Liquidating limited partnerships
Unless the partnership agreement provides otherwise, if a new general partner is not elected by the automatic dissolution date, the Partnership is wound up and dissolved in accordance with the partnership agreement or in accordance with a court order made on the application of any partner or creditor of the Partnership.The Amended Law preserves the power of the court, on the application of a partner or creditor of a Partnership, to make such orders and give such directions for the winding up and dissolution of a Partnership as may be just and equitable.
The events causing automatic dissolution are now limited to the death, the commencement of liquidation or bankruptcy proceedings, or the withdrawal, removal or making of a winding up or dissolution order in relation to the sole or last remaining general partner, but other events causing automatic dissolution may be specified in the partnership agreement.
While in some instances it might make sense to liquidate the entity, in many, perhaps most cases, other options might warrant consideration.
This article will outline the general issues and considerations, and present several options that do not receive enough consideration.
As a result, the termination of a Partnership will consist of two distinct steps, its winding up and subsequent dissolution.
Winding Up Unless otherwise specified in the partnership agreement, a Partnership continues until wound up and dissolved by resolution of all the general partners, and a two-thirds majority of partners (a “Winding Up by Resolution”).
In some instances, liquidating the entire FLP may in fact be warranted.