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In this blog, I’ll be discussing some of the things you should think about concerning terminating the limited partnership.
Recall that the limited partnership is governed by the Limited Partnerships Act and the terms and conditions of a limited partnership agreement. So those are two sources that could govern the intended or unintended termination of a limited partnership.
Cancellation vis-a-vis Limited Partnership Agreement
Sometimes, the limited partnership agreement that governs the conduct of the parties to a limited partnership will deal with the issue of termination. For example, termination may arise as of a certain date, after a certain time (e.g. 5 years), on the occurrence of a certain event or situation arising, or upon agreement in writing (for example) by all of the parties. There may be notice requirements that must be followed with respect to the latter. There may also be issues as to how many (e.g. majority, unanimity) of the partners – be they limited or general – are capable of requesting termination of the limited partnership. A limited partnership agreement may also discuss those not so great situations where the limited partnership is terminated for ’cause’ (i.e. because of an act or omission of one of the partners).
Cancellation vis-a-vis General Partner
First, under this Act, a limited partnership is dissolved on the following events happening to the general partner:
- death of a general partner
- mental incompetence of a general partner
- dissolution of a corporate general partner
These things being said, any remaining general partner can continue the business of the limited partnership IF it has right to do so in a partnership agreement and the consent of all remaining partners is obtained. So what if all the partners in the limited partnership agreed that a majority of the remaining partners – not unanimous consent – was required? What if they agreed to that unanimously in a limited partnership agreement? That’s an interesting point. Just to clarify: the idea is that any percentage less than ALL of the remaining partners can consent to a remaining general partner from continuing on as the general partner. Can this be done? Some might say: couldn’t those remaining partners simply consent that not everyone’s consent is required in these circumstances? Perhaps majority consent? Recall that limited partnerships are also governed by the Partnerships Act, which says that the default clauses of that Act can be varied by the consent of all the partners: s. 20. But the problem with that is that the Partnerships Act only applies insofar as it does not conflict with the Limited Partnerships Act: s. 46. Since the Limited Partnerships Act doesn’t allow for partnership agreements to vary the requirement that ALL remaining partners consent (as discussed above), you’d be violating this statute by doing otherwise.
Interesting (or mind-bogglingly confusing) stuff, eh?
So how could a general partner be dissolved if it’s a corporation? Well, it could be dissolved for failure to comply with corporate or tax laws. It could also be dissolved by court order under the relevant statute. It could be wound up as part of an agreement by the shareholders (e.g. pursuant to the terms of a shareholders’ agreement).
Cancellation vis-a-vis Limited Partner
Limited partners can try to dissolve the limited partnership through a court order: s. 10(c). That said, this right should be looked at in light of the limited partnership agreement, which may create contractual rights between the parties concerning the dissolution of the limited partnership by applying for a court order.
A limited partner also has the right to have the limited partnership dissolved and its affairs wound up where the limited partner is entitled to the return of its contribution but, upon demand, that contribution is not returned to the limited partner. Note: I’m curious as to what form the demand must take and how long it must go unreturned for this provision to be applicable. Just some side-thoughts…. Furthermore, a limited partner can have the limited partnership dissolved if the OTHER liabilities of the limited partnership have not been paid (i.e. not liability to the limited or general partners) or the limited partnership assets are insufficient for their payment and the limited partner seeking dissolution would otherwise be entitled to the return of their contribution. I know that’s a mouthful, but you get the idea: (1) OTHER liabilities have not been paid and limited partner wanting dissolution would otherwise be entitled to the return of their contribution or (2) limited partnership assets are NOT ENOUGH to pay OTHER liabilities and the limited partner wanting dissolution would otherwise be entitled to the return of their contribution.
Filing Declaration of Dissolution
In these three examples (i.e. termination pursuant to agreement, or dissolution because of something to do with the general or limited partner), the limited partnership must file a DECLARATION OF DISSOLUTION with the registrar under the Business Names Act. This declaration must be filed when the limited partnership is dissolved or when all of the limited partners cease to be limited partners: s. 23 of the Limited Partnerships Act. Furthermore, the declaration of dissolution must be signed by at least one of the general partners. When it’s filed, the declaration of the limited partnership is canceled: s. 23(3).
Cancellation vis-a-vis Registrar
Under s. 23.2 of the Limited Partnerships Act, the Registrar under the Business Names Act can cancel a limited partnership declaration – thereby eliminating the limited liability enjoyed by the limited partners as of that point – for failure to pay the required fee. This can only be done, however, if the Registrar gives the limited partnership 21 days notice of the intention to cancel.
At the end of the day, there’s a lot of guidance you’re going to need (going through the partnership agreement, the legislation, and shareholder agreement for the general partner, etc.) if you’re thinking about dissolving or terminating the limited partnership. Your best bet is to get professional help: make a post on Dynamic Lawyers.











