Limited Partners

Corporations Code Title 2, Chapter 4.5, Article 3 deals with limited partners under the California Uniform Limited Partnership Act of 2008.

Section 15903.01 provides that a person becomes a limited partner in three specified instances.

Section 15903.02 provides that a limited partner does not have the right or the power as a limited partner to act for or bind the limited partnership.

Section 15903.03 specifies that a limited partner is not liable for any obligation of a limited partnership unless named as a general partner in the certificate or, in addition to exercising the rights and powers of a limited partner, the limited partner participates in the control of the business.

If a limited partner participates in the control of the business without being named as a general partner, that partner may be held liable as a general partner only to persons who transact business with the limited partnership with actual knowledge of that partner’s participation in control and with a reasonable belief, based upon the limited partner’s conduct, that the partner is a general partner at the time of the transaction.

A limited partner does not participate in the control of the business solely by doing, attempting to do, or having the right or power to do, one or more of thirteen entities.

Section 15903.04 states that, on 10 days’ demand, made in a record received by the limited partnership, a limited partner may inspect and copy any information required to be maintained during regular business hours in the limited partnership’s principal office. The limited partner need not have any particular purpose for seeking the information. Within 10 days after receiving a demand, the limited partnership in a record is required to inform the limited partner that made the demand of three specified items.

Section 15903.05 specifies that a limited partner does not have any fiduciary duty to the limited partnership or to any other partner solely by reason of being a limited partner. A limited partner discharges the duties to the partnership and the other partners under this chapter or under the partnership agreement and exercise any rights consistently with the obligation of good faith and fair dealing.

Section 15903.06 says that a person that makes an investment in a business enterprise and erroneously, but in good faith, believes that the person has become a limited partner in the enterprise is not liable for the enterprise’s obligations by reason of making the investment, receiving distributions from the enterprise, or exercising any rights of or appropriate to a limited partner, if, on ascertaining the mistake, the person takes either of two specified actions.

A person that makes an investment is liable to the same extent as a general partner to any third party that enters into a transaction with the enterprise, believing in good faith that the person is a general partner, before the Secretary of State files a certificate of withdrawal, certificate of limited partnership, amendment, or certificate of correction to show that the person is not a general partner.

Section 15903.07 allows the partnership agreement to provide for the creation of classes of limited partners. The partnership agreement defines the rights, powers, and duties of those classes, including rights, powers, and duties senior to ther classes of limited partners. The partnership agreement may provide to all or certain specified classes of limited partners the right to vote separately or with all or any class or the general partners on any matter.