to have the
37-25 rights and duties of a partner other than the interest transferred.
38-1 Until a transferee becomes a partner, the transferee has no
38-2 liability as a partner solely as a result of the transfer. For any
38-3 proper purpose, the transferee may require reasonable information
38-4 or account of partnership transactions and make reasonable
38-5 inspection of the partnership books.
38-6 (c) Rights of Transferee On Winding Up. If an event
38-7 requires a winding up of the partnership business under Section
38-8 8.01, then a transferee is entitled to receive, to the extent
38-9 transferred, the net amount otherwise distributable to the
38-10 transferor. In a winding up, a transferee may require an
38-11 accounting only from the date of the latest account agreed to by
38-12 all of the partners.
38-13 (d) Notice to Partnership. Until receipt of notice of a
38-14 transfer, a partnership has no duty to give effect to the
38-15 transferee's rights under this Section.
38-16 (e) No Effect If Prohibited. A partnership has no duty to
38-17 give effect to a transfer, assignment, or grant of a security
38-18 interest prohibited by a partnership agreement.
38-19 Sec. 5.04. Effect Of Death Or Divorce On Partnership Interest.
38-20 (a) Divorce. On the divorce of a partner, the partner's
38-21 spouse shall, to the extent of the spouse's partnership interest,
38-22 be regarded for purposes of this Act as a transferee of the
38-23 partnership interest from the partner.
38-24 (b) Death of Partner. On the death of a partner, the
38-25 partner's surviving spouse (if any) and the partner's heirs,
39-1 legatees, or personal representative shall, to the extent of their
39-2 respective partnership interests, be regarded for purposes of this
39-3 Act as transferees of the partnership interests from the partner.
39-4 (c) Death of Partner's Spouse. On the death of a partner's
39-5 spouse, the spouse's heirs, legatees or personal representative
39-6 shall, to the extent of their respective partnership interests, be
39-7 regarded for purposes of this Act as transferees of the partnership
39-8 interest from the partner.
39-9 (d) Events Involving Partner's Spouse Not
39-10 Withdrawals. Events of the type described in Section 6.01
39-11 occurring with respect to a partner's spouse are not events of
39-12 withdrawal.
39-13 (e) No Impairment of Purchase Rights. This Act does not
39-14 impair an agreement for the purchase or sale of a partnership
39-15 interest at the death of the owner of the partnership interest, or
39-16 at any other time.
39-17 ARTICLE VI
39-18 EVENTS OF WITHDRAWAL
39-19 Sec. 6.01. Events Of Withdrawal.
39-20 (a) No Longer A Partner. A person ceases to be a partner on
39-21 the occurrence of an event of withdrawal.
39-22 (b) Events of Withdrawal. An event of withdrawal of a
39-23 partner occurs on:
39-24 (1) receipt by the partnership of notice of the
39-25 partner's express will to withdraw as a partner or on any later
40-1 date specified in the notice;
40-2 (2) an event specified in the partnership agreement as
40-3 causing the partner's withdrawal;
40-4 (3) the partner's expulsion as provided in the
40-5 partnership agreement;
40-6 (4) the partner's expulsion by the vote of a
40-7 majority-in-interest of the other partners if:
40-8 (A) it is unlawful to carry on the partnership
40-9 business with that partner;
40-10 (B) there has been a transfer of all or
40-11 substantially all of that partner's partnership interest, other
40-12 than a transfer for security purposes that has not been foreclosed,
40-13 and other than the substitution of a successor trustee or successor
40-14 personal representative;
40-15 (C) within 90 days after the partnership
40-16 notifies a corporate partner that it will be expelled because it
40-17 has filed a certificate of dissolution or the equivalent, its
40-18 charter has been revoked, or its right to conduct business has been
40-19 suspended by the jurisdiction of its incorporation, there is no
40-20 revocation of the certificate of dissolution or no reinstatement of
40-21 its charter or its right to conduct business; or
40-22 (D) an event requiring a winding up has occurred
40-23 with respect to a partnership that is a partner;
40-24 (5) on application by the partnership or another
40-25 partner, the partner's expulsion by judicial decree because:
41-1 (A) the partner engaged in wrongful conduct that
41-2 adversely and materially affected the partnership business;
41-3 (B) the partner willfully or persistently
41-4 committed one or more material breaches of the partnership
41-5 agreement or of one or more duties owed to the partnership or the
41-6 other partners under Section 4.04; or
41-7 (C) the partner engaged in conduct relating to
41-8 the partnership business that made it not reasonably practicable to
41-9 carry on the business in partnership with that partner.
41-10 (6) the partner:
41-11 (A) becomes a debtor in bankruptcy;
41-12 (B) executes an assignment for the benefit of
41-13 creditors;
41-14 (C) seeks, consents to, or acquiesces in the
41-15 appointment of a trustee, receiver, or liquidator of that partner
41-16 or of all or substantially all of that partner's property; or
41-17 (D) fails, within 90 days after the appointment,
41-18 to have vacated or stayed the appointment of a trustee, receiver,
41-19 or liquidator of the partner or of all or substantially all of the
41-20 partner's property obtained without the partner's consent or
41-21 acquiescence, or fails within 90 days after the expiration of a
41-22 stay to have the appointment vacated;
41-23 (7) in the case of a partner who is an individual:
41-24 (A) the partner's death;
41-25 (B) the appointment of a guardian or general
42-1 conservator for the partner; or
42-2 (C) a judicial determination that the partner
42-3 has otherwise become incapable of performing the partner's duties
42-4 under the partnership agreement;
42-5 (8) termination of a partner's existence.
42-6 (9) in the case of a partner that has transferred all
42-7 of the partner's partnership interest, on redemption of the
42-8 transferee's interest under Section 7.01 (n)-(r).
42-9 (10) the agreement to continue the partnership under
42-10 Section 8.01(g) if the partnership has received a notice from the
42-11 partner under Section 8.01(g) requesting that the partnership be
42-12 would up.
42-13 Sec. 6.02. Wrongful Withdrawal.
42-14 (a) Power To Withdraw. A partner has the power at any time
42-15 before the occurrence of an event requiring a winding up to
42-16 withdraw from the partnership and cease to be a partner as provided
42-17 in Section 6.01.
42-18 (b) Wrongful Withdrawal. A partner's withdrawal is wrongful
42-19 only if:
42-20 (1) it is in breach of an express provision of the
42-21 partnership agreement; or
42-22 (2) in the case of a partnership for a definite term
42-23 or particular undertaking, or the partnership agreement of which
42-24 provides for winding up on a specified event, before the expiration
42-25 of the term, the completion of the undertaking or the occurrence of
43-1 the event:
43-2 (A) the partner withdraws by express will, or;
43-3 (B) in the case of a partner that is not an
43-4 individual, trust other than a business trust, or estate, the
43-5 partner is expelled or otherwise withdraws because the partner
43-6 willfully terminated.
43-7 (3) the partner is expelled by judicial decree under
43-8 Section 6.01(b) (5).
43-9 (c) Liability For Damages. A wrongfully withdrawing partner
43-10 is liable to the partnership and to the other partners for damages
43-11 caused by the withdrawal, in addition to any other liability of the
43-12 partner to the partnership or to the other partners.
43-13 ARTICLE VII
43-14 PARTNER'S WITHDRAWAL WHEN BUSINESS NOT WOUND UP
43-15 Sec. 7.01. Redemption Of A Withdrawing Partner's or Transferee's
43-16 Interest When Partnership Is Not Wound Up.
43-17 (a) Redemption. If an event of withdrawal occurs under
43-18 Section 6.01(1)-(9) and no event requiring a winding up occurs
43-19 within 60 days after the withdrawal, or on a partner's withdrawal
43-20 under Section 6.01(10), the partnership interest of the withdrawn
43-21 partner automatically is redeemed by the partnership as of the date
43-22 of withdrawal in accordance with this Section 7.01.
43-23 (b) Redemption Price. The redemption price of a withdrawn
43-24 partner's partnership interest is the fair value of the interest as
43-25 of the date of withdrawal, except that the redemption price of the
44-1 partnership interest of a partner who wrongfully withdraws before
44-2 the expiration of a definite term, the completion of a particular
44-3 undertaking, or the occurrence of a specified event requiring a
44-4 winding up is the lesser of:
44-5 (1) The fair value of the withdrawn partner's
44-6 partnership interest as of the date of withdrawal; and
44-7 (2) The amount that the withdrawn partner would have
44-8 received if an event requiring a winding up had occurred at the
44-9 time of the partner's withdrawal.
44-10 Interest is payable on the amount owed under this
44-11 Section 7.01(b).
44-12 (c) Contributions From Wrongfully Withdrawing Partner. If a
44-13 wrongfully withdrawing partner would have been liable to make
44-14 contributions to the partnership under Section 8.06(b) or (c) if an
44-15 event requiring winding up had occurred at the time of withdrawal,
44-16 then the withdrawn partner is liable to the partnership to make
44-17 contributions in that amount to the partnership, plus interest on
44-18 the amount owed.
44-19 (d) Setoff. The partnership may set-off the damages for
44-20 wrongful withdrawal under Section 6.02(b), and all other amounts
44-21 owed by the withdrawn partner to the partnership, regardless
44-22 whether currently due, including interest, against the redemption
44-23 price payable to the withdrawn partner.
44-24 (e) Interest. Interest owed under Sections 7.01(b), (c) or
44-25 (d) accrues from the date of the withdrawal to the date of payment.
45-1 (f) Indemnity. A partnership shall indemnify a withdrawn
45-2 partner against all partnership liabilities incurred before the
45-3 withdrawal, except
45-4 (1) liabilities then unknown to the partnership, and
45-5 (2) liabilities incurred by an act of the withdrawn
45-6 partner under Section 7.02.
45-7 For purposes of this Subsection, a liability not known to a partner
45-8 other than the withdrawn partner is not know to the partnership.
45-9 (g) Tender of Redemption Price. If a deferred payment is
45-10 not authorized under Section 7.01(k), and if no agreement on the
45-11 redemption price of a withdrawn partner's interest is reached
45-12 within 120 days after a written demand for payment by either party,
45-13 then within 30 days thereafter the partnership must either pay in
45-14 cash to the withdrawn partner the amount the partnership estimates
45-15 to be the redemption price plus accrued interest, reduced by any
45-16 setoffs and accrued interest under Section 7.01(d), or make written
45-17 demand for payment of its estimate of the amount owed by the
45-18 withdrawn partner, net of amounts owed to the partner, to the
45-19 partnership.
45-20 (h) Written Offer To Pay Or Demand For Payment. If a
45-21 deferred payment is authorized under Section 7.01(h), or if a
45-22 contribution or other amount is owed by the withdrawn partner to
45-23 the partnership, then the partnership may tender a written offer to
45-24 pay, or deliver a written statement of demand for the amount that
45-25 it estimates to be the net amount owed to it, stating the amount
46-1 and the other terms and conditions of the obligation.
46-2 (i) Explanatory Statement Accompanying Or Following Tender.
46-3 The payment, tender, or demand required or allowed by Sections
46-4 7.01(d) or (e) must, on request of the other party, be accompanied
46-5 or followed promptly by:
46-6 (1) if payment, tender, or demand is made or delivered
46-7 by the partnership, a statement of partnership property and
46-8 liabilities as of the date of the partner's withdrawal and the
46-9 latest available partnership balance sheet and income statement, if
46-10 any; and
46-11 (2) an explanation of the computation of the estimated
46-12 payment obligation.
46-13 (j) Tender In Full Satisfaction. If the payment or tender
46-14 required or allowed by Section 7.01(g) or (h) is accompanied by
46-15 written notice that:
46-16 (1) the payment or the tendered amount, if made, is in
46-17 full satisfaction of a party's obligations relating to the
46-18 redemption of the withdrawn partner's partnership interest, or
46-19 (2) the action to determine the redemption price, any
46-20 contribution obligation or setoffs under Section 7.01(c) or (d), or
46-21 other terms of the redemption obligation, must be commenced within
46-22 one year after the later of (i) the time the written notice is
46-23 given or (ii) the delivery of the information required by
46-24 Subsection (i), then the terms of the payment or tender govern the
46-25 redemption unless the party receiving the payment or tender
47-1 commences an action within that one year period.
47-2 (k) Deferral Of Payment To Wrongfully Withdrawing Partner.
47-3 A partner who wrongfully withdraws before the expiration of a
47-4 definite term, the completion of a particular undertaking, or the
47-5 occurrence of a specified event requiring a winding up is not
47-6 entitled to receive any portion of the redemption price until the
47-7 expiration of the term or completion of the undertaking, unless the
47-8 partner establishes to the satisfaction of the court that earlier
47-9 payment will not cause undue hardship to the partnership. A
47-10 deferred payment bears interest. The withdrawn partner may seek to
47-11 demonstrate to the satisfaction of the court that security for a
47-12 deferred payment is appropriate.
47-13 (l) Action To Determine Redemption Terms. A withdrawn
47-14 partner or the partnership may maintain an action against the other
47-15 party, pursuant to Section 4.06, to determine the terms of
47-16 redemption of that partner's interest, including any contribution
47-17 obligations or setoffs under Section 7.01(c) or (d), or other terms
47-18 of the redemption obligations of either party. The action must be
47-19 commenced within the time specified in Section 7.01(j). The court
47-20 shall determine the terms of the redemption of the withdrawn
47-21 partner's interest, any contribution obligation or setoff due under
47-22 Section 7.01(c) or (d), and accrued interest, and enter judgment
47-23 for any additional payment or refund. If deferred payment is
47-24 authorized under Section 7.01(k), the court shall also determine
47-25 the security for payment if it is requested to consider whether
48-1 security is appropriate. If the court finds that the other party
48-2 acted arbitrarily, vexatiously, or not in good faith, including
48-3 that the party failed to tender payment or make an offer to pay or
48-4 to comply with the requirements of Section 7.01(i), the court may
48-5 assess damages against the other party, including if appropriate a
48-6 share of the profits of the continuing business, and reasonable
48-7 attorney's fees and the fees and expenses of appraisers or other
48-8 experts for a party to the action, in amounts the court finds
48-9 equitable.
48-10 (m) Deferral Of Payment On Occurrence Of Event Requiring
48-11 Winding Up. If a partner withdraws under Section 6.01 and an event
48-12 occurs within 60 days of the withdrawal that requires a winding up
48-13 of the partnership under Section 8.01, then:
48-14 (1) The partnership may defer paying the redemption
48-15 price to the withdrawn partner until the partnership first makes a
48-16 winding up distribution to the remaining partners; and
48-17 (2) The redemption price or contribution obligation is
48-18 the amount the withdrawn partner would have received or contributed
48-19 if the event requiring a winding up had occurred at the time of the
48-20 partner's withdrawal.
48-21 (n) Obligation to Redeem Transferee. A partnership must
48-22 redeem the partnership interest of a transferee for its fair value
48-23 if:
48-24 (1) The interest was transferred when the partnership
48-25 was for a definite term not then expired or a particular
49-1 undertaking not then completed, or when the partnership agreement
49-2 provided for winding up or a specified event that has not yet
49-3 occurred, and
49-4 (2) That definite term has expired, that particular
49-5 undertaking has been completed, or that specified event has
49-6 occurred, and
49-7 (3) The transferee makes a written demand for
49-8 redemption.
49-9 (o) Payment to Transferee. If no agreement for the
49-10 redemption price of the transferee's interest is reached within 120
49-11 days after a written demand for redemption, then within 30 days the
49-12 partnership must pay in cash to the transferee the amount the
49-13 partnership estimates to be the redemption price, plus accrued
49-14 interest from the date of demand.
49-15 (p) Information to Transferee. The payment allowed by
49-16 Section 7.01(o) must, on request of the transferee, be accompanied
49-17 or followed by:
49-18 (1) A statement of partnership property and
49-19 liabilities as of the date of the demand for redemption;
49-20 (2) the latest available partnership balance sheet and
49-21 income statement, if any; and
49-22 (3) an explanation of the computation of the estimated
49-23 payment obligation.
49-24 (q) Price for Transferee. If the payment allowed by Section
49-25 7.01(n) is accompanied by written notice that the payment is in
50-1 full satisfaction of the partnership's obligations relating to the
50-2 redemption of the transferee's interest, the payment (less
50-3 interest) shall be the redemption price unless the transferee
50-4 within one year after the written notice commences an action to
50-5 determine the redemption price.
50-6 (r) Suit by Transferee. A transferee may maintain an action
50-7 against the partnership to determine the redemption price of the
50-8 transferee's interest. The court shall determine the redemption
50-9 price of the transferee's interest and accrued interest and enter
50-10 judgment for any payment or refund. If the court finds that the
50-11 partnership acted arbitrarily, vexatiously or not in good faith,
50-12 including failure to make payment, the court may assess reasonable
50-13 attorney's fees and the fees and expenses of appraisers or other
50-14 experts for a party to the action, in amounts the court finds
50-15 equitable, against any other party.
50-16 (s) Deferral of Transferee Redemption. The redemption of a
50-17 transferee's interest under Sections 7.01(n) and (o) may be
50-18 deferred as determined by the court if the partnership establishes
50-19 to the satisfaction of the court that failure to defer redemption
50-20 will cause undue hardship to the business of the partnership.
50-21 Sec. 7.02. Withdrawn Partner's Power To Bind The Partnership.
50-22 (a) Power To Bind For One Year. The action of a withdrawn
50-23 partner within one year after the person's withdrawal binds the
50-24 partnership if the transaction is one that would bind the
50-25 partnership before the person's withdrawal, and the other party to
51-1 the transaction.
51-2 (1) does not have notice of the person's withdrawal as
51-3 a partner;
51-4 (2) had done business with the partnership within one
51-5 year preceding the withdrawal; and
51-6 (3) reasonably believed that the withdrawn partner was
51-7 a partner at the time of the transaction.
51-8 (b) Withdrawn Partner's Liability For Loss. A withdrawn
51-9 partner is liable to the partnership for any loss caused to the
51-10 partnership arising from an obligation incurred by the withdrawn
51-11 partner after the withdrawal, for which the partnership is liable
51-12 under Subsection (a).
51-13 Sec. 7.03. Effect Of Withdrawal On Partner's Existing Liability.
51-14 (a) Withdrawal Does Not Discharge Liability. The withdrawal
51-15 of a partner does not of itself discharge the partner's liability
51-16 for obligations of the partnership incurred before the withdrawal.
51-17 (b) Liability Of Deceased Partner's Estate. The estate of a
51-18 deceased partner is liable for all obligations of the partnership
51-19 incurred while the deceased was a partner to the same extent that a
51-20 withdrawn partner is liable for obligations of the partnership
51-21 incurred before the withdrawal.
51-22 (c) Discharge Of Withdrawn Partner By Agreement Of Creditor.
51-23 A withdrawn partner is discharged from any liability incurred
51-24 before the withdrawal by an agreement to that effect between the
51-25 partner and the partnership creditor.
52-1 (d) Unconsented Material Alteration Of Obligation Discharges
52-2 Withdrawn Partner. If a creditor of the partnership has notice of
52-3 a partner's withdrawal, and without the consent of the withdrawn
52-4 partner consents to a material alteration in the nature or time of
52-5 payment of an obligation of the partnership incurred before the
52-6 withdrawal, then the withdrawn partner is discharged from the
52-7 obligation.
52-8 (e) Liability Of Withdrawn Partner To Creditor. A person
52-9 who withdraws as a partner in a circumstance that does not
52-10 constitute an event requiring a winding up under Section 8.01 is
52-11 liable as a partner to the other party in a transaction entered
52-12 into by the partnership, or a surviving partnership under Chapter
52-13 Nine of the Texas Business & Commerce Code, within two years after
52-14 the partner's withdrawal, but only if the other party to the
52-15 transaction:
52-16 (1) does not have notice of the partner's withdrawal;
52-17 and
52-18 (2) reasonably believed that the withdrawn partner was
52-19 a partner at the time of the transaction.
52-20 ARTICLE VIII
52-21 WINDING UP PARTNERSHIP BUSINESS
52-22 Sec. 8.01. Events That Require A Winding Up Of The Partnership.
52-23 The following events require a winding up of the partnership:
52-24 (a) Express Will Of Majority-In-Interest Where No Term Or
52-25 Undertaking. The express will of a majority-in-interest of the
53-1 partners who have not assigned their interests, except prior to the
53-2 expiration of a definite term or completion of a particular
53-3 undertaking or when the partnership agreement provides for winding
53-4 up on a specified event and that event has not occurred;
53-5 (b) Term Or Undertaking. In a partnership for a definite
53-6 term or particular undertaking or the partnership agreement of
53-7 which provides for winding up on a specified event:
53-8 (1) the express will of all the partners; or
53-9 (2) the expiration of the term or the completion of
53-10 the undertaking, except as provided in Section 4.06;
53-11 (c) Agreement. An event specified in the partnership
53-12 agreement as requiring the winding up of the partnership business,
53-13 except as provided in Section 4.06;
53-14 (d) Illegal To Continue. An event that makes it illegal for
53-15 all or substantially all of the business of the partnership to be
53-16 continued, but any cure of illegality within 90 days after notice
53-17 to the partnership of the event is effective retroactively to the
53-18 date of the event for purposes of this Section;
53-19 (e) Judicial Decree. On application by a partner, a
53-20 judicial decree that:
53-21 (1) the economic purpose of the partnership is likely
53-22 to be unreasonably frustrated;
53-23 (2) another partner has engaged in conduct relating to
53-24 the partnership business that makes it not reasonably practicable
53-25 to carry on the business in partnership with that partner; or
54-1 (3) it is not otherwise reasonably practicable to
54-2 carry on the partnership business in conformity with the
54-3 partnership agreement; or
54-4 (f) Sale of Property. The sale of all or substantially all
54-5 of the property of the partnership outside the ordinary course of
54-6 business.
54-7 (g) Notice From Partner Where No Term Or Undertaking; Option
54-8 To Continue. If the partnership is not for a definite term or a
54-9 particular undertaking and its partnership agreement does not
54-10 provide for a specified event requiring a winding up, 60 days
54-11 following the partnership's receipt of notice (or such later date
54-12 as the notice specifies) from any partner, other than a partner who
54-13 has agreed not to withdraw, requesting that the partnership be
54-14 wound up, unless in the meantime a majority-in-interest of the
54-15 partners agree to continue the partnership; and the continuation of
54-16 the business by the other partners or those who habitually act in
54-17 the business before the notice, other than the partner giving the
54-18 notice, without any settlement or liquidation of the partnership
54-19 business, is prima facie evidence of agreement to continue the
54-20 partnership.
54-21 Sec. 8.02. Partnership Continues After The Occurrence Of An Event
54-22 Requiring Winding Up.
54-23 A partnership continues after the occurrence of an event
54-24 requiring winding up until the winding up of its business is
54-25 completed, at which time the partnership is terminated.
55-1 Sec. 8.03. Conduct Of Winding Up.
55-2 (a) Persons Authorized To Wind Up. After the occurrence of
55-3 an event requiring a winding up:
55-4 (1) the partners who have not withdrawn may wind up a
55-5 partnership's business,
55-6 (2) the legal representative of the last surviving
55-7 partner may wind up a partnership's business, and
55-8 (3) on application of any partner, partner's legal
55-9 representative, or transferee, or a withdrawn partner whose
55-10 interest is not redeemed under Section 7.01(k), a court, for good
55-11 cause, may appoint a person to carry out the winding up and may
55-12 make all other orders, direction or inquiries that the
55-13 circumstances require.
55-14 (b) Authorized Actions. A person winding up a partnership's
55-15 business may take the following actions, to the extent appropriate
55-16 for winding up, as soon as reasonably practicable, in the name of
55-17 and for and on behalf of the partnership:
55-18 (1) prosecute and defend civil, criminal or
55-19 administrative suits;
55-20 (2) settle and close the partnership's business;
55-21 (3) dispose of and convey the partnership's property;
55-22 (4) satisfy or provide for the satisfaction of the
55-23 partnership's liabilities;
55-24 (5) distribute to the partners any remaining of the
55-25 partnership; and
56-1 (6) perform any other necessary acts
56-2 (c) Continuation To Preserve Value. A person winding
56-3 up the partnership's business may continue the business of the
56-4 partnership in whole or in part, including delaying the disposition
56-5 of partnership property, but only for the limited period necessary
56-6 to avoid unreasonable loss of partnership's property or business.
56-7 Sec. 8.04. Partner's Liability To Other Partners After Occurrence
56-8 Of An Event Requiring Winding Up.
56-9 (a) Liability of All Partners For Losses. Except as
56-10 provided in Section 8.04(b), after occurrence of an event requiring
56-11 winding up, the losses with respect to which a partner must
56-12 contribute under Section 8.06(c) include losses from any
56-13 liabilities incurred under Section 8.05.
56-14 (b) Individual Liability Of Acting Partner For Losses. A
56-15 partner who, with notice that an event requiring a winding up has
56-16 occurred, incurs a partnership liability under Section 8.05(2) by
56-17 an act that is not appropriate for winding up the partnership
56-18 business is liable to the partnership for any loss caused to the
56-19 partnership arising from that liability.
56-20 Sec. 8.05. Partner's Power To Bind Partnership After Occurrence Of
56-21 Event Requiring Winding Up.
56-22 After the occurrence of an event requiring winding up, a
56-23 partnership is bound by a partner's act that:
56-24 (1) is appropriate for winding up the partnership
56-25 business; or
57-1 (2) would bind the partnership under Section 3.02
57-2 before the occurrence of the event requiring winding up, if the
57-3 other party to the transaction does not have notice that an event
57-4 requiring winding up has occurred.
57-5 Sec. 8.06. Rules For Distribution On Winding Up.
57-6 (a) Application Of Property To Obligations. In winding up
57-7 the partnership business, the property of the partnership must be
57-8 applied to discharge its obligations to creditors, including
57-9 partners who are creditors, other than in their capacities as
57-10 partners. Any surplus must be applied to pay in cash the net
57-11 amount distributable to partners in accordance with their right to
57-12 distributions pursuant to Subsection (b).
57-13 (b) Settlement Of Accounts Among Partners. Each partner is
57-14 entitled to a settlement of all partnership accounts on winding up
57-15 the partnership business. In settling accounts among the partners:
57-16 (1) the partnership interest of a withdrawn partner
57-17 that is not redeemed under Section 7.01 is credited with a share of
57-18 any profits for the period after the partner's withdrawal but is
57-19 charged with a share of losses for that period only to the extent
57-20 of profits credited for that period, and
57-21 (2) the profits and losses that result from the
57-22 liquidation of the partnership property must be credited and
57-23 charged to the partners' capital accounts.
57-24 The partnership shall make a distribution to a partner in an amount
57-25 equal to that partner's positive balance in the partner's capital
58-1 account. A partner shall contribute to the partnership an amount
58-2 equal to that partner's negative balance in the partner's capital
58-3 account.
58-4 (c) Contribution To Satisfy Obligations. To the extent not
58-5 taken into account in settling the accounts among partners pursuant
58-6 to Section 8.06(b), each partner must contribute, in the proportion
58-7 in which the partner shares partnership losses, the amount
58-8 necessary to satisfy partnership obligations, but excluding any
58-9 liabilities that creditors have agreed shall be satisfied only with
58-10 partnership property without recourse to individual partners. If a
58-11 partner fails to contribute, then the other partners shall
58-12 contribute, in the proportions in which the partners share
58-13 partnership losses, the additional amount necessary to satisfy the
58-14 partnership obligations. A partner or partner's legal
58-15 representative may enforce or recover from the other partners, or
58-16 the estate of a deceased partner, any contributions the partner or
58-17 estate makes to the extent the amount contributed exceeds that
58-18 partner's or the estate's share of the partnership obligations.
58-19 (d) Liability of Deceased Partner's Estate. The estate of a
58-20 deceased partner is liable for the partner's obligation to
58-21 contribute to the partnership.
58-22 (e) Enforcement Of Obligation of Estate of Deceased Partner.
58-23 The partnership, an assignee for the benefit of creditors of a
58-24 partnership or a partner, or a person appointed by a court to
58-25 represent creditors of a partnership or a partner, may enforce the
59-1 obligation of a partner or the estate of a deceased partner to
59-2 contribute to the partnership.
59-3 ARTICLE IX
59-4 PARTNERSHIP CONVERSIONS, MERGERS
59-5 AND EXCHANGES
59-6 Sec. 9.01. Conversions.
59-7 (a) General To Limited Partnership. A partnership formed
59-8 under this Act may, with the consent of a majority-in-interest of
59-9 the partners, convert to a domestic or foreign limited partnership
59-10 by properly filing a certificate of limited partnership in the
59-11 state in which the limited partnership is to be formed. If the
59-12 limited partnership is formed under the law of this state, then in
59-13 addition to the other matters required; the certificate shall
59-14 state:
59-15 (1) that the partnership formerly operated as a
59-16 partnership and the partnership is converting from a partnership to
59-17 a limited partnership;
59-18 (2) the name of the former partnership at the time of
59-19 the conversion to a limited partnership;
59-20 (3) the names of the general partners.
59-21 (4) the state in which the partnership was organized
59-22 before conversion;
59-23 (5) the change in name required, if any, in connection
59-24 with the operation of the partnership as a limited partnership in
59-25 the state in which the limited partnership is organized; and
60-1 (6) the effective date of the conversion if it is
60-2 other than the date the certificate is filed.
60-3 If a partnership not already a limited partnership, converts to a
60-4 limited partnership, any partner who did not consent to the
60-5 conversion will be deemed to be a partner who has withdrawn from
60-6 the partnership effective immediately before the effective date of
60-7 the conversion, unless within 60 days after the later of the
60-8 effective date of the conversion or the date the partner receives
60-9 actual notice of the conversion, the partner notifies the
60-10 partnership in writing of the partner's desire to not so withdraw.
60-11 A withdrawal under the described circumstances is not to be
60-12 considered a wrongful withdrawal.
60-13 (b) Limited to General. A domestic or foreign limited
60-14 partnership may, on the affirmative vote of a majority-in-interest
60-15 of the partners, convert to a partnership under the terms of this
60-16 Act by:
60-17 (1) cancelling its certificate of limited partnership
60-18 in the state of formation or otherwise complying with the
60-19 provisions of that states law as of that partnership
60-20 existence terminated;
60-21 (2) amending its partnership agreement to reflect its
60-22 change in status and any change in its name required to
60-23 comply with this Act; and
60-24 (3) stating the effective date of the conversion in
60-25 the partnership agreement if it is other than the date of the
61-1 cancellation of the limited partnership certificate.
61-2 If a limited partnership converts to a partnership under this Act,
61-3 any partner who did not consent to the conversion will be deemed to
61-4 be a partner who has withdrawn from the limited partnership
61-5 effective immediately before the effective date of the conversion,
61-6 unless within 60 days after the later of the effective date of the
61-7 conversion or the date the partner receives actual notice of the
61-8 conversion, the partner notifies the partnership in writing of its
61-9 desire to not so withdraw. A withdrawal under the described
61-10 circumstances is not considered a wrongful withdrawal.
61-11 (c) Liability of Former Limited Partner. A limited partner
61-12 who remains in a partnership that results from the conversion of a
61-13 limited partnership to a partnership under this Act, is treated as
61-14 an incoming partner in the partnership as of the effective date of
61-15 the conversion for the purposes of determining the partner's
61-16 liability (1) to the partners of the partnership and (2) the debts
61-17 and obligations of the Partnership.
61-18 (d) Liability of General Partner In Converted Limited
61-19 Partnership. When a partnership is converted to a limited
61-20 partnership, for the purposes of determining a partner's liability
61-21 (1) to the partners of a partnership and (2) for the debts and
61-22 obligations of the partnership, a partner who is converted to a
61-23 limited partner continues to be liable for the debts and
61-24 obligations of the partnership incurred before the date of
61-25 conversion on the same basis that a withdrawn partner remains
62-1 liable for the debts and obligations of a partnership incurred
62-2 before withdrawal, under Section 7.03.
62-3 (e) Liability of Former General Partner Who Is Limited
62-4 Partner In Converted Limited Partnership. When a partnership
62-5 converts to a limited partnership, the action of a partner who
62-6 converts to a limited partner taken within one year after the
62-7 effective date of the conversion binds the partnership to a
62-8 transaction for which the former general partner no longer has
62-9 authority to bind the partnership if the transaction is one in
62-10 which the partner's actions would bind the partnership before the
62-11 effective date of the conversion and the other party to the
62-12 transaction:
62-13 (1) does not have notice of the person's conversion to
62-14 a limited partner;
62-15 (2) had done business with the partnership within one
62-16 year preceding the effective date of the conversion; and
62-17 (3) reasonably believed that the partner who has
62-18 converted was a partner with authority to bind the
62-19 partnership to the transaction at the time of the
62-20 transaction.
62-21 (f) Effective Date of Conversion. Any conversion of a
62-22 partnership to a limited partnership or a limited partnership to a
62-23 partnership under the terms of this Act shall be effective upon the
62-24 later of the date specified in any written agreement concerning the
62-25 conversion between the partners or the date all actions required by
63-1 this section have been completed.
63-2 Sec. 9.02. Mergers.
63-3 (a) Adoption of Plan. A partnership may adopt a plan of
63-4 merger and one or more partnerships may merge with one or more
63-5 domestic or foreign partnerships or other entities if:
63-6 (1) each domestic or foreign partnership that is a
63-7 party to the plan of merger approves the plan of merger in
63-8 the manner prescribed for such transactions in its
63-9 partnership agreement, constituent documents or as otherwise
63-10 prescribed by applicable law; and
63-11 (2) if one or more foreign partnerships or other
63-12 entities is a party to the merger or is to be created by the
63-13 terms of the plan of merger, (A) the merger is permitted
63-14 either by (i) the laws under which each foreign partnership
63-15 and each other entity that is a party to the merger is formed
63-16 or organized or (ii) by the partnership agreement or other
63-17 constituent documents of the foreign partnership or other
63-18 entity that are not inconsistent with such laws, and (B) each
63-19 foreign partnership or other entity that is a party to the
63-20 merger complies with such laws or documents in effecting the
63-21 merger.
63-22 (b) Contents Of Plan Of Merger. If a partnership merges
63-23 with one or more domestic or foreign limited partnerships or other
63-24 entities (other than another partnership formed under this Act), a
63-25 plan of merger must be adopted which shall set forth:
64-1 (1) the name and state of domicile of each domestic or
64-2 foreign partnership or other entity that is a party to the
64-3 merger and the name and state of domicile of each domestic or
64-4 foreign partnership or other entity, if any, that shall
64-5 survive the merger, which may be one or more of the domestic
64-6 or foreign partnerships or other entities who are a party to
64-7 the merger, and the name and state of domicile of each new
64-8 domestic or foreign partnership or other entity, if any, that
64-9 may be created by the terms of the plan of merger;
64-10 (2) the terms and conditions of the merger including,
64-11 if more than one domestic or foreign partnership or other
64-12 entity is to survive or to be created by the terms of the
64-13 plan of merger, (i) the manner and basis of allocating and
64-14 vesting the real estate and other property of each domestic
64-15 or foreign partnership and of each other entity that is a
64-16 party to the merger among one or more of the surviving or new
64-17 domestic or foreign partnerships or other entities, and (ii)
64-18 the manner and basis of allocating all liabilities and
64-19 obligations of each domestic or foreign partnership and other
64-20 entity that is a party to the merger (or making adequate
64-21 provision for the payment and discharge thereof) among one or
64-22 more of the surviving or new domestic or foreign partnerships
64-23 or other entities;
64-24 (3) the manner and basis of converting any of the
64-25 partnership interests or other evidences of ownership of each
65-1 domestic or foreign partnership and other entity that is a
65-2 party to the merger into (i) partnership interests, shares,
65-3 obligations, evidences of ownership, rights to purchase
65-4 securities or other securities of one or more of the
65-5 surviving or new domestic or foreign partnerships or other
65-6 entities, (ii) cash, or (iii) other property including
65-7 shares, obligations, evidences of ownership, rights to
65-8 purchase securities or other securities of any other person
65-9 or entity, or into any combination of the foregoing;
65-10 (4) the certificate of limited partnership, Articles
65-11 of Incorporation, Articles of Organization or other
65-12 organizational documents of each other entity that is to be
65-13 created or will act as a surviving entity by the terms of the
65-14 plan of merger;
65-15 (5) the principal officer of the surviving entities
65-16 and the registered officer and registered agent of the
65-17 surviving entities if a registered officer and/or agent is
65-18 required by the laws under which the surviving entities are
65-19 formed;
65-20 (6) whether the surviving entity is a partnership,
65-21 limited partnership, corporation, limited liability company
65-22 or other entity; and
65-23 (7) any other provisions relating to the merger.
65-24 (c) Certificate Of Merger. If a partnership merges with one
65-25 or more domestic or foreign limited partnerships or other entities,
66-1 after a plan of merger has been approved by each of the
66-2 partnerships or other entities that is a party to the plan of
66-3 merger, a certificate of merger shall be executed on behalf of each
66-4 partnership or other entity by at least one general partner of each
66-5 partnership that is a party to the plan of merger and by an
66-6 authorized officer, agent or other representative of each other
66-7 entity that is a party to the plan of merger and shall set forth:
66-8 (1) the plan of merger; and
66-9 (2) as to each domestic or foreign partnership or
66-10 other entity that is a party to the plan of merger, a
66-11 statement that the plan of merger was duly authorized by all
66-12 action required by the laws under which it was formed or
66-13 organized and by its constituent documents.
66-14 (d) Filing. The original of the certificate of merger and
66-15 the number of copies of the certificate equal to the number of
66-16 surviving and new domestic or foreign partnerships and other
66-17 entities that are a party to the plan of merger or that will be
66-18 created by the terms thereof, shall be delivered to the authority
66-19 with which the surviving entity files merger documents.
66-20 (e) Effective Date of Merger. If a certificate of merger is
66-21 delivered to the Secretary of State, the merger is effective on the
66-22 issuance of the certificate of merger by the Secretary of State or
66-23 a later date stated in the certificate of merger. If a certificate
66-24 of merger is not required to be filed with the Secretary of State,
66-25 the merger is effective on the date agreed to between the parties
67-1 to the merger as set out in the plan of merger or as otherwise
67-2 agreed to between the parties.
67-3 (f) Effect Of Merger. When a merger takes effect:
67-4 (1) no partner of a partnership that is a party to the
67-5 merger will, as a result of such a merger, become personally
67-6 liable for the liabilities or obligations of any other person
67-7 or entity which is a party to the merger unless such partner
67-8 consents to becoming personally liable by action taken in
67-9 connection with the specific plan of merger approved by such
67-10 partner. A partner who remains in or enters a domestic or
67-11 foreign partnership or other entity that survives the merger
67-12 or that enters a domestic or foreign partnership or other
67-13 entity created by the terms of the plan of merger shall be
67-14 treated as an incoming partner in such new or surviving
67-15 partnership as of the effective date of the merger for the
67-16 purpose of determining the partner's liability for the debts
67-17 and obligations of the other partnerships or entities that
67-18 are parties to the merger and in which the partner was not
67-19 associated;
67-20 (2) the separate existence of every domestic
67-21 partnership or other entity that is a party to the merger,
67-22 except any surviving or new domestic partnership or other
67-23 entity, shall cease;
67-24 (3) all rights, title, and interest to all real estate
67-25 and other property owned by each domestic or foreign
68-1 partnership and by each other entity that is a party to the
68-2 merger shall be allocated to and vested in one or more of the
68-3 surviving or resulting entities as provided in the plan of
68-4 merger without reversion or impairment, without further act
68-5 or deed, and without any transfer or assignment having
68-6 occurred, but subject to any existing liens or other
68-7 encumbrances thereon;
68-8 (4) all liabilities and obligations of each domestic
68-9 or foreign partnership and other entity that is a party to
68-10 the merger shall be allocated to one or more of the surviving
68-11 or new domestic or foreign partnerships or other entities in
68-12 the manner set forth in the plan of merger, and each
68-13 surviving or new domestic or foreign partnership, and each
68-14 surviving or new other entity to which a liability or
68-15 obligation shall have been allocated pursuant to the plan of
68-16 merger shall be the primary obligor therefor and, except as
68-17 otherwise set forth in the plan of merger or as otherwise
68-18 provided by law or contract, no other party to the merger,
68-19 other than a surviving domestic or foreign partnership or
68-20 other entity liable thereon at the time of the merger and no
68-21 other domestic or foreign partnership or other entity created
68-22 thereby, shall be liable therefor;
68-23 (5) a proceeding pending by or against any domestic or
68-24 foreign partnership or by or against any other entity that is
68-25 a party to the merger may be continued as if the merger did
69-1 not occur and the domestic or foreign partnership or other
69-2 entity which has been allocated the liabilities, obligations,
69-3 property or rights associated with such proceedings under the
69-4 terms of the plan of merger shall be the primary obligor
69-5 therefor; or the surviving or new domestic or foreign
69-6 partnership or surviving or new other entity or entities to
69-7 which the liability, obligations, asset or right associated
69-8 with such proceeding is allocated to and vested in pursuant
69-9 to the plan of merger may be substituted in the proceeding;
69-10 (6) the partnership agreement, certificate of limited
69-11 partnership and other constituent documents of each other
69-12 entity that will act as a surviving entity by the terms of
69-13 the plan of merger shall be deemed amended to the extent
69-14 provided in the plan of merger;
69-15 (7) each new domestic partnership which is set forth
69-16 in the plan of merger under Subdivision (1) of Subsection (a)
69-17 of this Section, shall be formed as a partnership under this
69-18 Act; each new domestic limited partnership, the certificate
69-19 of limited partnership of which is set forth in the plan of
69-20 merger under Subdivision (4) of Subsection (b) of this
69-21 Section; and each other entity to be formed or organized
69-22 under the laws of this State, the organizational documents of
69-23 which are set forth in the plan of merger as set forth in the
69-24 plan of merger under Subdivision (4) of Subsection (b) of
69-25 this Section, shall, upon an executed copy of the certificate
70-1 of merger being delivered to or filed with any required
70-2 governmental entity with which organizational documents of
70-3 such another entity are required to be delivered or filed,
70-4 and upon meeting such additional requirements, if any, of law
70-5 for its formation or organization, shall be formed or
70-6 organized as provided in the plan of merger; and
70-7 (8) the partnership interest of each domestic or
70-8 foreign partnership and the interest, shares or evidences of
70-9 ownership in each other entity that is a party to the merger
70-10 that are to be converted or exchanged, in whole or in part,
70-11 into (i) partnership interests, shares, obligations,
70-12 evidences of ownership, rights to purchase securities or
70-13 other securities of one or more of the surviving or new
70-14 domestic or foreign partnerships or other entities, (ii)
70-15 cash, or (iii) other property, including shares, obligations,
70-16 evidences of ownership, rights to purchase securities or
70-17 other securities of any other person or entity, or into any
70-18 combination of the foregoing, shall be so converted and
70-19 exchanged and the former partners of each domestic
70-20 partnership and owners of shares or evidences of ownership in
70-21 each other domestic entity that is a party to the merger
70-22 shall be entitled only to the rights provided in the plan of
70-23 merger;
70-24 (9) if the plan of merger shall fail to provide for
70-25 the allocation and vesting of the right, title and interest
71-1 in any particular item of real estate or other property or
71-2 for the allocation of any liability or obligation of any
71-3 party to the merger, such item of real estate or other
71-4 property shall be owned in undivided interest by, or such
71-5 liability or obligation shall be a joint and several
71-6 liability and obligation of, each of the surviving and new
71-7 domestic and foreign partnerships and other entities, pro
71-8 rata to the total number of surviving and new domestic and
71-9 foreign partnerships and other entities resulting from the
71-10 merger; and
71-11 (10) in the case of a domestic or foreign partnership
71-12 which has merged with another domestic or foreign
71-13 partnership, or other entity and, through the merger process
71-14 is no longer in existence, a person who becomes a member of
71-15 the surviving domestic or foreign partnership or other entity
71-16 has the power, for a period of one (1) year after the
71-17 effective date of the merger, to bind the surviving entity to
71-18 a transaction for which it no longer has authority to bind
71-19 such entity if the transaction is one in which the partners
71-20 actions would bind the foreign or domestic partnership before
71-21 the effective date of the merger and the other party to the
71-22 transaction:
71-23 (A) does not have notice of the merger;
71-24 (B) had done business with the partnership which
71-25 is no longer in existence within one (1) year preceding the
72-1 effective date of the merger; and
72-2 (C) reasonably believe that the partner who was
72-3 previously a member of the partnership which was merged into
72-4 the surviving entity and is now a partner of the surviving
72-5 entity was a partner with authority to bind the partnership
72-6 to the transaction at the time of the transaction.
72-7 (g) Definition Of "Other Entity." For purposes of this
72-8 section, the term "other entity" means any entity, whether
72-9 organized for profit or not, that is a corporation, limited
72-10 partnership (other than a domestic or foreign limited partnership),
72-11 limited liability company, joint venture, joint stock company,
72-12 cooperative, association, bank, insurance company or other legal
72-13 entity organized pursuant to the laws of this state or any other
72-14 state or country to the extent such laws or the constituent
72-15 documents of that entity, not inconsistent with such laws, permit
72-16 that entity to enter into a merger or partnership interest exchange
72-17 as permitted by this section.
72-18 Sec. 9.03. Exchange.
72-19 One or more domestic or foreign partnerships may adopt a plan
72-20 of exchange by which a domestic or foreign partnership or other
72-21 entity acquires all of the outstanding partnership interest of one
72-22 or more domestic partnerships in exchange for cash and/or
72-23 securities of the acquiring domestic or foreign partnership or
72-24 other entity, if:
72-25 (1) each domestic or foreign partnership, the
73-1 partnership interest of which are to be acquired pursuant to
73-2 the plan of exchange, approves the plan of exchange in the
73-3 manner prescribed in its partnership agreement;
73-4 (2) each acquiring domestic or foreign partnership or
73-5 other entity takes all action that may be required by the
73-6 laws of the State under which it was incorporated and as
73-7 required by its partnership agreement or other constituent
73-8 documents in order to effect the exchange. No filing with
73-9 the secretary of state shall be necessary in order to
73-10 evidence or effect such interest exchange with respect to a
73-11 domestic partnership that is a party to such interest
73-12 exchange. When an interest exchange takes effect as provided
73-13 in the plan of exchange, the partnership interest of each
73-14 domestic partnership that is to be acquired pursuant to the
73-15 plan of exchange shall be deemed to have been exchanged as
73-16 provided in the plan of exchange and the former holders of
73-17 the partnership interests exchanged pursuant to the plan of
73-18 exchange shall be entitled only to the exchange rights
73-19 provided in the plan of exchange and the acquiring domestic
73-20 or foreign partnership or other entity or entities shall be
73-21 entitled to all rights, title, and interest with respect to
73-22 the partnership interests so acquired and exchanged subject
73-23 to the provisions in the plan of exchange; and
73-24 (3) For purposes of this section, the term "other
73-25 entity" means any entity, whether organized for profit or
74-1 not, that is a corporation, limited liability corporation,
74-2 limited partnerships, partnerships (other than limited
74-3 partnership), limited liability company, joint venture, joint
74-4 stock company, cooperative, association, bank, insurance
74-5 company or other legal entity organized pursuant to the laws
74-6 of this state or any other state or country to the extent
74-7 such laws or the constituent documents of that entity, not
74-8 inconsistent with such laws, permit that entity to enter into
74-9 a merger or partnership interest exchange as permitted by
74-10 this section.
74-11 ARTICLE X
74-12 MISCELLANEOUS PROVISIONS
74-13 Sec. 10.01. Short Title.
74-14 This Act may be cited as the "Texas Revised Partnership Act."
74-15 Sec. 10.02. Severability.
74-16 If any provision of this Act or its application to any person
74-17 or circumstance is held invalid, the invalidity does not affect
74-18 other provisions or applications of this Act which can be given
74-19 effect without the invalid provisions or application, and to this
74-20 end the provisions of this Act are severable.
74-21 Sec. 10.03. Effective Date.
74-22 (a) Before January 1, 1999. Before January 1, 1999, this
74-23 Act applies only to:
74-24 (1) a partnership formed on or after the effective
74-25 date of this Act unless that partnership is continuing the
75-1 business of a dissolved partnership under Section 41 of the
75-2 Texas Uniform Partnership Act; and
75-3 (2) a partnership formed before the effective date of
75-4 this Act that elects, as provided by this Section 10.03, to
75-5 be governed by this Act.
75-6 (b) After December 31, 1998. After December 31, 1998, this
75-7 Act applies to all partnerships.
75-8 (c) Voluntary Application Early. Before January 1, 1999, a
75-9 partnership formed before the effective date of this Act unless
75-10 that partnership is continuing the business of a dissolved
75-11 partnership under Section 41 of the Texas Uniform Partnership Act,
75-12 may voluntarily elect, by complying with the procedures provided in
75-13 its partnership agreement for amending the partnership agreement,
75-14 to adopt this Act; except that the provisions of this Act relating
75-15 to the liability of the partnership's partners to third parties
75-16 will apply to limit those partners' liability to any third party
75-17 who had done business with the partnership within one year
75-18 preceding the partnership's election to adopt this Act only after
75-19 the partnership gives notice to the third party of the
75-20 partnership's election to adopt this Act.
75-21 Sec. 10.04. Application To Existing Relationships.
75-22 (1) This Act does not impair the obligations of a
75-23 contract existing when the Act takes effect or affect an
75-24 action or proceeding begun or right accrued before this Act
75-25 takes effect.
76-1 (2) A judgment against a partnership or a partner in
76-2 an action commenced before the effective date of this Act may
76-3 be enforced in the same manner as a judgment rendered before
76-4 the effective date of this Act.
76-5 SECTION 2. The Texas Uniform Partnership Act (Article 6132B,
76-6 Vernon's Texas Civil Statutes) is amended by adding Section 47 to
76-7 read as follows:
76-8 Sec. 47. Application; Expiration.
76-9 (a) This Act does not apply to a partnership to which
76-10 the Texas Revised Partnership Act applies.
76-11 (b) This Act expires January 1, 1999.
76-12 SECTION 3. Section 4A, Texas Securities Act (Article 581
76-13 Sec. 4A, Vernon's Texas Civil Statutes) as amended is amended to
76-14 read as follows:
76-15 A. The term "security" or "securities" shall include
76-16 any limited partner interest in a limited partnership, share,
76-17 stock, treasury stock, stock certificate under a voting trust
76-18 agreement, collateral trust certificate, equipment trust
76-19 certificate, note, bond, debenture, mortgage certificate or other
76-20 evidence of indebtedness, any form of commercial paper, certificate
76-21 in or under a profit sharing or participation agreement,
76-22 certificate or any instrument representing any interest in or under
76-23 an oil, gas or mining lease, fee or title, or any certificate or
76-24 instrument representing or secured by an interest in any or all of
76-25 the capital, property, assets, profits or earnings of any company,
77-1 investment contract, or any other instrument commonly known as a
77-2 security, whether similar to those herein referred to or not.
77-3 Provided, however, that this definition shall not apply to any
77-4 insurance policy, endowment policy, annuity contract, optional
77-5 annuity contract, or any contract or agreement in relation to and
77-6 in consequence of any such policy or contract, issued by an
77-7 insurance company subject to the supervision or control of the
77-8 State Board of Insurance when the form of such policy or contract
77-9 has been duly filed with the Board as now or hereafter required by
77-10 law.
77-11 SECTION 4. Sections 2 and 3 of this Act take effect January
77-12 1, 1994.
77-13 SECTION 5. The importance of this legislation and the
77-14 crowded condition of the calendars in both houses create an
77-15 emergency and an imperative public necessity of the constitutional
77-16 rule requiring bills to be read on three several days in each house
77-17 be suspended, and this rule is hereby suspended.