2006 Minnesota Statutes

321.0508 LIMITATIONS ON DISTRIBUTION.
(a) A limited partnership may not make a distribution in violation of the partnership
agreement.
(b) A limited partnership may 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; or
(2) the limited partnership's total assets would be less than the sum of its total liabilities plus
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 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) 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), the effect of a distribution under
subsection (b) is measured:
(1) in the case of distribution by purchase, redemption, or other acquisition of a transferable
interest in the limited partnership, as of the date money or other property is transferred or debt
incurred by the limited partnership; and
(2) in all other cases, as of the date:
(A) the distribution is authorized, if the payment occurs within 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 is 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, is not considered a liability for purposes of subsection (b) 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 is treated as a distribution, the effect of which is measured on the date the payment
is made.
History: 2004 c 199 art 5 s 50