N.Y. Partnership Law 121-607 – Limitations on distribution
§ 121-607. Limitations on distribution. (a) A limited partnership shall not make a distribution to a partner to the extent that, at the time of the distribution, after giving effect to the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their partnership interests and liabilities for which recourse of creditors is limited to specified property of the limited partnership, exceed the fair market value of the assets of the limited partnership, except that the fair market value of property that is subject to a liability for which the recourse of creditors is limited shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds that liability.
Terms Used In N.Y. Partnership Law 121-607
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Distribution: means the transfer of property by a limited partnership to one or more of its partners in his capacity as a partner. See N.Y. Partnership Law 121-101
- Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Limited partner: means a person who has been admitted to a limited partnership as a limited partner in accordance with the partnership agreement or as otherwise provided by the law of the jurisdiction under which the limited partnership or foreign limited partnership, as the case may be, is organized. See N.Y. Partnership Law 121-101
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Partner: means a limited or general partner. See N.Y. Partnership Law 121-101
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Partnership agreement: means any written agreement of the partners as to the affairs of a limited partnership and the conduct of its business. See N.Y. Partnership Law 121-101
- Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
(b) A limited partner who receives a distribution in violation of subdivision (a) of this section, and who knew at the time of the distribution that the distribution violated subdivision (a) of this section, shall be liable to the limited partnership for the amount of the distribution. A limited partner who receives a distribution in violation of subdivision (a) of this section, and who did not know at the time of the distribution that the distribution violated subdivision (a) of this section, shall not be liable for the amount of the distribution. Subject to subdivision (c) of this section, this subdivision shall not affect any obligation or liability of a limited partner under a partnership agreement or other applicable law for the amount of a distribution.
(c) Unless otherwise agreed, a limited partner who receives a wrongful distribution from a limited partnership shall have no liability under this article or other applicable law for the amount of the distribution after the expiration of three years from the date of the distribution.