This area of law is vast and sometimes convoluted. A limited partnership that faces dissolution may be salvaged by understanding and using the proper procedures as outlined in California's Commercial Code Section 15908.02. The problem faced by many people in limited partnerships is what happens when the partners can no longer agree.
The following is a summary of California Commercial Code Section 15908.2.
California Commercial Code Section 15908.02 states that a court may order a dissolution of a limited partnership if is not reasonably practicable to carry on the activities…in conformity with the partnership agreement itself. If such a situation arises, then the other partners, in an attempt to avoid dissolution may purchase for cash the partnership interests (at fair market value) owned by those partners that are initiating the judicial dissolution action.
If the partner that is pursuing the dissolution and the purchasing partners cannot come to an understanding of the purchase price, then the court, upon application of the purchasers, will decide a fair market value for the partnership interests. This will be done by using three disinterested appraisers to appraise the fair market value of the partnership interests owned by the moving partners. Thereafter, whatever the fair market value is based on the appraisers, the purchasing partners will pay that price to the moving partners or else the dissolution will proceed.
What this means for my Limited Partnership
If your limited partnership is facing dissolution, then it's essential that the proper legal procedures are taken to avoid such a grim conclusion. This may also mean that if you don’t have the cash necessary to purchase the partnership interests at any value, then it’s up to you and your attorney to evaluate your situation and evaluate any and all means to secure a favorable result.
Orange County’s business lawyer, The Law Offices of Kalab A. Honey.