Rights and duties Flashcards
Absent agreement to the contrary partners are entitled to:
Equal management rights; and
Have their capital contribution repaid and to equally share in profits.
Partnership property belongs to the partnership.
RUPA states: “Property acquired by a partnership is property of the partnership and not of the partners individually.” Property purchased with partnership assets is presumed to be partnership property. Partners do not own any specific partnership property directly or individually. It is owned by the partnership as a legal entity. Partners are entitled to use or possess partnership property, but only on behalf of the partnership.
Creditors or individual partners
Creditors of individual partners may not seize partnership property to satisfy the individual debts of partners. Rather, they may go to court to obtain a charging order in which the judge orders the other partners to pay any distribution due to the debtor partner to that partner’s creditor instead. Creditors of an individual partner may even purchase that partner’s partnership interest at auction, but they gain only the right to receive distributions due the partner. They do not become real partners for any purpose (voting, access to information, etc.).
right of delectus personae
Partners may veto the admission of potential new partners because new partners may be added only upon the unanimous consent of the existing partners.
Limited partners
In LPs, limited partners have many of the same rights as general partners in general partnerships, but they may not take part in managing the business of the partnership without imperiling their limited liability status. They are supposed to act more as passive investors, as shareholders do in public corporations.
limited partners can do the following without losing their limited liability:
Vote on any matter as authorized by the partnership agreement
Inspect and copy the partnership records
Obtain financial information, tax returns, and other partnership information if just and reasonable
Assign their partnership interest
Receive the fair value of the partnership interest upon withdrawal
LLPs
The significant difference between an LLP and a general partnership is that partners in an LLP are not liable for the torts of other partners—only for their own and those of the people they supervise. And in many states, partners in an LLP are also sheltered from personal liability for partnership contractual obligations.
director duties - duty of loyalty
The transactions between a director and the corporation are not automatically void but will be carefully scrutinized. Such transactions are permitted if (1) they are approved by an affirmative majority of disinterested directors, (2) they are approved by a majority of knowledgeable shareholders, or (3) they are “fair” to the corporation.
They should respect the corporate opportunity doctrine by not appropriating for themselves business opportunities that rightfully belong to the corporation.
Director’s rights - right to profit
Directors have the opportunity to breach their fiduciary duty to the corporation by profiting in transactions with it. But such transactions are not automatically improper, and they may be perfectly legitimate so long as a majority of directors, who are fully informed and disinterested, approve the transaction and the transaction is fair to the corporation. This is true even if the conflicted director’s presence is accounted for in ensuring that a quorum was present for the meeting and the conflicted director voted for the transaction.
