Legislature(1997 - 1998)
02/10/1998 01:32 PM Senate L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 198 - UNIFORM PARTNERSHIP ACT
CHAIRMAN LEMAN announced SB 198 as the next order of business and
Art Peterson, Uniform Law Commissioner, to explain the bill.
MR. ART PETERSON, Uniform Law Commissioner, supported SB 198 and
said that Alaska is currently operating on the 1914 version of the
Uniform Partnership Act. MR. PETERSON said the major portion of
the bill deals with the 1994 revision by the Uniform Laws
Conference. He described the limited liability portion of the bill,
saying it was incorporated into the Uniform Partnership Act in
1996. Eighteen states have already enacted this revision; thirteen
included the limited liability provisions. He said Alaska has
already enacted some provisions relating to limited liability that
would be superseded by this bill. MR. PETERSON said the bill
contains 36 (of 42) pages devoted to this 80-year-old Act. He said
the other six pages cover the limited liability issue. He cited one
of the key elements of the bulk of this revision as changing the
concept of a partnership. The old version stressed collective
individuals, while the new version focuses on partnership as an
entity, which has numerous ramifications. MR. PETERSON assured the
committee this bill will not interfere with other concepts of
partnership that currently exist in statute.
MR. PETERSON concluded the committee could be comfortable in the
knowledge that this is dealing strictly with partnerships and
limited liability partnerships. This bill does not deal with any
other variety of business entity. He said if we do not update our
laws, Alaska will be severely disadvantaged in business. He
explained there were a few "polishing" changes that might need to
be dealt with before the bill moves from committee. He said these
changes are minor and include numbering differently, which would be
done to maintain consistency within the Alaska Statutes and
simplicity for interstate use. He said we would achieve a double
benefit by having both the substance and format uniform in style
with other states. He offered his help with any further work on
this piece of legislation.
MR. JOHN MCCABE, legal counsel for the National Conference of
Commissioners and Uniform State Laws, testified via teleconference
from Chicago.
CHAIRMAN LEMAN asked if case law should be addressed when adopting
an entirely new title.
MR. MCCABE replied that states have been acting under de facto
uniformity of law for the past 50 years and case law is virtually
interchangeable from state to state. He said this Act is a
distillation of the experience of other states dealing with
partnership.
MR. PETERSON said The Act will be easily adaptable to Alaska case
law. He concluded the Uniform Act revision is both conservative and
evolutionary, maintaining the same concept of a partnership
organization yet enhancing it's utility. He stated this would not
jeopardize case law in Alaska.
Number 302
CHAIRMAN LEMAN asked if the apportionment of fault previously
established in tort law would be inconsistent with this Act.
MR. PETERSON responded that it may be necessary to amend one
portion of the bill to recognize the existing statute.
MR. MCCABE said he thought this was an apples and oranges
situation. The real question is how damages are determined in a
personal injury action. He does not believe this Act would change
nor conflict with any law regarding apportionment of fault or
liability of a partnership. He illustrated this with an example
showing how liability might be apportioned in a personal injury
lawsuit against a partnership. He concluded that they are dealing
with something different.
MR. PETERSON asked how the revised Act's emphasis on partnership as
an entity would affect how the partners' liability interacts. MR.
MCCABE said the Act requires the assets of the partnership be first
in line to satisfy a judgement. These assets must be exhausted
before other assets could be sought. He said this is the basic
difference between the 1914 and 1996 Acts. MR. MCCABE said a
partner who pays a judgement in larger proportion than his
contribution to the partnership has the ability to seek
contribution from other partners. MR. PETERSON asked if it would be
necessary to amend section 306 (a) and MR. MCCABE replied it would
not be necessary and might only confuse the issue.
MR. MCCABE said 306 (a) is a very important part of the legislation
and could have critical impact on the nature of partnerships in
general and he cautioned that great care be taken in any change.
CHAIRMAN LEMAN thanked MR. MCCABE for his input and said that
details would be worked out while the bill is held in committee.
MR. MCCABE concluded that most of the changes proposed in this bill
stem from a change in the status of partners from an aggregate of
individuals to an entity and how that affects the nature of the
organization, the relationships between members, liabilities to
third persons, distribution of profits and losses, and the
termination of the entity. One of the relationships between
partners is fiduciary obligations in section 404. Others are
information rights (403) and (303) statement of authority. There
have always been things like fiduciary obligations within
partnerships and they have largely been common law in character.
The default rule in this act is that every partner is an agent for
the partnership, but there is the ability to limit the agency
authority of partners. That is done by filing a statement of
authority. This can be done more consistently when you have
entities than when you have an aggregate. This is very important
for things like real estate transactions.
One of the problems with the former aggregate notion is that every
partner not only has partnership interests, but also specific
interests in partnership property and because of that
characteristic, it was very hard to finance real estate
transactions. Because of the new entity status a partner only has
his partnership interest; he does not have a specific interest in
any specific property and has a right to distributions under the
partnership. A personal property interest becomes subject to a
partner's own specific creditors for his specific interest. This
act provides for a kind of attachment procedure called the charging
order which allow a partner's creditors to be able to get access to
his share of the interest without upsetting the partnership as an
entity.
MR. MCCABE said he hoped to give the Committee an overview of the
advances in this legislation which are very important in terms of
doing business in the current business environment. There are
things this bill does that were not done under the old 1914 act
like the conversion and merger provisions. There is an integrated
limited liability partnership consistent with RUPA. The most
important part about that is that it's a full liability shield.
The partnership entity has the liability and all of the vicarious
liability is essentially gone.
MR. WILLIS KIRKPATRICK, Director, Division of Banking, Securities
and Corporations, introduced Mr. Mike Monagle, Corporation
Supervisor, who would offer suggestions, not on the substance of
the bill, but on consistencies and efficiencies with their
Division's operation.
MR. MONAGLE, Records and Licensing Supervisor, said he was focusing
on the filing provisions. In 1996 the Legislature added Article 6
to the Partnership Act which created limited liability
partnerships. Article 9 (in particular starting on page 31) and
the uniform provisions, are not consistent with the original
Article 6 of the Liability Partnership Act. It lacks provisions
for what to do if a name is filed that's the same as one on file
already. He believed most of the filing provisions could be taken
from the existing LLP Section, Article 6, and be incorporated in
this bill. It would not change the substance of the bill at all,
but would make it more consistent with current filing practices.
Fiscal impacts of statements of authority, denial, disassociation,
dissolution for general partnerships to the agency are unknown.
According to business license records right now there are over
9,500 general partnerships with business licenses. Since the
partnership provision was added a year ago they have had less than
100 LLPs filed, so they didn't feel it appropriate to put in a
fiscal note with any impact. With 9,500 entities out there it's
hard to predict the impact the bill might have, if the entities all
decide on the same day to file. There would obviously have to be
some data base to track the statements and a record capture and
retention system to store and retrieve documents as they are filed.
CHAIRMAN LEMAN asked if they could all work together and resolve
the details.
MR. PETERSON said he thought the changes suggested by Mr. Monagle
should work very well.
SENATOR KELLY said that they had been trusting Mr. Peterson for
years on these types of bills dealing with Uniform Laws and he had
never had any of them bounce back.
CHAIRMAN LEMAN closed the public hearing and said he intended to
bring this back up on Tuesday after some further work and report it
then.
| Document Name | Date/Time | Subjects |
|---|