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CALIFORNIA CORPORATE & SECURITIES LAW

Bill Would Clarify When Limited Partnership Life Begins

When does life begin for a California limited partnership?  The California Uniform Limited Partnership Act of 2008 seems to provide inconsistent answers.  The first is found in Corporations Code Section 15902.01(a).

In order for a limited partnership to be formed, a certificate of limited partnership must be filed with and on a form prescribed by the Secretary of State and, either before or after the filing of a certificate of limited partnership, the partners shall have entered into a partnership agreement.

The second, and inconsistent, answer is found in Section 15902.01(c):

A limited partnership is formed when the Secretary of State files the certificate of limited partnership.

The confusion is further exacerbated by the fact that Section 15902.06(c) permits a delayed effective date for filings.  So, does formation occur on filing, on the effective date of the filing (if that option is chosen), or only after filing and entering into a partnership agreement?

AB 506 (Maienschein) would clarify the answer by amending Section 15902.01(c) to provide:

(c) Subject to subdivision (c) of Section 15902.06, a limited partnership is formed when the Secretary of State files the certificate of limited partnership and the partners enter into a partnership agreement before or after the filing of a certificate of limited partnership.

AB 506 is being sponsored by the Partnerships and LLC Committee of the Business Law Section of the California State Bar.  The bill also attempts to fix many of the errors and other problems in the misbegotten and much maligned California Revised Uniform Limited Liability Company Act (“RULLCA”).

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