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9 Bus. Law. Update 1 (1988-1989)

handle is hein.journals/buslwme9 and id is 1 raw text is: SSD I I- Delaware Amends Limited Partnership and General Corporation Laws L MM r/October 1988 Volume 9 Number 1 Section of Business Law fJ From the Section Chairman... Delaware, long the forum of choice for incorporation and more recently an equally attractive forum for the for- mation of limited partnerships, recently amended its limited partnership and corporate statutes as part of its contin- uing effort to keep its laws in these areas the most modern and flexible available. The most noteworthy of these changes are described below. Delaware has also adopted a new business trust statute recognizing this additional form of business organization. Limited partnership amendments Effective September 1, 1988, the Dela- ware Revised Uniform Limited Part- nership Act has been amended to facilitate further the formation of lim- ited partnerships, limit the liability of a limited partner, permit broad contrac- tual flexibility in partnership agree- ments, and clarify existing provisions of the Act. Of particular note are the amendments relating to the liability of limited partners, the participation by limited partners in the control of the business, the ability to limit a limited partner's power to withdraw or assign its partnership interest, paperless transactions, and filing requirements. Liability of a limited partner Prior to the recent amendments, a part- ner who received the return of any part of its contribution to a limited partner- ship was liable in certain circumstances for the return of such contributions (section 17-608), and in certain circum- stances, a partner could not receive a distribution from a limited partnership (section 17-607). The amendments de- leted section 17-608 in its entirety and completely rewrote section 17-607. The deletion of section 17-608 oc- curred in light of the changes made in section 17-607 and the conclusion that the liability for return of contributions imposed by section 17-608 was not nec- essary to protect any public policy in- terests. Instead, section 17-607(a), as rewritten, provides that a limited part- nership may not make a distribution to a partner if at the time of, and after giving effect to, the distribution, all li- abilities of the limited partnership (other than liabilities to partners on account of their partnership interests and non- recourse liabilities) exceed the fair value of the assets of the limited partnership (excluding that portion of the fair value that is subject to non-recourse liability). While this is the same standard set forth in section 17-607 as it existed prior to the amendments, the section has been rewritten to clarify the role of non-re- course liabilities and the value of assets securing such liabilities in applying that standard. A new subsection (b) that has also been added to section 17-607 materially limits the potential liability of a limited partner and explains the interrelation- Continued on page 2 Our recent, very successful Annual Meeting in Toronto highlighted for me the benefits of active involvement in Section activities-that is, participating in committee work, attending meetings, and listening to educational programs. I know there are many Section mem- bers reading this who would find such participation worthwhile, and I encour- age them to make the effort. I believe that there are two major professional reasons for becoming in- volved in Section activities: first, the opportunity to work with lawyers from all over the country who are involved in dealing with the same or similar problems, and second, a chance to par- ticipate in an educational program that in depth and scope exceeds all compe- tition in the business law field. In To- ronto, approximately 2,500 Section members were registered, and they at- tended panel presentations on widely diverse subjects-from Professional Opinions on Solvency Issues in the LBO Setting to Life Cycle of a Technolog- ically-Based Growth-Oriented Enter- prise: Financing Growth Through Venture Capital to Partners as Role Continued on page 2 INSIDE Law firms need policies on confidentiality 3 SEC adopts rule on one-share, one-vote 5 Report on the Commission on Women in the Profession: Part I 6

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