However, a Partnership was, for the 90 day period immediately following automatic dissolution, in an uncertain state, since it had been dissolved, but was subject to revival by the limited partners.In addition, it was by no means certain that the limited partners would become aware of the event causing automatic dissolution in time to avail themselves of the full 90 day period.That can eliminate the unrealized capital gain inherent in the asset at death.Since discounts reduce the fair value of the FLP as compared to its underlying assets, the step-up is less and heirs may realize a larger capital gain when the asset is sold. Phil approach to estate planning is to “get real.” As with so much of estate and tax planning, generalizations are dangerous.Under normal principles of partnership law, dissolution would precede the winding up of the Partnership’s affairs.The ELP Law, as amended by the Exempted Limited Partnership (Amendment) Law, 2009 (the “Amended Law”) contains procedures that will, so far as possible, bring the regime for the winding up and dissolution of Partnerships into line with the new provisions relating to the winding up of companies, contained in Part V of the Companies Law (2007 Revision, as amended (the “Companies Law”) and the Companies Winding Up Rules 2008 (the “Winding Up Rules”) which came into effect on 1 March 2009.Family limited partnerships (“FLPs”) and family limited liability companies (“LLCs”) have been a mainstay of estate and related planning for decades.
This article will outline the general issues and considerations, and present several options that do not receive enough consideration.
The Exempted Limited Partnership (Amendment) Law, 2009, which was enacted in March 2009 and is expected to come into effect before the end of April 2009, has made significant changes to the regime for the winding up and dissolution of exempted limited partnerships (“Partnerships”).
The opportunity has also been taken to clarify certain other provisions of the Exempted Limited Partnership Law (2007 Revision) (“ELP Law”).
As originally enacted, the ELP Law provided for the immediate automatic dissolution of a Partnership notwithstanding any express or implied term of the partnership agreement to the contrary, on the occurrence of certain events to the sole or last remaining general partner, subject to the proviso that if, within 90 days of the date of that dissolution, the limited partners unanimously elected one or more new general partners, the business of the Partnership was not required to be wound up but might be assumed and continued as provided for in the partnership agreement or any subsequent agreement.
All of the circumstances requiring automatic dissolution were outside the control of the limited partners, and the proviso enabled the limited partners to prevent the dissolution of a Partnership as a result of events outside their control.