TITLE 7
Corporations, Associations, and Partnerships

CHAPTER 7-13
Limited Partnerships

SECTION 7-13-19


§ 7-13-19 Liability to third parties.

(a) Except as provided in subsection (d), a limited partner is not liable for the obligations of a limited partnership unless he or she is also a general partner or, in addition to the exercise of his or her rights and powers as a limited partner, he or she participates in the control of the business. However, if the limited partner participates in the control of the business, he or she is liable only to persons who establish by clear and convincing evidence that they transacted business with the limited partnership reasonably believing, based on the limited partner's active conduct, that the limited partner is a general partner.

(b) A limited partner does not participate in the control of the business regardless of the nature, extent, scope, number or frequency of the limited partner's possessing or, regardless of whether or not the limited partner has the rights or powers, exercising or attempting to exercise one or more of the rights or powers or having or, regardless of whether or not the limited partner has the rights or powers, acting or attempting to act in one or more of the following capacities:

(1) Being an independent contractor for or transacting business with, including being a contractor for, or being an agent or employee of, the limited partnership or a general partner, or being an officer, director or stockholder of a corporate general partner, or being a partner of a partnership that is a general partner of the limited partnership, or being a fiduciary or beneficiary or an estate or trust which is a general partner;

(2) Consulting with or advising a general partner regarding any matter, including the business of the limited partnership;

(3) Acting as surety, guarantor or endorser for the limited partnership or a general partner, guaranteeing or assuming one or more obligations of a limited partnership or a general partner, borrowing money from the limited partnership or a general partner, lending money to the limited partnership or a general partner, or providing collateral for the limited partnership or a general partner;

(4) Approving or disapproving an amendment to the partnership agreement;

(5) Acting or causing the taking or refraining from the taking of any action, including by proposing, approving, consenting, or disapproving, by voting or otherwise, with respect to one or more of the following matters:

(i) The dissolution and winding up of the limited partnership or an election to continue the limited partnership or an election to continue the business of a limited partnership;

(ii) The sale, exchange, lease, mortgage, pledge, or other transfer of or granting of a security interest in any asset or assets of the limited partnership;

(iii) The incurrence, renewal, refinancing, or repayment or other discharge of indebtedness by the limited partnership;

(iv) A change in the nature of the business;

(v) The admission, removal, or retention of a general partner;

(vi) An amendment to the partnership agreement or certificate of limited partnership;

(vii) A matter related to the business of the limited partnership not otherwise enumerated in this subsection which the partnership agreement states, in writing, is subject to the approval or disapproval of limited partners;

(viii) Winding up the limited partnership pursuant to this chapter;

(ix) Exercising any right or power permitted to limited partners under this chapter and not specifically enumerated in this subsection;

(x) The admission, removal, or retention of a limited partner;

(xi) A transaction or other matter involving an actual or potential conflict of interest;

(xii) The merger or consolidation of a limited partnership;

(xiii) As to a limited partnership which is registered as an investment company under the Investment Company Act of 1940, as amended, any matter required by the Investment Company Act of 1940, 15 U.S.C. § 80a-1 et seq., as amended, or the rules and regulations of the securities and exchange commission under that Act, to be approved by the holders of beneficial interests in an investment company, including the election of directors or trustees of the investment company, the approving or terminating of investment advisory or underwriting contracts, and the approving of auditors;

(xiv) The indemnification of any partner or any other person; or

(xv) Any other matters that are stated in the partnership agreement or in any other agreement or in writing.

(6) Taking any action required or permitted by law to bring or pursue or settle or otherwise terminate a derivative action in the right of the limited partnership;

(7) Calling, requesting, attending, or participating in a meeting of partners or limited partners; or

(8) Serving on a committee of the limited partnership or the limited partners.

(9) Serving on the board of directors or a committee of, consulting with or advising, being an officer, director, stockholder, partner, agent or employee of, or being a fiduciary for, any person in which the limited partnership has an interest; or

(10) Exercising any right or power granted or permitted to limited partners under this chapter and not specifically enumerated in this subsection.

(c) The enumeration in subsection (b) does not mean that the possession or exercise of any other powers by a limited partner constitutes participation by him or her in the business of the limited partnership.

(d) A limited partner does not participate in the control of the business within the meaning of subsection (a) by virtue of the fact that all or any part of the name of the limited partner is included in the name of the limited partnership.

(e) This section does not create rights or powers of limited partners. The rights and powers may be created only by a certificate of limited partnership, a partnership agreement or any other agreement or in writing, or by other sections of this chapter.

History of Section.
(P.L. 1985, ch. 390, § 2; P.L. 1987, ch. 440, § 1; P.L. 1989, ch. 379, § 1; P.L. 1992, ch. 227, § 2.)