SB657: Bill Text

SB657,50,1 (c) With the affirmative vote or consent of all the partners.

SB657,50,2 (3) A person may become a partner without doing any of the following:

SB657,50,3 (a) Acquiring a transferable interest.

SB657,50,4 (b) Making or being obligated to make a contribution to the partnership.

SB657,50,8 178.0403 Form of contribution. A contribution may consist of money or other property transferred to, services performed for, or another benefit provided to the partnership or an agreement to transfer money or property to, perform services for, or provide another benefit to the partnership.

SB657,50,11 178.0404 Liability for contribution. (1) A person's obligation to make a contribution to a partnership is not excused by the person's death, disability, termination, or other inability to perform personally.

SB657,50,14 (2) If a person does not fulfill an obligation to make a contribution other than money, the person is obligated at the option of the partnership to contribute money equal to the value of the part of the contribution which has not been made.

SB657,50,19 (3) The obligation of a person to make a contribution may be compromised only by the affirmative vote or consent of all the partners. If a creditor of a limited liability partnership extends credit or otherwise acts in reliance on an obligation described in sub. (1) without knowledge or notice of a compromise under this subsection, the creditor may enforce the obligation.

SB657,50,23 178.0405 Sharing of and right to distributions before dissolution. (1) Any distribution made by a partnership before its dissolution and winding up must be in equal shares among partners, except to the extent necessary to comply with a transfer effective under s. 178.0503 or charging order in effect under s. 178.0504.

SB657,51,3 (2) Subject to s. 178.0701, a person has a right to a distribution before the dissolution and winding up of a partnership only if the partnership decides to make an interim distribution.

SB657,51,8 (3) A person does not have a right to demand or receive a distribution from a partnership in any form other than money. Except as otherwise provided in s. 178.0806, a partnership may distribute an asset in kind only if each part of the asset is fungible with each other part and each person receives a percentage of the asset equal in value to the person's share of distributions.

SB657,51,14 (4) If a partner or transferee becomes entitled to receive a distribution, the partner or transferee has the status of, and is entitled to all remedies available to, a creditor of the partnership with respect to the distribution. However, the partnership's obligation to make a distribution is subject to offset for any amount owed to the partnership by the partner or a person dissociated as partner on whose account the distribution is made.

SB657,51,17 178.0406 Limitations on distributions by limited liability partnership. (1) A limited liability partnership may not make a distribution, including a distribution under s. 178.0806, if after the distribution any of the following applies:

SB657,51,19 (a) The partnership would not be able to pay its debts as they become due in the ordinary course of the partnership's business.

SB657,51,24 (b) The partnership's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the partnership were to be dissolved and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up of partners and transferees whose preferential rights are superior to the rights of persons receiving the distribution.

SB657,52,2 (2) A limited liability partnership may base a determination that a distribution is not prohibited under sub. (1) on any of the following:

SB657,52,4 (a) Financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances.

SB657,52,6 (b) A fair valuation or other method that is reasonable under the circumstances.

SB657,52,8 (3) Except as otherwise provided in sub. (5), the effect of a distribution under sub. (1) is measured as follows:

SB657,52,10 (a) In the case of a distribution described in s. 178.0102 (4) (a) 1. and 2., as of the earlier of the following:

SB657,52,12 1. The date money or other property is transferred or debt is incurred by the limited liability partnership.

SB657,52,14 2. The date the person entitled to the distribution ceases to own the interest or rights being acquired by the partnership in return for the distribution.

SB657,52,16 (b) In the case of any distribution of indebtedness other than one under par. (a), as of the date the indebtedness is distributed.

SB657,52,17 (c) In all cases other than those under par. (a) or (b), as of the following:

SB657,52,19 1. The date the distribution is authorized, if the payment occurs not later than 120 days after that date.

SB657,52,21 2. The date the payment is made, if the payment occurs more than 120 days after the distribution is authorized.

SB657,52,25 (4) A limited liability partnership's indebtedness to a partner or transferee incurred by reason of a distribution made in accordance with this section is at parity with the partnership's indebtedness to its general, unsecured creditors, except to the extent subordinated by agreement.

SB657,53,7 (5) A limited liability partnership's indebtedness, including indebtedness issued as a distribution, is not a liability for purposes of sub. (1) if the terms of the indebtedness provide that payment of principal and interest is made only if and to the extent that a payment of a distribution could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is made.

SB657,53,10 (6) In measuring the effect of a distribution under s. 178.0806, the liabilities of a dissolved limited liability partnership do not include any claim that has been disposed of under s. 178.0807, 178.0808, or 178.0809.

SB657,53,16 178.0407 Liability for improper distributions by limited liability partnership. (1) Except as otherwise provided in sub. (2), if a partner of a limited liability partnership consents to a distribution made in violation of s. 178.0406 and in consenting to the distribution fails to comply with s. 178.0409, the partner is personally liable to the partnership for the amount of the distribution which exceeds the amount that could have been distributed without the violation of s. 178.0406.

SB657,53,21 (2) To the extent the partnership agreement of a limited liability partnership expressly relieves a partner of the authority and responsibility to consent to distributions and imposes that authority and responsibility on one or more other partners, the liability stated in sub. (1) applies to the other partners and not to the partner that the partnership agreement relieves of the authority and responsibility.

SB657,53,25 (3) A person that receives a distribution knowing that the distribution violated s. 178.0406 is personally liable to the limited liability partnership but only to the extent that the distribution received by the person exceeded the amount that could have been properly paid under s. 178.0406.

SB657,54,2 (4) A person against which an action is commenced because the person is liable under sub. (1) may do any of the following:

SB657,54,4 (a) Implead any other person that is liable under sub. (1) and seek to enforce a right of contribution from the person.

SB657,54,7 (b) Implead any person that received a distribution in violation of sub. (3) and seek to enforce a right of contribution from the person in the amount the person received in violation of sub. (3).

SB657,54,9 (5) An action under this section is barred unless commenced not later than 2 years after the distribution.

SB657,54,12 178.0408 Rights to information of partners and persons dissociated as partner. (1) A partnership shall keep its books and records, if any, at its principal office.

SB657,54,17 (2) On reasonable notice, a partner may inspect and copy during regular business hours, at a reasonable location specified by the partnership, any record maintained by the partnership regarding the partnership's business, financial condition, and other circumstances, to the extent the information is material to the partner's rights and duties under the partnership agreement or this chapter.

SB657,54,18 (3) The partnership shall furnish to each partner all of the following:

SB657,54,23 (a) Without demand, any information concerning the partnership's business, financial condition, and other circumstances which the partnership knows and is material to the proper exercise of the partner's rights and duties under the partnership agreement or this chapter, except to the extent the partnership can establish that it reasonably believes the partner already knows the information.

SB657,55,2 (b) On demand, any other information concerning the partnership's business, financial condition, and other circumstances, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances.

SB657,55,5 (4) The duty to furnish information under sub. (3) also applies to each partner on whom a demand is made to the extent the partner knows any of the information described in sub. (3).

SB657,55,8 (5) Subject to sub. (10), on 10 days' demand made in a record received by a partnership, a person dissociated as a partner may have access to information to which the person was entitled while a partner if all of the following apply:

SB657,55,10 (a) The information pertains to the period during which the person was a partner.

SB657,55,11 (b) The person seeks the information in good faith.

SB657,55,12 (c) The person satisfies the requirements imposed on a partner by sub. (2).

SB657,55,15 (6) Not later than 10 days after receiving a demand under sub. (5), the partnership in a record shall inform the person that made the demand of all of the following:

SB657,55,17 (a) The information that the partnership will provide in response to the demand and when and where the partnership will provide the information.

SB657,55,19 (b) The partnership's reasons for declining, if the partnership declines to provide any demanded information.

SB657,55,21 (7) A partnership may charge a person that makes a demand under this section the reasonable costs of copying, limited to the costs of labor and material.

SB657,56,2 (8) A partner or person dissociated as a partner may exercise the rights under this section through an agent or, in the case of an individual under legal disability, a legal representative. Any restriction or condition imposed by the partnership agreement or under sub. (10) applies both to the agent or legal representative and to the partner or person dissociated as a partner.

SB657,56,4 (9) Subject to s. 178.0505, the rights under this section do not extend to a person as transferee.

SB657,56,11 (10) In addition to any restriction or condition stated in its partnership agreement, a partnership, as a matter within the ordinary course of its business, may impose reasonable restrictions and conditions on access to and use of information to be furnished under this section, including designating information confidential and imposing nondisclosure and safeguarding obligations on the recipient. In a dispute concerning the reasonableness of a restriction under this subsection, the partnership has the burden of proving reasonableness.

SB657,56,14 178.0409 Standards of conduct for partners. (1) A partner owes to the partnership and the other partners the duties of loyalty and care stated in subs. (2) and (3).

SB657,56,15 (2) The fiduciary duty of loyalty of a partner includes all of the following duties:

SB657,56,17 (a) The duty to account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner in or from any of the following:

SB657,56,18 1. The conduct or winding up of the partnership's business.

SB657,56,19 2. A use by the partner of the partnership's property.

SB657,56,20 3. The appropriation of a partnership opportunity.

SB657,56,23 (b) The duty to refrain from dealing with the partnership in the conduct or winding up of the partnership business as or on behalf of a person having an interest adverse to the partnership.

SB657,56,25 (c) The duty to refrain from competing with the partnership in the conduct of the partnership's business before the dissolution of the partnership.

SB657,57,3 (3) The duty of care of a partner in the conduct or winding up of the partnership business is to refrain from engaging in conduct for which relief or exoneration from liability is not permitted under s. 178.0105 (3) (h).

SB657,57,6 (4) A partner shall discharge the duties and obligations under this chapter or under the partnership agreement and exercise any rights thereunder consistently with the contractual obligation of good faith and fair dealing.

SB657,57,9 (5) A partner does not violate a duty or obligation under this chapter or under the partnership agreement solely because the partner's conduct furthers the partner's own interest.

SB657,57,13 (6) All the partners, or one or more disinterested partners with authority to act in the matter, may authorize or ratify, after full disclosure of all material facts, a specific act or transaction by a partner that otherwise would violate the duty of loyalty.

SB657,57,15 (7) It is a defense to a claim under sub. (2) (b) and any comparable claim in equity or at common law that the transaction was fair to the partnership.

SB657,57,19 (8) If, as permitted by sub. (6) or the partnership agreement, a partner enters into a transaction with the partnership which otherwise would be prohibited by sub. (2) (b), the partner's rights and obligations arising from the transaction are the same as those of a person that is not a partner.

SB657,57,22 178.0410 Actions by partnership and partners. (1) A partnership may maintain an action against a partner for a breach of the partnership agreement, or for the violation of a duty to the partnership, causing harm to the partnership.

SB657,58,2 (2) A partner may maintain an action against the partnership or another partner, with or without an accounting as to partnership business, to enforce the partner's rights and protect the partner's interests, including rights and interests under the partnership agreement or this chapter or arising independently of the partnership relationship.

SB657,58,4 (3) A right to an accounting on dissolution and winding up does not revive a claim barred by law.

SB657,58,10 178.0411 Continuation of partnership beyond definite term or particular undertaking. (1) If a partnership for a definite term or particular undertaking is continued, without an express agreement, after the expiration of the term or completion of the undertaking, the rights and duties of the partners remain the same as they were at the expiration or completion, so far as is consistent with a partnership at will.

SB657,58,14 (2) If the partners, or those of them who habitually acted in the business during the term or undertaking, continue the business without any settlement or liquidation of the partnership, they are presumed to have agreed that the partnership will continue.

SB657,58,15 subchapter V

SB657,58,16 TRANSFERABLE INTERESTS AND

SB657,58,17 RIGHTS OF transferees and

SB657,58,18 creditors

SB657,58,21 178.0501 Partner not co-owner of partnership property. A partner is not a co-owner of partnership property and has no interest in partnership property which can be transferred, either voluntarily or involuntarily.

SB657,58,23 178.0502 Nature of transferable interest. A transferable interest is personal property.

SB657,58,25 178.0503 Transfer of transferable interest. (1) All of the following apply to a transfer, in whole or in part, of a transferable interest:

SB657,59,1 (a) It is permissible.

SB657,59,3 (b) It does not by itself cause a person's dissociation as a partner or a dissolution and winding up of the partnership business.

SB657,59,5 (c) Subject to s. 178.0505, it does not entitle the transferee to do any of the following:

SB657,59,6 1. Participate in the management or conduct of the partnership's business.

SB657,59,8 2. Except as otherwise provided in sub. (3), have access to records or other information concerning the partnership's business.

SB657,59,9 (2) A transferee has the right to all of the following:

SB657,59,11 (a) To receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled.

SB657,59,13 (b) To seek under s. 178.0801 (5) a judicial determination that it is equitable to wind up the partnership business.

SB657,59,15 (3) In a dissolution and winding up of a partnership, a transferee is entitled to an account of the partnership's transactions only from the date of dissolution.

SB657,59,17 (4) A partnership need not give effect to a transferee's rights under this section until the partnership knows or has notice of the transfer.