H. B. 2624
(By Delegate Kiss)
[Introduced January 10, 1996; referred to the
Committee on the Judiciary.]
A BILL to amend and reenact sections two, six, fifteen, eighteen,
thirty-four, thirty-six and forty, article eight-a, chapter
forty-seven of the code of West Virginia, one thousand nine
hundred thirty-one, as amended; and to further amend said
article by adding thereto four new sections, designated
sections forty-six, forty-seven, forty-eight and forty-nine,
all relating to registered limited liability partnerships;
defining registered limited liability partnership and
foreign registered limited liability partnership;
recognizing that a registered limited liability partnership
is a general partnership; providing that a partner in a
registered limited liability partnership shall not be
personally liable for the debts, obligations and liabilities
of partnership arising from omissions, negligence, wrongful
acts, misconduct or malpractice committed by another partner conducting partnership business or by any employee, agent or
other representative of the partnership unless such
employee, agent or other representative acted under such
partner's direct supervision or control; addressing rights
and liabilities of partners in connection with the
dissolution of a registered limited liability partnership;
requiring that registered limited liability partnerships
file registration together with fee and annually thereafter
pay a renewal fee, with the secretary of state and setting
forth required content of such registration; requiring that
the names of such partnerships contain the words "registered
limited liability partnership" or the abbreviation "L.L.P."
or "LLP" as the last words or letters in the partnership's
name; requiring that a registered limited liability
partnership carry a minimum of one million dollars in
liability insurance or create, in lieu thereof, a segregated
fund consisting of an insurance bond or other specified
collateral, either of which shall be used to satisfy
judgments against the partnership and its partners;
requiring foreign registered limited liability partnerships
to file notice together with fee with secretary of state;
and recognizing that foreign registered limited liability
partnership shall be governed by the laws of the state of
its formation.
Be it enacted by the Legislature of West Virginia:
That sections two, six, fifteen, eighteen, thirty-four,
thirty-six and forty, article eight-a, chapter forty-seven of the
code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted; and that said article be
further amended by adding thereto four new sections, designated
sections forty-six, forty-seven, forty-eight and forty-nine, all
to read as follows:
ARTICLE 8A. UNIFORM PARTNERSHIP ACT.
§47-8A-2. Definition of terms.
In this article, "court" includes every court and judge
having jurisdiction in the case.
"Business" includes every trade, occupation or profession.
"Person" includes individuals, partnerships, corporations
and other associations.
"Bankrupt" includes bankrupt under the Federal Bankruptcy
Act or insolvent under any state insolvent act.
"Conveyance" includes every assignment, lease, mortgage or
encumbrance.
"Foreign registered limited liability partnership" means a
registered limited liability partnership or limited liability
partnership formed pursuant to an agreement governed by the laws
of another jurisdiction and registered under the laws of such
jurisdiction.
"Real property" includes land and any interest or estate in
land.
"Registered limited liability partnership" means a
partnership formed pursuant to an agreement governed by the laws
of this state, registered under section forty-six of this
article.
§47-8A-6. Partnership defined.
(1) A partnership is an association of two or more persons
to carry on as co-owners a business for profit and includes, for
all purposes of the laws of this state, a registered limited
liability partnership.
(2) But any association formed under any other statute of
this state, or any statute adopted by authority, other than the
authority of this state is not a partnership under this article,
unless such association would have been a partnership in this
state prior to the adoption of this article; but this article
shall apply to limited partnerships except insofar as the
statutes relating to such partnerships are inconsistent herewith.
§47-8A-15. Nature of partner's liability.
(a) All Except as provided in subsection (b) of this
section, all partners are liable:
(a) (1) Jointly and severally for everything chargeable to the partnership under sections thirteen and fourteen of this
article.
(b) (2) Jointly for all other debts and obligations of the
partnership; but any partner may enter into a separate obligation
to perform a partnership contract.
(b) Subject to subsection (c) of this section, a partner in
a registered limited liability partnership is not liable directly
or indirectly (including by way of indemnification, contribution
or otherwise) for debts, obligations and liabilities of or
chargeable to the partnership or another partner or partners,
whether in tort, contract or otherwise, arising from omissions,
negligence, wrongful acts, misconduct or malpractice committed
while the partnership is a registered limited liability
partnership and in the course of the partnership business by
another partner or by an employee, agent or representative of the
partnership.
(c) Subsection (b) of this section shall not affect the
liability of a partner in a registered limited liability
partnership for the partner's own omission, negligence, wrongful
act, misconduct or malpractice, or that of any person under the
partner's direct supervision and control.
(d) A partner in a registered limited liability partnership is not a proper party to a proceeding by or against a registered
limited liability partnership, the object of which is to recover
damages or enforce the obligations arising out of the omissions,
negligence, wrongful acts, misconduct or malpractice of the type
described in subsection (b) of this section, unless such partner
is personally liable under subsection (c) of this section."
§47-8A-18. Rules determining rights and duties of partners.
The rights and duties of the partners in relation to the
partnership shall be determined, subject to any agreement between
them, by the following rules:
(a) Each partner shall be repaid his contributions, whether
by way of capital or advances to the partnership property and
share equally in the profits and surplus remaining after all
liabilities, including those to partners, are satisfied; and,
except as provided in section fifteen of this article, each
partner must contribute towards the losses, whether of capital or
otherwise, sustained by the partnership according to his share in
the profits.
(b) The partnership must indemnify every partner in respect
of payments made and personal liabilities reasonably incurred by
him in the ordinary and proper conduct of its business, or for
the preservation of its business or property.
(c) A partner, who in aid of the partnership makes any
payment or advance beyond the amount of capital which he agreed
to contribute, shall be paid interest from the date of the
payment or advance.
(d) A partner shall receive interest on the capital
contribution by him only from the date when repayment should be
made.
(e) All partners have equal rights in the management and
conduct of the partnership business.
(f) No partner is entitled to remuneration for acting in the
partnership business, except that a surviving partner is entitled
to reasonable compensation for his services in winding up the
partnership affairs.
(g) No person can become a member of a partnership without
the consent of all the partners.
(h) Any difference arising as to ordinary matters connected
with the partnership business may be decided by a majority of the
partners; but no act in contravention of any agreement between
the partners may be done rightfully without the consent of all
the partners.
§47-8A-34. Right of partner to contribution from copartners after
dissolution.
Where the dissolution is caused by the act, death or
bankruptcy of a partner, each partner is liable to his copartners
for his share of any liability created by any partner acting for
the partnership as if the partnership had not been dissolved
unless:
(a) The dissolution being by act of any partner, the partner
acting for the partnership had knowledge of the dissolution, or
(b) The dissolution being by the death or bankruptcy of a
partner, the partner acting for the partnership had knowledge or
notice of the death or bankruptcy, or
(c) The liability is for a debt, obligation or liability for
which the partner is not liable as provided in section fifteen of
this article.
§47-8A-36. Effect of dissolution on partner's existing liability;
liability of individual property of deceased
partner.
(1) The dissolution of the partnership does not of itself
discharge the existing liability of any partner.
(2) A partner is discharged from any existing liability upon
dissolution of the partnership by an agreement to that effect
between himself, the partnership creditor and the person or
partnership continuing the business; and such agreement may be inferred from the course of dealing between the creditor having
knowledge of the dissolution and the person or partnership
continuing the business.
(3) Where a person agrees to assume the existing obligations
of a dissolved partnership, the partners whose obligations have
been assumed shall be discharged from any liability to any
creditor of the partnership who, knowing of the agreement,
consents to a material alteration in the nature or time of
payment of such obligations.
(4) The individual property of a deceased partner shall be
liable for all those obligations of the partnership incurred
while he was a partner and for which he was liable under section
fifteen of this article, but subject to the prior payment of his
separate debts.
§47-8A-40. Rules for settling accounts between partners.
In settling accounts between the partners after dissolution,
the following rules shall be observed, subject to any agreement
to the contrary:
(a) The assets of the partnership are:
(I) The partnership property,
(II) The contributions of the partners necessary for the
payment of all the liabilities specified in clause (paragraph) (b) of this paragraph section.
(b) The liabilities of the partnership shall rank in order
of payment, as follows:
(I) Those owing to creditors other than partners,
(II) Those owing to partners other than for capital and
profits,
(III) Those owing to partners in respect of capital,
(IV) Those owing to partners in respect of profits.
(c) The assets shall be applied in the order of their
declaration in clause subsection (a) of this paragraph section to
the satisfaction of the liabilities.
(d) The Except as provided in section fifteen of this
article:
(I) Partners shall contribute, as provided by section
eighteen (a) of this article, the amount necessary to satisfy the
liabilities, but if; and
(II) If any, but not all, of the partners are insolvent, or,
not being subject to process, refuse to contribute, the other
partners shall contribute their share of the liabilities, and, in
the relative proportions in which they share the profits, the
additional amount necessary to pay the liabilities.
(e) An assignee for the benefits of creditors or any person appointed by the court shall have the right to enforce the
contributions specified in clause subsection (d) of this
paragraph section.
(f) Any partner or his legal representative shall have the
right to enforce the contributions specified in clause subsection
(d) of this paragraph section, to the extent of the amount which
he has paid in excess of his share of the liability.
(g) The individual property of a deceased partner shall be
liable for the contributions specified in clause subsection (d)
of this paragraph section.
(h) When partnership property and the individual properties
of the partners are in possession of a court for distribution,
partnership creditors shall have priority on partnership property
and separate creditors on individual property, saving the rights
of lien or secured creditors as heretofore.
(i) Where a partner has become bankrupt or his estate is
insolvent the claims against his separate property shall rank in
the following order:
(I) Those owing to separate creditors,
(II) Those owing to partnership creditors,
(III) Those owing to partners by way of contribution.
§47-8A-46. Registered limited liability partnerships.
(a) To become a registered limited liability partnership. a
partnership shall file with the secretary of state a registration
stating the name of the partnership; the address of its principal
office; if the partnership's principal office is not located in
this state, the address of a registered office and the name and
address of a registered agent for service of process in this
state, which the partnership will be required to maintain; a
brief statement of the business in which the partnership engages;
any other matters that the partnership determines to include; and
that the partnership thereby registers as a registered limited
liability partnership.
(b) The registration shall be executed by one or more
partners authorized to execute a registration.
(c) The registration shall be accompanied by a fee of two
hundred fifty dollars.
(d) The secretary of state shall register as a registered
limited liability partnership any partnership that submits a
completed registration with the required fee.
(e) A partnership registered under this section shall pay,
in each year following the year in which its registration is
filed, on a date specified by the secretary of state, an annual
fee of five hundred dollars. The fee must be accompanied by a notice, on a form provided by the secretary of state, of any
material changes in the information contained in the
partnership's registration.
(f) Registration is effective immediately after the date a
registration is filed or at any later date or time specified in
the registration, and remains effective until: (a) It is
voluntarily withdrawn by filing with the secretary of state a
written withdrawal notice executed by one or more partners
authorized to execute a withdrawal notice; or (b) thirty days
after receipt by the partnership of a notice from the secretary
of state (which notice shall be sent by certified mail, return
receipt requested) that the partnership has failed to make timely
payment of the annual fee specified in subsection (e) of this
section, unless the fee is paid within such thirty day period.
(g) A partnership becomes a registered limited liability
partnership at the time of the filing of the initial registration
with the secretary of state or at any later date or time
specified in the registration if, in either case, there has been
substantial compliance with the requirements of this article. A
partnership continues as a registered limited liability
partnership if there has been substantial compliance with the
requirements of this article. The status of a partnership as a registered limited liability partnership and the liability of a
partner of such registered limited liability partnership shall
not be affected by errors or subsequent changes in the
information stated in a registration under subsection (a) of this
section or notice under subsection (e) of this section.
(h) The fact that a registration or a notice is on file with
the secretary of state is notice that the partnership is a
registered limited liability partnership and is notice of all
other facts set forth in the registration or notice.
(i) A partnership that has registered as a registered
limited liability partnership is for all purposes the same
partnership that existed before the registration and continues to
be a partnership under the laws of this state. If a registered
limited liability partnership dissolves, a partnership which is
a successor to such registered limited liability partnership and
which intends to be a registered limited liability partnership
shall not be required to file a new registration and shall be
deemed to have filed any documents required or permitted under
this section which were filed by the predecessor partnership.
(j) The secretary of state shall provide forms for a
registration under subsection (a) of this section or a notice
under subsection (e) of this section.
§47-8A-47. Name of registered limited liability partnership.
The name of a registered limited liability partnership shall
contain the words "Registered Limited Liability Partnership" or
the abbreviation "L.L.P." or "LLP" as the last words or letters
or its name.
§47-8A-48. Insurance or financial responsibility of registered
limited liability partnerships and foreign
registered limited liability partnerships.
(a) A registered limited liability partnership, and any
foreign registered limited liability partnership transacting
business in this state, shall carry at all times at least one
million dollars of liability insurance, beyond the amount of any
applicable deductible, of a kind that is designed to cover the
kinds of omissions, negligence, wrongful acts, misconduct and
malpractice for which liability is limited by subsection (b),
section fifteen of this article and which insures the partnership
and its partners.
(b) If, in any proceeding, compliance by a partnership with
the requirements of subsection (a) of this section is disputed,
that issue shall be determined by the court, and the burden of
proof of compliance shall be on the person who claims the
limitation of liability in subsection (b), section fifteen of this article.
(c) If a registered limited liability partnership, or a
foreign registered limited liability partnership, is in
compliance with the requirements of subsection (a) of this
section, the requirements of this section shall not be admissible
or in any way be made known to a jury in determining an issue of
liability for or extent of the debt or obligation or damages in
question.
(d) A registered limited liability partnership, or a foreign
registered limited liability partnership, shall be in compliance
with subsection (a) of this section if the partnership provides
one million dollars of funds specifically designated and
segregated for the satisfaction of judgments against the
partnership or its partners bases on the kinds of omissions,
negligence, wrongful acts, misconduct and malpractice for which
liability is limited by subsection (b), section fifteen of this
article, by:
(1) Deposit in trust or in bank escrow of cash, bank
certificates of deposit or United States Treasury obligations; or
(2) A bank letter of credit or insurance company bond.
§47-8A-49. Applicability of article to foreign and interstate
commerce.
(a) A partnership, including a registered limited liability
partnership, formed pursuant to an agreement governed by this
article, may conduct its business, carry on its operations, and
have and exercise the powers granted by this article in any
state, territory, district or possession of the United States or
in any foreign country.
(b) It is the intent of the Legislature that the legal
existence of registered limited liability partnerships formed
pursuant to an agreement governed by this article be recognized
outside the boundaries of this state and that the laws of this
state governing such registered limited liability partnerships
transacting business outside this state be granted the protection
of full faith and credit under the Constitution of the United
States.
(c) It is the policy of this state that the internal affairs
of partnerships, including registered limited liability
partnerships, formed pursuant to an agreement governed by this
article, including the liability of partners for debts,
obligations and liabilities of or chargeable to the partnership
or another partner or partners, shall be subject to and governed
by the laws of this state.
(b) Before transacting business in this state, a foreign registered limited liability partnership shall: (i) Comply with
any statutory or administrative registration or filing
requirements governing the specific type of business in which the
partnership is engaged; (ii) comply with the requirements of
section forty-eight of this article; and (iii) file a notice with
the secretary of state, on such forms as the secretary of state
shall provide, stating the name of the partnership; the
jurisdiction the laws of which govern its partnership agreement
and under which it is registered as a limited liability
partnership; the address of its principal office; if the
partnership's principal office is not located in this state, the
address of a registered office and the name and address of a
registered agent for service of process in this state, which the
partnership will be required to maintain; a brief statement of
the business in which the partnership engages; any other
information that the partnership determines to include; and a
statement that the partnership is a registered limited liability
partnership. Such notice shall be accompanied by a fee of two
hundred fifty dollars. Such notice shall be effective for two
years from the date of filing, after which time the partnership
shall file a new notice.
(e) The failure of a foreign registered limited liability partnership to file a notice pursuant to subsection (d) of this
section or to appoint and maintain a registered agent in this
state shall not affect the liability of the partners or impair
the validity of any contract or act of the foreign registered
limited liability partnership, and shall not prevent the foreign
registered limited liability partnership from defending any
action or proceeding in any court of this state, but the foreign
registered limited liability partnership shall not maintain any
action or proceeding in any court of this state until it has
filed a notice. A foreign registered limited liability
partnership, by transacting business in this state without
filing a notice, appoints the secretary of state as its agent for
service of process with respect to causes of action arising out
of the transaction of business in this state.
(f) The name of a foreign registered limited liability
partnership doing business in this state shall contain the words
"Registered Limited Liability Partnership" or the abbreviation
"L.L.P." or "LLP" or such other similar words or abbreviations as
may be required by the laws of the state where the partnership is
registered, as the last words or letters of its name.
(g) Subject to compliance with the requirements of section
forty-eight of this article, the internal affairs of foreign registered limited liability partnerships, including the
liability of partners for debts, obligations and liabilities of
or chargeable to the partnership or another partner or partners,
shall be subject to and governed by the laws of the jurisdiction
in which the foreign registered limited liability partnership is
registered.
NOTE: The purpose of this bill is to permit the general
partners of a general partnership organized under state law to
limit the scope of their personal liability for certain
obligations and liabilities of the partnership. Under present
law, each partner in a general partnership is personally liable,
jointly and severally with all other partners in the partnership,
for the negligence, misconduct or wrongful acts of another
partner or representative of the partnership. The bill would
permit a general partnership to register as a registered limited
liability partnership and thereby limit a partner's personal
liability to those partnership obligations and debts arising from
such partner's own omissions, negligence, wrongful acts,
misconduct or malpractice.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.
Sections forty-six, forty-seven, forty-eight and forty-nine
are new; therefore, strike-throughs and underscoring have been
omitted.