§ 17-220 — Division of a limited partnership

Delaware § 17-220

• Jurisdiction: Delaware
• Title: 6
• Ch. 17: LIMITED PARTNERSHIPS
• Subch.: Formation; Certificate of Limited Partnership

Text

(a) As used in this section and §§ 17-203 and 17-301 of this title:

(1) “Dividing partnership” means the domestic limited partnership that is effecting a division in the manner provided in this section.

(2) “Division” means the division of a dividing partnership into two or more domestic limited partnerships in accordance with this section.

(3) “Division contact” means, in connection with any division, a natural person who is a Delaware resident, any division partnership in such division or any other domestic limited partnership or other business entity as defined in § 17-211 of this title formed or organized under the laws of the State of Delaware, which division contact shall maintain a copy of the plan of division for a period of 6 years from the effective date of the division and shall comply with paragraph (g)(3) of this section.

(4) “Division partnership” means a surviving partnership, if any, and each resulting partnership.

(5) “Organizational documents” means the certificate of limited partnership and partnership agreement of a domestic limited partnership.

(6) “Resulting partnership” means a domestic limited partnership formed as a consequence of a division.

(7) “Surviving partnership” means a dividing partnership that survives the division.

(b) Pursuant to a plan of division, any domestic limited partnership may, in the manner provided in this section, be divided into 2 or more domestic limited partnerships. The division of a domestic limited partnership in accordance with this section and, if applicable, the resulting cessation of the existence of the dividing partnership pursuant to a certificate of division shall not be deemed to affect the personal liability of any person (including any general partner of the dividing partnership) incurred prior to such division with respect to matters arising prior to such division, nor shall it be deemed to affect the validity or enforceability of any obligations or liabilities of the dividing partnership incurred prior to such division; provided, that the obligations and liabilities of the dividing partnership shall be allocated to and vested in, and valid and enforceable obligations of, such division partnership or partnerships to which such obligations and liabilities have been allocated pursuant to the plan of division, as provided in subsection (l) of this section. Each resulting partnership in a division shall be formed in compliance with the requirements of this chapter and subsection (i) of this section.

(c) If the partnership agreement of the dividing partnership specifies the manner of adopting a plan of division, the plan of division shall be adopted as specified in the partnership agreement. If the partnership agreement of the dividing partnership does not specify the manner of adopting a plan of division and does not prohibit a division of the limited partnership, the plan of division shall be adopted in the same manner as is specified in the partnership agreement for authorizing a merger or consolidation that involves the limited partnership as a constituent party to the merger or consolidation. If the partnership agreement of the dividing partnership does not specify the manner of adopting a plan of division or authorizing a merger or consolidation that involves the limited partnership as a constituent party and does not prohibit a division of the limited partnership, the adoption of a plan of division shall be authorized by the approval:

(1) By all general partners of the dividing partnership; and

(2) Limited partners who own more than 50% of the then current percentage or other interest in the profits of the dividing partnership owned by all of the limited partners of the dividing partnership.

In any event, the adoption of a plan of division also shall require the approval of any person who, at the effective date or time of the division, shall be a general partner of any division partnership. Notwithstanding prior approval, a plan of division may be terminated or amended pursuant to a provision for such termination or amendment contained in the plan of division.

(d) Unless otherwise provided in a plan of division, the division of a domestic limited partnership pursuant to this section shall not require such limited partnership to wind up its affairs under § 17-803 of this title or pay its liabilities and distribute its assets under § 17-804 of this title, and the division shall not constitute a dissolution of such limited partnership.

(e) In connection with a division under this section, rights or securities of, or interests in, the dividing partnership may be exchanged for or converted into cash, property, rights or securities of, or interests in, the surviving partnership or any resulting partnership or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights or securities of, or interests in, a domestic limited partnership or any other business entity which is not a division partnership or may be canceled or remain outstanding (if the dividing partnership is a surviving partnership).

(f) A plan of division adopted in accordance with subsection (c) of this section:

(1) May effect any amendment to the partnership agreement of the dividing partnership if it is a surviving partnership in the division; or

(2) May effect the adoption of a new partnership agreement for the dividing partnership if it is a surviving partnership in the division; and

(3) Shall effect the adoption of a partnership agreement for each resulting partnership.

Any amendment to a partnership agreement or adoption of a new partnership agreement for the dividing partnership, if it is a surviving partnership in the division, or adoption of a partnership agreement for each resulting partnership made pursuant to the foregoing sentence shall be effective at the effective time or date of the division. Any amendment to a partnership agreement or adoption of a new partnership agreement for the dividing partnership, if it is a surviving partnership in the division, shall be effective notwithstanding any provision in the partnership agreement of the dividing partnership relating to amendment or adoption of a new partnership agreement, other than a provision that by its terms applies to an amendment to the partnership agreement or the adoption of a new partnership agreement, in either case, in connection with a division, merger or consolidation.

(g) If a domestic limited partnership is dividing under this section, the dividing partnership shall adopt a plan of division which shall set forth:

(1) The terms and conditions of the division, including:

a. Any conversion or exchange of the partnership interests of the dividing partnership into or for partnership interests or other securities or obligations of any division partnership or cash, property or rights or securities or obligations of or interests in any other business entity or domestic limited partnership which is not a division partnership, or that the partnership interests of the dividing partnership shall remain outstanding or be canceled, or any combination of the foregoing; and

b. The allocation of assets, property, rights, series, debts, liabilities and duties of the dividing partnership among the division partnerships;

(2) The name of each resulting partnership and, if the dividing partnership will survive the division, the name of the surviving partnership;

(3) The name and business address of a division contact which shall have custody of a copy of the plan of division. The division contact, or any successor division contact, shall serve for a period of 6 years following the effective date of the division. During such 6 year period the division contact shall provide, without cost, to any creditor of the dividing partnership, within 30 days following the division contact’s receipt of a written request from any creditor of the dividing partnership, the name and business address of the division partnership to which the claim of such creditor was allocated pursuant to the plan of division; and

(4) Any other matters that the dividing partnership determines to include therein.

(h) If a domestic limited partnership divides under this section, the dividing partnership shall file a certificate of division executed by at least 1 general partner of the dividing partnership on behalf of such dividing partnership in the office of the Secretary of State in accordance with § 17-204 of this title, and a certificate of limited partnership that complies with § 17-201 of this title for each resulting partnership executed by all general partners of such resulting partnership in accordance with § 17-204 of this title.

(1) The certificate of division shall state:

a. The name of the dividing partnership and, if it has been changed, the name under which its certificate of limited partnership was originally filed and whether the dividing partnership is a surviving partnership;

b. The date of filing of the dividing partnership’s original certificate of limited partnership with the Secretary of State;

c. The name of each division partnership;

d. The name and business address of the division contact required by paragraph (g)(3) of this section;

e. The future effective date or time (which shall be a date or time certain) of the division if it is not to be effective upon the filing of the certificate of division;

f. That the division has been approved in accordance with this section;

g. That the plan of division is on file at a place of business of such division partnership as is specified therein, and shall state the address thereof;

h. That a copy of the plan of division will be furnished by such division partnership as is specified therein, on request and without cost, to any partner of the dividing partnership; and

i. Any other information the dividing partnership determines to include therein.

(2) A certificate of division may be amended to change the name or business address of the division contact in a certificate of division or to change information in the certificate of division required by paragraph (h)(1)g. of this section. A certificate of division is amended by filing a certificate of amendment thereto for each division partnership that exists as a limited partnership in the office of the Secretary of State. Each certificate of amendment of certificate of division must include all of the following:

a. The name of the dividing partnership and, if the name has been changed, the name under which the dividing partnership’s certificate of limited partnership was originally filed.

b. The name of the division partnership to which the amendment to the certificate of division relates.

c. The amendment to the certificate of division.

(3) If the dividing partnership is a surviving partnership, a general partner of the dividing partnership who becomes aware that the name or business address of the division contact, or information in the certificate of division required by paragraph (h)(1)g. of this section, in a certificate of division was false when made, or that the name or business address of the division contact, or information in the certificate of division required by paragraph (h)(1)g. of this section, in a certificate of division has changed, must promptly amend the certificate of division. If the dividing partnership is not a surviving partnership or no longer exists as a limited partnership, a general partner of any resulting partnership who becomes aware that the name or business address of the division contact, or information in the certificate of division required by paragraph (h)(1)g. of this section, in a certificate of division was false when made, or that the name or business address of the division contact, or information in the certificate of division required by paragraph (h)(1)g. of this section, in a certificate of division has changed, must promptly amend the certificate of division. This subsection does not apply after the expiration of a period of 6 years following the effective date of the division.

(4) Unless otherwise provided in this chapter or unless a later effective date or time (which shall be a date or time certain) is provided for in the certificate of amendment of certificate of division, a certificate of amendment of certificate of division is effective at the time of its filing with the Secretary of State.

(5) Subject to this chapter, the Secretary of State shall accept the filing of certificates of amendment of certificate of division for all division partnerships resulting from the same certificate of division if at least 1 division partnership is in good standing at the time of such filings.

(i) The certificate of division and each certificate of limited partnership for each resulting partnership required by subsection (h) of this section shall be filed simultaneously in the office of the Secretary of State and, if such certificates are not to become effective upon their filing as permitted by § 17-206(b) of this title, then each such certificate shall provide for the same effective date or time in accordance with § 17-206(b) of this title. Concurrently with the effective date or time of a division, the partnership agreement of each resulting partnership shall become effective.

(j) A certificate of division shall act as a certificate of cancellation for a dividing partnership which is not a surviving partnership.

(k) A partnership agreement may provide that a domestic limited partnership shall not have the power to divide as set forth in this section.

(l) Upon the division of a domestic limited partnership becoming effective:

(1) The dividing partnership shall be divided into the distinct and independent division partnerships named in the plan of division, and, if the dividing partnership is not a surviving partnership, the existence of the dividing partnership shall cease.

(2) For all purposes of the laws of the State of Delaware, all of the rights, privileges and powers, and all the property, real, personal and mixed, of the dividing partnership and all debts due on whatever account to it, as well as all other things and other causes of action belonging to it, shall without further action be allocated to and vested in the applicable division partnership in such a manner and basis and with such effect as is specified in the plan of division, and the title to any real property or interest therein allocated to and vested in any division partnership shall not revert or be in any way impaired by reason of the division.

(3) Each division partnership shall, from and after effectiveness of the certificate of division, be liable as a separate and distinct domestic limited partnership for such debts, liabilities and duties of the dividing partnership as are allocated to such division partnership pursuant to the plan of division in the manner and on the basis provided in paragraph (g)(1)b. of this section.

(4) Each of the debts, liabilities and duties of the dividing partnership shall without further action be allocated to and be the debts, liabilities and duties of such division partnership as is specified in the plan of division as having such debts, liabilities and duties allocated to it, in such a manner and basis and with such effect as is specified in the plan of division, and no other division partnership shall be liable therefor, so long as the plan of division does not constitute a fraudulent transfer under applicable law, and all liens upon any property of the dividing partnership shall be preserved unimpaired, and all debts, liabilities and duties of the dividing partnership shall remain attached to the division partnership to which such debts, liabilities and duties have been allocated in the plan of division, and may be enforced against such division partnership to the same extent as if said debts, liabilities and duties had originally been incurred or contracted by it in its capacity as a domestic limited partnership.

(5) In the event that any allocation of assets, debts, liabilities and duties to division partnerships in accordance with a plan of division is determined by a court of competent jurisdiction to constitute a fraudulent transfer, each division partnership shall be jointly and severally liable on account of such fraudulent transfer notwithstanding the allocations made in the plan of division; provided, however, the validity and effectiveness of the division are not otherwise affected thereby.

(6) Debts and liabilities of the dividing partnership that are not allocated by the plan of division shall be the joint and several debts and liabilities of all of the division partnerships.

(7) It shall not be necessary for a plan of division to list each individual asset, property, right, series, debt, liability or duty of the dividing partnership to be allocated to a division partnership so long as the assets, property, rights, series, debts, liabilities or duties so allocated are reasonably identified by any method where the identity of such assets, property, rights, series, debts, liabilities or duties is objectively determinable.

(8) The rights, privileges, powers and interests in property of the dividing partnership that have been allocated to a division partnership, as well as the debts, liabilities and duties of the dividing partnership that have been allocated to such division partnership pursuant to a plan of division, shall remain vested in each such division partnership and shall not be deemed, as a result of the division, to have been assigned or transferred to such division partnership for any purpose of the laws of the State of Delaware.

(9) Any action or proceeding pending against a dividing partnership may be continued against the surviving partnership, if any, as if the division did not occur, but subject to paragraph (l)(4) of this section, and against any resulting partnership to which the asset, property, right, series, debt, liability or duty associated with such action or proceeding was allocated pursuant to the plan of division by adding or substituting such resulting partnership as a party in the action or proceeding. Any action or proceeding pending against a general partner of a dividing partnership may be continued against such general partner as if the division did not occur and against the general partner of any resulting partnership to which the asset, property, right, series, debt, liability or duty associated with such action or proceeding was allocated pursuant to the plan of division by adding or substituting such general partner as a party in the action or proceeding.

(m) In applying the provisions of this chapter on distributions, a direct or indirect allocation of property or liabilities in a division is not deemed a distribution for purposes of this chapter.

(n) The provisions of this section shall not be construed to limit the means of accomplishing a division by any other means provided for in a partnership agreement or other agreement or as otherwise permitted by this chapter or as otherwise permitted by law.

(o) All limited partnerships formed on or after August 1, 2019, shall be governed by this section. All limited partnerships formed prior to August 1, 2019, shall be governed by this section; provided, that if the dividing partnership is a party to any written contract, indenture or other agreement entered into prior to August 1, 2019, that, by its terms, restricts, conditions or prohibits the consummation of a merger or consolidation by the dividing partnership with or into another party, or the transfer of assets by the dividing partnership to another party, then such restriction, condition or prohibition shall be deemed to apply to a division as if it were a merger, consolidation or transfer of assets, as applicable.

Legislative History

82 Del. Laws, c. 46, § 17 ; 82 Del. Laws, c. 258, § 8 ; 83 Del. Laws, c. 63, § 2 ; 84 Del. Laws, c. 96, § 5