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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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