A bill has been placed on notice in the House Business and Utilities Subcommittee that seeks to enact the Tennessee Uniform Limited Partnership Act of 2017 (the “2017 Act”). The 2017 Act would be a stand-alone statute and would not repeal the current act (the “1988 Act”). If passed, limited partnerships formed on or after January 1, 2018 would be covered by the 2017 Act. If a limited partnership formed before January 1, 2018 elects to be governed by the 2017 Act, it may do so. Below is a high-level summary of only some of the differences between the 1988 Act and the 2017 Act.
- Purpose of Limited Partnership – The 1988 Act authorizes a limited partnership to carry on any business that a partnership without limited partners may carry on, unless otherwise prohibited by law. The 2017 Act would allow a limited partnership to have any lawful purpose, regardless of whether for profit.
- Duration of Limited Partnership – Under the 1988 Act, a limited partnership has a term of 50 years unless the certificate of limited partnership provides otherwise. Under the 2017 Act, a limited partnership would have perpetual duration.
- No Liability as Limited Partner for Limited Partnership Obligations – The 1988 Act provides that no limited partner shall be liable for the obligations of a limited partnership, so long as such limited partner is also not a general partner and/or does not participate in the control of the business. The 2017 Act seeks to further limit the liability of limited partners by providing that a limited partner is not personally liable even if the limited partner participates in the management and control of the limited partnership. Furthermore, under the 2017 Act, neither the failure of a limited partnership to observe formalities relating to the exercise of its powers or management of its activities and affairs nor the failure of a limited partnership to maintain the information required under §61-3-107 is a ground for imposing liability on a limited partner for a debt, obligation, or other liability of the partnership.
- Annual Reports – The 2017 Act would require limited partnerships to file annual reports with the secretary of state. Currently, limited partnerships are not required to file annual reports.
- Dissolution by Partner Consent – The 1988 Act requires the written consent of all partners for a dissolution by partner consent. The 2017 Act would only require consent of “all general partners and of limited partners owning a majority of the rights to receive distributions as limited partners at the time the consent is to be effective” for a dissolution by partner consent.
For your reference, here is the bill as filed. Please let us know if you have any questions or concerns about this bill. We will continue to monitor it as it moves through both chambers of the General Assembly.