GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1999

S	1 

SENATE BILL 297

Short Title:  Various Limited Partnership Law Changes.	(Public)

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Sponsors: Senators Clodfelter; Cooper, Hartsell, Kerr, Miller, and Odom.

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Referred to:  Judiciary I.

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March 8, 1999

A BILL TO BE ENTITLED
AN ACT TO MAKE TECHNICAL AND OTHER CHANGES REGARDING LIMITED PARTNERSHIPS AND THE NORTH CAROLINA REVISED UNIFORM LIMITED PARTNERSHIP ACT.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 1-79 reads as rewritten:
"§ 1-79. Domestic corporations, limited partnerships, and limited liability companies.
(a)	For the purpose of suing and being sued the residence of a  domestic corporation, limited partnership, or limited liability company is as follows:
(1)	Where the registered or principal office of the corporation, limited partnership, or limited liability company is  located, or
(2)	Where the corporation, limited partnership, or limited liability company maintains a place of business, or
(3)	If no registered or principal office is in existence, and no  place of business is currently maintained or can reasonably be found, the term 'residence' shall include any place where the corporation, limited partnership, or limited liability company is regularly engaged in carrying on business.
(b)	For purposes of this section, the term 'domestic' when applied to an entity means:
(1)	An entity formed under the laws of this State, or
(2)	An entity that (i) is formed under the laws of any jurisdiction other than this State, and (ii) maintains a registered office in this State pursuant to a certificate of authority from the Secretary of State."
Section 2.  G.S. 59-102 reads as rewritten:
"§ 59-102. Definitions.
As used in this Article, unless the context otherwise requires:
(1)	'Business' means any lawful trade, investment, or other purpose or activity, whether or not the trade, investment, purpose, or activity is carried on for profit.
(1a)	'Certificate of limited partnership' means the certificate referred to in G.S. 59-201, and the certificate as amended.
(2)	'Conformed copy' shall include a photostatic or other photographic copy of the original document.
(3)	'Contribution' means any cash, property, services rendered, or a promissory note or other binding obligation to contribute cash or property or to perform services, which a partner contributes to a limited partnership in his capacity as a partner.
(4)	'Event of withdrawal of a general partner' means an event that causes a person to cease to be a general partner as provided in G.S. 59-402.
(5)	'Foreign limited partnership' means a partnership formed under the laws of any state, province, country, or other jurisdiction other than this State and having as partners one or more general partners and one or more limited partners.
(6)	'General partner' means a person who has been admitted to a limited partnership as a general partner in accordance with the partnership agreement and named in the certificate of limited partnership as a general partner.
(7)	'Limited partner' means a person who has been admitted to a limited partnership as a limited partner in accordance with the partnership agreement.
(8)	'Limited partnership' and 'domestic limited partnership' mean a partnership formed by two or more persons under the laws of this State and having one or more general partners and one or more limited partners.
(9)	'Partner' means a limited or general partner.
(10)	'Partnership agreement' means any valid agreement of the partners as to the affairs of a limited partnership, the conduct of its business, and the responsibilities and rights of its partners.  The term 'partnership agreement' includes any written or oral agreement, whether or not the agreement is set forth in a document referred to by the partners as a 'partnership agreement', and includes any amendment agreed upon by the partners unanimously or in accordance with the terms of the agreement.  The term also includes any agreement of the partners to waive or revise the terms of the partnership agreement in one or more specific instances and not necessarily on an ongoing or permanent basis.
(11)	'Partnership interest' means a partner's share of the allocations of income, gain, loss, deduction or credit of a limited partnership and the right to receive distributions of cash or other partnership assets.
(12)	'Person' means a natural person, partnership, limited partnership (domestic or foreign), trust, estate, association, or corporation.
(13)	'State' means a state, territory, or possession of the United States, the District of Columbia, or the Commonwealth of Puerto Rico."
Section 3.  G.S. 59-106(a)(5) reads as rewritten:
"(5)	A written record that contains:
a.	 The amount of cash and a description and statement of the agreed value of the other property or services contracted by each partner and which each partner has agreed to contribute;
b.	The times at which or events on the happening of which any additional contributions agreed to be made by each partner are to be made;
c.	Any right of a partner to receive distribution of property, including cash from the limited partnership; and
d.	Events upon the happening of which the limited partnership is to be dissolved and its affairs wound up.
	The written record required pursuant to this subdivision may be part of a written partnership agreement or may be contained in one or more other documents or records."
Section 4.  G.S. 59-107 reads as rewritten:
"§ 59-107. Nature of business.
A limited partnership may be formed for and carry on any lawful business."
Section 5.  G.S. 59-205 reads as rewritten:
"§ 59-205. Execution by judicial act.
If a person fails or refuses to execute a certificate pursuant to G.S. 59-204, any other person who is adversely affected by the failure or refusal, may petition the court for the county in which the partnership's registered office is located to direct the execution of the certificate. If the court finds that it is proper for the certificate to be executed and that any person so designated has failed or refused to execute the certificate, it shall order an appropriate person to prepare, and the Secretary of State to record, an appropriate certificate."
Section 6.  G.S. 59-206(a)(5) reads as rewritten:
"(5)	The certificate required by subdivision (3a) of this subsection shall be recorded by the register of deeds in the same manner as deeds, and for the same fees, but no formalities as to acknowledgement, probate, or approval by any other officer shall be required. The former name of the limited partnership holding title to the real property before the amendment shall appear in the 'Grantor' index, and the amended name of the limited partnership holding title to the real property by virtue of the amendment shall appear in the 'Grantee' index."
Section 7.  G.S. 59-301 reads as rewritten:
"§ 59-301. Admission of limited partners.
(a)	In connection with the formation of a limited partnership, a person is admitted as a limited partner upon the later to occur of:
(1)	The formation of the limited partnership; or
(2)	The time provided for becoming a limited partner pursuant to and upon compliance with the partnership agreement.
(b)	After the formation of a limited partnership, a person may be admitted as an additional limited partner:
(1)	In the case of a person acquiring a partnership interest directly from the limited partnership, at the time provided pursuant to, and upon the compliance with, the partnership agreement; and
(2)	In the case of an assignee of a partnership interest of a partner who has the power, as provided in G.S. 59-704, to grant the assignee the right to become a limited partner, upon the exercise of that power and compliance with any conditions limiting the grant or exercise of the power."
Section 8.  G.S. 59-302 reads as rewritten:
"§ 59-302. Voting.
The partnership agreement may grant to all or a specified group of the limited partners the right to vote (on a per capita or other basis) upon any matter."
Section 9.  G.S. 59-303 reads as rewritten:
"§ 59-303.  Liability to third parties.
																	A limited partner is not liable for the obligations of a limited partnership by reason of being a limited partner and does not become liable for the obligations of a limited partnership by participating in the management or control of the business of the limited partnership."
Section 10.  G.S. 59-304 reads as rewritten:
"§ 59-304. Person erroneously believing himself limited partner.
(a)	Except as provided in subsection (b), a person who makes a contribution to a business enterprise and erroneously but in good faith believes that the person has become a limited partner in the enterprise is not a general partner in the enterprise and is not bound by its obligations by reason of making the contribution, receiving distributions from the enterprise, or exercising any rights of a limited partner, if, on ascertaining the mistake, he:
(1)	Causes an appropriate certificate of limited partnership or certificate of amendment to be  executed and filed; or
(2)	Withdraws from future equity participation in the enterprise.
(b)	A person who makes a contribution of the kind described in subsection (a) of this section is liable as a general partner to any third party who transacts business with the enterprise in the case in which:
(1)	The third party actually believed in good faith that the person was a general partner at the time of the transaction; and
(2)	The third party transacted business with the enterprise before either:
a.	An appropriate certificate has been filed pursuant to subsection (a) of this section to reflect that the person is not a general partner; or
b.	The person has given notice to the partnership of withdrawal from future equity participation and before the withdrawal was effective."
Section 11.  G.S. 59-305 reads as rewritten:
"§ 59-305. Information.
Each limited partner has the right to:
(1)	Inspect and copy any of the partnership records required to be  maintained by G.S. 59-106; and
(2)	Obtain from the general partners from time to time upon reasonable demand (i) true and full information regarding the state of the business and financial condition of the limited partnership, (ii) promptly after becoming available, a copy of the limited partnership's federal, State, and local income tax returns for each year, and (iii) other information regarding the affairs of the limited partnership as is just and reasonable."
Section 12.  G.S. 59-402(4) reads as rewritten:
"(4)	Unless otherwise provided in writing in the partnership agreement, the general partner: (i) makes an assignment for the benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is adjudicated a bankrupt or insolvent; (iv) files a petition or answer seeking for himself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the general partner in any proceeding of this nature; or (vi) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of the general partner or of all or any substantial part of the general partner's properties;".
Section 13.  G.S. 59-402(5) reads as rewritten:
"(5)	Unless otherwise provided in writing in the partnership agreement, 120 days after the commencement of any proceeding against the general partner seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, the proceeding has not been dismissed, or if within 90 days after the appointment without the general partner's consent or acquiescence of a trustee, receiver, or liquidator of the general partner or of all or any substantial part of his properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated;".
Section 14.  G.S. 59-502(a) reads as rewritten:
"(a)	Except as provided in the partnership agreement, a partner is obligated to the limited partnership to perform any enforceable promise to contribute cash or property or to perform services, even if the partner is unable to perform because of death, disability or any other reason. If a partner does not make the required contribution of property or services, the partner is obligated at the option of the limited partnership to contribute cash equal to that portion of the agreed value of the stated contribution that has not been made. As used in this section, the term 'agreed value' means an amount or other measure of value as (i) is provided in the partnership agreement, or (ii) if not provided in the partnership agreement, is required to be set forth in the written records required pursuant to G.S. 59-106."
Section 15.  G.S. 59-503 reads as rewritten:
"§ 59-503. Sharing income, gain, loss, deduction or credit.
Income, gain, loss, deduction or credit of a limited partnership shall be allocated among the partners, and among classes of partners, in the manner provided in the partnership agreement. To the extent the partnership agreement does not provide for the allocation of items of income, gain, loss, deduction, or credit, then those items shall be allocated on the basis of the agreed value of the contributions made by each partner to the extent they have been received by the partnership and have not been returned.  As used in this section, the term 'agreed value' means an amount or other measure of value as (i)	is provided in the partnership agreement, or (ii) if not provided in the partnership agreement, is required to be set forth in the written records required pursuant to G.S. 59-106."
Section 16.  G.S. 59-504 reads as rewritten:
"§ 59-504. Sharing of distributions.
Distributions of cash or other assets of a limited partnership shall be made among the partners, and among classes of partners, in the manner provided in the partnership agreement. To the extent the partnership agreement does not provide for the sharing of distributions among the partners, distributions shall be made among the partners on the basis of the agreed value of the contributions made by each partner to the extent they have been received by the partnership and have not been returned.  As used in this section, the term 'agreed value' means an amount or other measure of value as (i)	is provided in the partnership agreement, or (ii) if not provided in the partnership agreement, is required to be set forth in the written records required pursuant to G.S. 59-106."
Section 17.  G.S. 59-602 reads as rewritten:
"§ 59-602. Withdrawal of general partner.
After filing of the original certificate of limited partnership, a general partner may withdraw from a limited partnership at any time by giving written notice to the other partners, but if the withdrawal violates the partnership agreement, the limited partnership may recover from the withdrawing general partner, in addition to its other remedies, any damages for breach of the partnership agreement and may offset the damages against the amount otherwise distributable or payable to the partner."
Section 18.  G.S. 59-603 reads as rewritten:
"§ 59-603. Withdrawal of limited partner.
A limited partner may withdraw from a limited partnership only at the time or upon the happening of events specified in writing in and in accordance with the partnership agreement, including any amendment or addendum to the partnership agreement agreed upon by the partners unanimously or in accordance with the terms of the agreement and made in connection with any permitted withdrawal. If the partnership agreement does not specify in writing the time or the events upon the happening of which a limited partner may withdraw, a limited partner may not withdraw prior to the time for the dissolution and winding up of the limited partnership."
Section 19.  G.S. 59-604 reads as rewritten:
"§ 59-604. Distribution upon withdrawal.
Except as provided in this Article, upon withdrawal any withdrawing partner is entitled to receive any distribution to which the partner is entitled under the partnership agreement and, if not otherwise provided in the agreement, the partner is entitled to receive, within a reasonable time after withdrawal, the fair value of the partner's partnership interest in the limited partnership as of the date of withdrawal, based upon the partner's right to share in distributions from the limited partnership."
Section 20.  G.S. 59-606 reads as rewritten:
"§ 59-606. Right to distribution.
Subject to the other provisions of Part 6 of this Article, at the time a partner becomes entitled to receive a distribution, the partner has the status of, and is entitled to all remedies available to, a creditor of the limited partnership with respect to the distribution."
Section 21.  G.S. 59-608(c) reads as rewritten:
"(c)	A partner receives a return of the partner's contribution to the extent that a distribution to the partner reduces the partner's share of the fair value of the net assets of the limited partnership below the agreed value of the partner's contribution which has not been distributed to the partner. As used in this section, the term 'agreed value' means an amount or other measure of value as (i) is provided in the partnership agreement, or (ii) if not provided in the partnership agreement, is required to be set forth in the written records required pursuant to G.S. 59-106."
Section 22.  G.S. 59-702 reads as rewritten:
"§ 59-702. Assignment of partnership interest.
Except as provided in the partnership agreement, a partnership interest is assignable in whole or in part. Subject to G.S. 59-801(3)	an assignment of a partnership interest does not dissolve a limited partnership or entitle the assignee to become or to exercise any rights of a partner. An assignment entitles the assignee to receive, to the extent assigned, only the allocation and distribution to which the assignor would be entitled. Except as provided in the partnership agreement, a partner ceases to be a partner and to have the power to exercise any rights and powers of a partner upon assignment of all of the partner's partnership interest.  Except as provided in the partnership agreement, neither the pledge or granting of a security interest in any or all of the partnership interest of a partner nor the pledge or granting of a lien or other encumbrance against any or all of the partnership interest of a partner shall cause the partner to cease to be a partner or cease to have the power to exercise any rights or powers of a partner."
Section 23.  G.S. 59-704(b) reads as rewritten:
"(b)	An assignee who has become a limited partner has, to the extent assigned, the rights and powers, and is subject to the restrictions and liabilities, of a limited partner under the partnership agreement and this Article. An assignee who becomes a limited partner also is liable for the obligations of the assignee's assignor to make and return contributions as provided in Parts 5 and 6 of this Article. However, the assignee is not obligated for liabilities that (i) are unknown to the assignee at the time the assignee became a limited partner and (ii) could not be ascertained from the written provisions of the partnership agreement."
Section 24.  G.S. 59-801 reads as rewritten:
"§ 59-801. Nonjudicial dissolution.
(a)	A limited partnership is dissolved and its affairs shall be wound up upon the happening of the first to occur of the following:
(1)	At the time specified in the certificate of limited partnership or upon the happening of events specified in writing in the partnership agreement;
(2)	Written consent of all partners;
(3)	An event of withdrawal of a general partner unless:
a.	At the time there is at least one other general partner, in which case, unless otherwise provided in a written partnership agreement or agreed upon by all remaining partners, (i) the limited partnership is not dissolved, (ii) the limited partnership shall not be wound up, and (iii) the business of the limited partnership shall be continued by the remaining general partners; or
b.	Within 90 days after the withdrawal, all remaining partners, or a lesser number or portion of the partners provided in the partnership agreement, agree in writing to continue the business of the limited partnership and to the appointment of one or more additional general partners if necessary or desired, in which case the limited partnership is not dissolved and is not required to be wound up by reason of the event of withdrawal;
(3a)	90 days after the withdrawal of the limited partnership's last limited partner, unless the limited partnership admits at least one limited partner before the end of the 90 days; or
(4) 	Entry of a decree of judicial dissolution under G.S. 59-802.
(b)	The causes of dissolution of a limited partnership shall be governed solely by this Article. Article 2 of this Chapter, which governs the causes of dissolution of a partnership without limited partners, does not apply and shall not govern the causes of dissolution of a limited partnership."
Section 25.  G.S. 59-903 reads as rewritten:
"§ 59-903.  Issuance of registration.
	If the Secretary of State finds that an application satisfies the requirements of this Article, the Secretary shall, when all requisite fees have been tendered as in this Article prescribed:
(1)	Endorse on the application the word 'filed', and the hour, day, month and year of the filing thereof;
(2)	File in the office of the Secretary of State the application;
(3)	Issue a certificate of authority to transact business in this State to which the Secretary shall affix the conformed copy of the application; and
(4)	Send to the foreign limited partnership or its representative the certificate of authority, together with the conformed copy of the application affixed thereto."
Section 26.  G.S. 59-907(e) reads as rewritten:
"(e)	A limited partner of a foreign limited partnership is not liable as a general partner of the foreign limited partnership solely by reason of the foreign limited partnership's having transacted business in this State without registration."
Section 27.  G.S. 59-1002 reads as rewritten:
"§ 59-1002. Proper plaintiff.
In a derivative action, the plaintiff must be a partner at the time of bringing the action and 	(i) must have been a partner at the time of the transaction that is the subject of the complaint or (ii) the plaintiff's status as a partner must have devolved upon the partner by operation of law or pursuant to the terms of the partnership agreement from a person who was a partner at the time of the transaction."
Section 28.  This act becomes effective October 1, 1999, and applies to suits filed on or after that date.  Section 18 of this act applies to (i) any limited partnership formed before October 1, 1999, only if validly adopted in writing by its partners or otherwise as a part of its partnership agreement, and (ii) all limited partnerships formed on or after October 1, 1999.