(a) A limited partnership shall not make a distribution, including a distribution under § 29-708.09, in violation of the partnership agreement.
(b) A limited partnership shall not make a distribution if after the distribution:
(1) The limited partnership would not be able to pay its debts as they become due in the ordinary course of the limited partnership’s activities and affairs; or
(2) The limited partnership’s total assets would be less than the sum of its total liabilities plus, unless the partnership agreement permits otherwise, the amount that would be needed, if the limited partnership were to be dissolved, wound up, and terminated at the time of the distribution, to satisfy the preferential rights upon dissolution, winding up, and termination of partners and transferees whose preferential rights are superior to those of persons receiving the distribution.
(c) A limited partnership may base a determination that a distribution is not prohibited under subsection (b) of this section on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.
(d) Except as otherwise provided in subsection (g) of this section, the effect of a distribution under subsection (b) of this section shall be measured:
(1) In the case of distribution, as defined in § 29-701.02(3), as of the earlier of:
(A) The date money or other property is transferred or debt is incurred by the limited partnership; or
(B) The date the person entitled to the distribution ceases to own the interest or right being acquired by the partnership in return for the distribution;
(2) In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and
(3) In all other cases, as of the date:
(A) The distribution is authorized, if the payment occurs not later than 120 days after that date; or
(B) The payment is made, if payment occurs more than 120 days after the distribution is authorized.
(e) A limited partnership’s indebtedness to a partner incurred by reason of a distribution made in accordance with this section shall be at parity with the limited partnership’s indebtedness to its general, unsecured creditors.
(f) A limited partnership’s indebtedness, including indebtedness issued in connection with or as part of a distribution, shall not [be] considered a liability for purposes of subsection (b) of this section if the terms of the indebtedness provide that payment of principal and interest are made only to the extent that a distribution could then be made to partners under this section.
(g) If indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness shall be treated as a distribution, the effect of which is measured on the date the payment is made.
(h) In measuring the effect of a distribution under § 29-705.03, the debts, obligations, and other liabilities of a dissolved limited partnership do not include any claim that has been disposed of under § 29-708.06, [§ ] 29-708.07, or [§ ] 29-708.08.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720; Mar. 5, 2013, D.C. Law 19-210, § 2(g)(6)(E), 59 DCR 13171.)
Section ReferencesThis section is referenced in § 29-705.09.
Effect of AmendmentsThe 2013 amendment by D.C. Law 19-210 rewrote (b) and (d); and added (h).
Editor's NotesUniform Law: This section is based on § 508 of the Uniform Limited Partnership Act (2001 Act).
Application of Law 19-210: Section 7 of D.C. Law 19-210 provided that the act shall apply as of January 1, 2012.