Regular Session 2015-2016 House Bill 1398 P.N. 2375

PRIOR PRINTER'S NO. 1895

PRINTER'S NO. 2375

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

1398

Session of

2015

INTRODUCED BY A. HARRIS, THOMAS, MACKENZIE, STAATS, MILLARD,

LONGIETTI, GIBBONS, ROZZI, McGINNIS, GREINER, BARBIN, COHEN,

MILNE, MARSICO, PETRI, DeLISSIO, DAVIDSON, JAMES, PEIFER,

DAY, GROVE, FARRY, ELLIS, BENNINGHOFF, P. COSTA, F. KELLER,

R. BROWN, D. PARKER, KORTZ, EVERETT AND SCHEMEL,

JUNE 24, 2015

AS REPORTED FROM COMMITTEE ON COMMERCE, HOUSE OF

REPRESENTATIVES, AS AMENDED, OCTOBER 19, 2015

AN ACT

Amending Titles 15 (Corporations and Unincorporated

Associations) and 54 (Names) of the Pennsylvania Consolidated

Statutes, modernizing the law on limited liability

partnerships, general partnerships, limited partnerships and

limited liability companies; and making conforming changes

with respect to associations, corporations, unincorporated

nonprofit associations and business trusts by doing the

following:

As to general provisions, making conforming changes by

revising definitions. PROVISIONS ON APPLICATION OF TITLE,

DEFINITIONS, DEFENSE OF USURY, TAX CLEARANCE OF CERTAIN

FUNDAMENTAL TRANSACTIONS AND FEE SCHEDULE.

AS TO ENTITIES GENERALLY, MAKING CONFORMING CHANGES BY

REVISING REQUIREMENTS FOR FOREIGN ASSOCIATION NAMES.

AS TO ENTITY TRANSACTIONS, MAKING CONFORMING CHANGES BY

REVISING PROVISIONS ON REGULATORY CONDITIONS AND REQUIRED

NOTICES AND APPROVALS, NATURE OF TRANSACTIONS, APPROVAL BY

LIMITED PARTNERSHIP, EFFECT OF MERGER, STATEMENT OF DIVISION

AND EFFECTIVENESS, EFFECT OF DIVISION AND EFFECT OF

DOMESTICATION.

AS TO FOREIGN ASSOCIATIONS, MAKING CONFORMING CHANGES BY

REVISING PROVISIONS ON GOVERNING LAW.

As to corporations, making conforming changes by revising

provisions on distributions by business corporations and by

adding provisions on the use of special litigation committees

by business corporations and nonprofit corporations.

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As to partnerships generally:

extensively revising provisions on:

interchangeability of partnership, limited

liability company and corporate forms of

organization; and

ownership of certain professional partnerships;

and

adding a provision on failure to observe formalities.

As to limited liability partnerships:

extensively revising provisions on:

scope;

definitions;

limitation on liability of partners;

extraterritorial application of subchapter;

foreign registered limited liability

partnerships; and

annual registration; and

adding provisions on:

distributions; and

dissolution.

As to general partnerships, repealing existing Chapter 83

and replacing it with a new Chapter 84 relating to:

general provisions;

nature of partnership;

relations of partners to persons dealing with

partnership;

relations of partners to each other and to

partnership;

transferable interests and rights of transferees and

creditors;

dissociation;

dissociation as partner if business not wound up; and

dissolution and winding up.

As to limited partnerships, repealing existing Chapter 85

and replacing it with a new Chapter 86 relating to:

general provisions;

formation and filings;

limited partners;

general partners;

contributions and distributions;

dissociation;

transferable interests and rights of transferees and

creditors;

dissolution and winding up; and

actions by partners.

As to limited liability companies, repealing existing

Chapter 89 and replacing it with a new Chapter 88 relating

to:

general provisions;

formation and filings;

relations of members and managers to persons dealing

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with limited liability company;

relations of members to each other and to limited

liability company;

transferable interests and rights of transferees and

creditors;

dissociation;

dissolution and winding up; and

actions by members.

As to unincorporated nonprofit associations, making

conforming amendments by revising provisions on ownership and

transfer of property.

As to business trusts, making conforming changes by

revising provisions on application and effect of chapter and

liability of trustees and beneficiaries.

As to names, revising provisions on register established.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The definitions of "association," "general

partnership," "limited liability company" and "limited

partnership" in section 102(a) of Title 15 of the Pennsylvania

Consolidated Statutes, amended October 22, 2014 (P.L.2640,

No.172), are amended and the section is amended by adding

definitions to read:

SECTION 1. SECTION 101(C) OF TITLE 15 OF THE PENNSYLVANIA

CONSOLIDATED STATUTES IS AMENDED TO READ:

§ 101. SHORT TITLE AND APPLICATION OF TITLE.

* * *

(C) REFERENCES TO PRIOR STATUTES.--A REFERENCE IN THE

[ARTICLES OR BYLAWS OR OTHER ORGANIC DOCUMENTS] ORGANIC RULES OF

AN ASSOCIATION TO ANY PROVISION OF LAW SUPPLIED OR REPEALED BY

THIS TITLE SHALL BE DEEMED TO BE A REFERENCE TO THE SUPERSEDING

PROVISION OF THIS TITLE.

SECTION 1.1. THE DEFINITIONS OF "ASSOCIATION," "GENERAL

PARTNERSHIP," "LIMITED LIABILITY COMPANY" AND "LIMITED

PARTNERSHIP" IN SECTION 102(A) OF TITLE 15, AMENDED OCTOBER 22,

2014 (P.L.2640, NO.172), ARE AMENDED AND THE SECTION IS AMENDED

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BY ADDING DEFINITIONS TO READ:

§ 102. Definitions.

(a) Defined terms.--Subject to additional or inconsistent

definitions contained in subsequent provisions of this title

that are applicable to specific provisions of this title, the

following words and phrases when used in this title shall have,

unless the context clearly indicates otherwise, the meanings

given to them in this section:

* * *

"Association." A corporation, for profit or not-for-profit,

a partnership, a limited liability company, a business or

statutory trust, an entity or two or more persons associated in

a common enterprise or undertaking. The term does not include:

(1) a testamentary trust or an inter vivos trust as

defined in 20 Pa.C.S. § 711(3) (relating to mandatory

exercise of jurisdiction through orphans' court division in

general);

(2) an association or relationship that:

(i) is not a person that has:

(A) a legal existence separate from any interest

holder of the person; or

(B) the power to acquire an interest in real

property in its own name; and

(ii) is not a partnership under the rules stated in

section [8312 (relating to rules for determining the

existence of partnership)] 8422(c) (relating to formation

of partnership) or a similar provision of the laws of

another jurisdiction;

(3) a decedent's estate; or

(4) a government or a governmental subdivision, agency

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or instrumentality.

* * *

"Charitable purposes." The relief of poverty, the

advancement and provision of education, including postsecondary

education, the advancement of religion, the prevention and

treatment of disease or injury, including mental retardation and

mental disorders, governmental or municipal purposes and any

other purpose the accomplishment of which is recognized as

important and beneficial to the public.

* * *

"Debtor in bankruptcy." A person that is the subject of:

(1) an order for relief under 11 U.S.C. (relating to

bankruptcy) or a comparable order under a successor statute

of general application; or

(2) a comparable order under Federal, State or foreign

law governing insolvency.

* * *

"General partnership." [A domestic or foreign partnership as

defined in section 8311 (relating to partnership defined),

whether or not it is a limited liability partnership or electing

partnership.] Either of the following:

(1) A partnership as defined in section 8412 (relating

to definitions).

(2) An association whose internal affairs are governed

by the laws of a jurisdiction other than this Commonwealth

which would be a partnership if its internal affairs were

governed by the laws of this Commonwealth.

* * *

"Limited liability company." [A domestic or foreign limited

liability company as defined in section 8903 (relating to

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definitions and index of definitions).] Either of the following:

(1) A limited liability company as defined in section

8812 (relating to definitions).

(2) An association whose internal affairs are governed

by the laws of a jurisdiction other than this Commonwealth

which would be a limited liability company if its internal

affairs were governed by the laws of this Commonwealth.

* * *

"Limited partnership." [A domestic or foreign limited

partnership as defined in section 8503 (relating to definitions

and index of definitions), whether or not it is a limited

liability limited partnership or electing partnership.] Either

of the following:

(1) A limited partnership as defined in section 8612

(relating to definitions).

(2) An association whose internal affairs are governed

by the laws of a jurisdiction other than this Commonwealth

which would be a limited partnership if its internal affairs

were governed by the laws of this Commonwealth.

* * *

Section 2. Section 152 of Title 15, amended October 22, 2014

(P.L.2640, No.172), is amended to read:

SECTION 1.2. TITLE 15 IS AMENDED BY ADDING A SECTION TO

READ:

§ 114. DEFENSE OF USURY.

A DOMESTIC ASSOCIATION OTHER THAN A BUSINESS CORPORATION

SHALL BE SUBJECT TO SECTION 1510 (RELATING TO CERTAIN

SPECIFICALLY AUTHORIZED DEBT TERMS) WITH RESPECT TO OBLIGATIONS,

AS DEFINED IN THAT SECTION, GOVERNED BY THE LAWS OF THIS

COMMONWEALTH OR AFFECTING REAL PROPERTY SITUATED IN THIS

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COMMONWEALTH, TO THE SAME EXTENT AS IF THE DOMESTIC ASSOCIATION

WERE A DOMESTIC BUSINESS CORPORATION.

SECTION 2. SECTIONS 139(A) AND (C), 152, 153(A)(2) AND (3),

206, 314(A), (D) AND (E), 315, 324(A) AND (C) AND 336(A)(2) OF

TITLE 15, AMENDED OR ADDED OCTOBER 22, 2014 (P.L.2640, NO.172),

ARE AMENDED TO READ:

§ 139. TAX CLEARANCE OF CERTAIN FUNDAMENTAL TRANSACTIONS.

(A) REQUIREMENT.--EXCEPT AS PROVIDED IN SUBSECTION (C) OR

(D), CLEARANCE CERTIFICATES FROM THE DEPARTMENT OF REVENUE AND

THE DEPARTMENT OF LABOR AND INDUSTRY, EVIDENCING THE PAYMENT BY

THE ASSOCIATION OF ALL TAXES AND CHARGES DUE THE COMMONWEALTH

REQUIRED BY LAW, MUST BE DELIVERED TO THE DEPARTMENT FOR FILING

WHEN ANY OF THE FOLLOWING IS DELIVERED TO THE DEPARTMENT FOR

FILING:

(1) ARTICLES OR A STATEMENT OR CERTIFICATE OF MERGER

MERGING A DOMESTIC ASSOCIATION INTO A NONREGISTERED FOREIGN

ASSOCIATION.

(2) ARTICLES OR A STATEMENT OR CERTIFICATE OF CONVERSION

OR DOMESTICATION EFFECTING A CONVERSION OR DOMESTICATION OF A

DOMESTIC ASSOCIATION INTO A NONREGISTERED FOREIGN

ASSOCIATION.

(3) ARTICLES [OR] OF DISSOLUTION, A CERTIFICATE OF

DISSOLUTION OR TERMINATION OR A STATEMENT OF REVIVAL OF A

DOMESTIC ASSOCIATION.

(4) AN APPLICATION FOR TERMINATION OF REGISTRATION,

STATEMENT OF WITHDRAWAL OR SIMILAR DOCUMENT BY A REGISTERED

FOREIGN ASSOCIATION.

(5) ARTICLES OR A STATEMENT OR CERTIFICATE OF DIVISION

DIVIDING A DOMESTIC ASSOCIATION SOLELY INTO FOREIGN

ASSOCIATIONS.

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* * *

(C) [ALTERNATIVE PROVISIONS.--IF CLEARANCE CERTIFICATES ARE

FILED WITH THE COURT AS REQUIRED UNDER SUBSECTION (B), IT SHALL

NOT BE NECESSARY TO FILE THE CLEARANCE CERTIFICATES WITH THE

DEPARTMENT OF STATE.] EXCEPTIONS.--IT SHALL NOT BE NECESSARY TO

FILE TAX CLEARANCE CERTIFICATES WITH THE DEPARTMENT OF STATE:

(1) IF CLEARANCE CERTIFICATES ARE FILED WITH THE COURT

AS REQUIRED UNDER SUBSECTION (B).

(2) WITH ARTICLES OF DISSOLUTION UNDER SECTION 1971

(RELATING TO VOLUNTARY DISSOLUTION BY SHAREHOLDERS OR

INCORPORATORS).

(3) WITH A CERTIFICATE OF DISSOLUTION UNDER SECTION

8482(B)(2)(I) (RELATING TO WINDING UP AND FILING OF OPTIONAL

CERTIFICATES).

(4) WITH A CERTIFICATE OF TERMINATION UNDER SECTION

8681.1 (RELATING TO VOLUNTARY TERMINATION BY PARTNERS).

(5) WITH A CERTIFICATE OF DISSOLUTION UNDER SECTION

8872(B)(2)(I) (RELATING TO WINDING UP AND FILING OF OPTIONAL

CERTIFICATES).

(6) WITH A CERTIFICATE OF TERMINATION UNDER SECTION 8878

(RELATING TO VOLUNTARY TERMINATION BY MEMBERS OR ORGANIZERS).

* * *

§ 152. Definitions.

The following words and phrases when used in this subchapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Ancillary transaction." Includes:

(1) preclearance of document;

(2) amendment of articles, charter, certificate or other

organic document, restatement of articles, charter,

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certificate or other organic document;

(3) dissolution, cancellation or termination of an

association;

(3.1) rescission of dissolution;

(4) withdrawal OR TRANSFER OF REGISTRATION by foreign

association;

(5) [withdrawal by] DISSOCIATION AS a partner;

(5.1) statement or certificate of authority and denial

or negation of authority;

(6) any transaction similar to any item listed in

paragraphs (1) through [(5)] (5.1);

(6.1) withdrawal, abandonment or termination of a

document which has been delivered to the department for

filing but has not yet become effective; or

(7) delivery to the department for filing in, by or with

the department or the Secretary of the Commonwealth of any

articles, statements, proceedings, agreements or any similar

papers affecting associations under the statutes of this

Commonwealth for which a specific fee is not set forth in

section 153 (relating to fee schedule) or other applicable

statute.

§ 153. FEE SCHEDULE.

(A) GENERAL RULE.--THE NONREFUNDABLE FEES OF THE BUREAU,

INCLUDING FEES FOR THE PUBLIC ACTS AND TRANSACTIONS OF THE

SECRETARY OF THE COMMONWEALTH ADMINISTERED THROUGH THE BUREAU,

SHALL BE AS FOLLOWS:

* * *

(2) FOREIGN ASSOCIATIONS:

(I) REGISTRATION STATEMENT OR SIMILAR

QUALIFICATIONS TO DO BUSINESS..................... 250

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(II) AMENDMENT OF REGISTRATION STATEMENT OR

SIMILAR CHANGE IN QUALIFICATION TO DO BUSINESS.... 250

(III) DOMESTICATION OF ALIEN ASSOCIATION

UNDER SECTION 161 (RELATING TO DOMESTICATION OF

CERTAIN ALIEN ASSOCIATIONS)....................... 250

[(IV) STATEMENT OF MERGER, DIVISION OR

CONVERSION OR SIMILAR INSTRUMENT REPORTING

OCCURRENCE OF MERGER, DIVISION OR CONVERSION NOT

EFFECTED BY A FILING IN THE DEPARTMENT............ 70]

(V) ADDITIONAL FEE FOR EACH [QUALIFIED]

REGISTERED FOREIGN ASSOCIATION WHICH IS NAMED IN A

STATEMENT OF MERGER OR SIMILAR INSTRUMENT......... 40

(VI) EACH ANCILLARY TRANSACTION.............. 70

(3) PARTNERSHIPS AND LIMITED LIABILITY COMPANIES:

(I) CERTIFICATE OF LIMITED PARTNERSHIP OR

CERTIFICATE OF ORGANIZATION OF A LIMITED LIABILITY

COMPANY........................................... 125

(II) STATEMENT OF REGISTRATION OF

[REGISTERED] LIMITED LIABILITY PARTNERSHIP OR

LIMITED LIABILITY LIMITED PARTNERSHIP OR STATEMENT

OF ELECTION AS AN ELECTING PARTNERSHIP............ 125

(III) EACH ANCILLARY TRANSACTION............. 70

* * *

§ 206. REQUIREMENTS FOR FOREIGN ASSOCIATION NAMES.

(A) GENERAL RULE.--THE DEPARTMENT SHALL NOT FILE A

REGISTRATION STATEMENT PURSUANT TO SECTION 412 (RELATING TO

FOREIGN REGISTRATION STATEMENT) FOR A FOREIGN ASSOCIATION THAT,

EXCEPT AS PROVIDED UNDER SUBSECTION (B), HAS A NAME THAT IS

RENDERED UNAVAILABLE FOR USE BY A COVERED ASSOCIATION [UNDER

SECTION 202(A), (B) OR (C)(1)(I), (III), (IV) OR (V) OR (2)

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(RELATING TO REQUIREMENTS FOR NAMES GENERALLY)] BY ANY PROVISION

OF THIS SUBCHAPTER.

(B) EXCEPTION.--THE PROVISIONS OF SECTION 202(B) AND (C)

(RELATING TO REQUIREMENTS FOR NAMES GENERALLY) SHALL NOT PREVENT

THE FILING OF A REGISTRATION STATEMENT OF A FOREIGN ASSOCIATION

[SETTING FORTH A NAME THAT IS PROHIBITED] WHOSE NAME IN ITS

JURISDICTION OF FORMATION WOULD BE PROHIBITED FROM USE IN THIS

COMMONWEALTH BY SECTION 202(B) AND (C) IF THE FOREIGN

ASSOCIATION [DELIVERS TO THE DEPARTMENT FOR FILING A RESOLUTION

OF ITS GOVERNORS ADOPTING] ADOPTS A NAME FOR USE IN REGISTERING

TO DO BUSINESS IN THIS COMMONWEALTH THAT IS AVAILABLE FOR USE BY

A COVERED ASSOCIATION.

§ 314. REGULATORY CONDITIONS AND REQUIRED NOTICES AND

APPROVALS.

(A) REGULATORY APPROVALS.--IF [LAWS] THE LAW OF THIS

COMMONWEALTH OTHER THAN THIS CHAPTER REQUIRES NOTICE TO OR THE

APPROVAL OF A GOVERNMENTAL AGENCY OR OFFICER OF THE COMMONWEALTH

IN CONNECTION WITH THE PARTICIPATION UNDER AN ORGANIC LAW THAT

IS NOT PART OF THIS TITLE BY A DOMESTIC OR FOREIGN ASSOCIATION

IN A TRANSACTION WHICH IS A FORM OF TRANSACTION AUTHORIZED BY

THIS CHAPTER, THE NOTICE MUST BE GIVEN OR THE APPROVAL OBTAINED

BY THE ASSOCIATION BEFORE IT MAY PARTICIPATE IN ANY FORM OF

TRANSACTION UNDER THIS CHAPTER.

* * *

(D) PRESERVATION OF TRANSFERS.--[A] SUBJECT TO SUBSECTION

(C) AND SECTION 5550 (RELATING TO DEVISES, BEQUESTS AND GIFTS

AFTER CERTAIN FUNDAMENTAL CHANGES), A BEQUEST, DEVISE, GIFT,

GRANT OR PROMISE CONTAINED IN A WILL OR OTHER INSTRUMENT OF

DONATION, SUBSCRIPTION OR CONVEYANCE THAT IS MADE TO:

(1) A MERGING ASSOCIATION THAT IS NOT THE SURVIVING

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ASSOCIATION AND THAT TAKES EFFECT OR REMAINS PAYABLE AFTER

THE MERGER INURES TO THE SURVIVING ASSOCIATION[.]; AND

(2) A DIVIDING ASSOCIATION MAY BE ALLOCATED IN THE

DIVISION AS IF IT WERE AN ASSET OF THE DIVIDING ASSOCIATION

AND, IF THE BEQUEST, DEVISE, GIFT, GRANT OR PROMISE TAKES

EFFECT OR REMAINS PAYABLE AFTER THE DIVISION, VESTS AS

PROVIDED IN SECTION 367(A)(4) (RELATING TO EFFECT OF

DIVISION).

(E) TRUST OBLIGATIONS.--A TRUST OBLIGATION THAT WOULD GOVERN

PROPERTY:

(1) IF TRANSFERRED TO A MERGING ASSOCIATION THAT IS NOT

THE SURVIVING ASSOCIATION APPLIES TO PROPERTY THAT IS

TRANSFERRED AFTER A MERGER TO THE SURVIVING ASSOCIATION[.];

AND

(2) IF TRANSFERRED TO A DIVIDING ASSOCIATION THAT IS NOT

A RESULTING ASSOCIATION APPLIES TO PROPERTY THAT IS

TRANSFERRED AFTER A DIVISION TO A RESULTING ASSOCIATION.

[(E)] (F) CROSS REFERENCE.--SEE SECTION 318 (RELATING TO

EXCLUDED ENTITIES AND TRANSACTIONS).

§ 315. NATURE OF TRANSACTIONS.

(A) GENERAL RULE.--THE FACT THAT A SALE OR CONVERSION OF THE

INTERESTS IN OR ASSETS OF AN ASSOCIATION OR A TRANSACTION UNDER

A PARTICULAR SUBCHAPTER PRODUCES A RESULT THAT COULD BE

ACCOMPLISHED IN ANY OTHER MANNER PERMITTED BY A DIFFERENT

SUBCHAPTER OR OTHER LAW SHALL NOT BE A BASIS FOR

RECHARACTERIZING THE SALE, CONVERSION OR TRANSACTION AS A

DIFFERENT FORM OF SALE, CONVERSION OR TRANSACTION UNDER ANY

OTHER SUBCHAPTER OR OTHER LAW.

(B) BUSINESS PURPOSE NOT REQUIRED.--A TRANSACTION UNDER THIS

CHAPTER DOES NOT REQUIRE AN INDEPENDENT BUSINESS PURPOSE IN

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ORDER FOR THE TRANSACTION TO BE LAWFUL.

§ 324. APPROVAL BY LIMITED PARTNERSHIP.

(A) PROPOSAL OF PLAN.--[A] EXCEPT AS PROVIDED IN THE ORGANIC

RULES, A PLAN SHALL BE PROPOSED IN THE CASE OF A DOMESTIC

LIMITED PARTNERSHIP BY THE ADOPTION BY A UNANIMOUS VOTE OF THE

GENERAL PARTNERS OF A RESOLUTION APPROVING THE PLAN. EXCEPT

WHERE THE APPROVAL OF THE LIMITED PARTNERS IS UNNECESSARY UNDER

THIS CHAPTER OR THE ORGANIC RULES, THE GENERAL PARTNERS SHALL

SUBMIT THE PLAN TO A VOTE OF THE LIMITED PARTNERS ENTITLED TO

VOTE THEREON AT A REGULAR OR SPECIAL MEETING OF THE LIMITED

PARTNERS.

* * *

(C) REQUIRED VOTE BY LIMITED PARTNERS.--[THE] EXCEPT AS

PROVIDED IN THE ORGANIC RULES:

(1) A PLAN SHALL BE ADOPTED UPON RECEIVING [A MAJORITY

OF THE VOTES CAST BY ALL LIMITED PARTNERS, IF ANY, ENTITLED

TO VOTE THEREON] THE AFFIRMATIVE VOTE OR CONSENT OF LIMITED

PARTNERS OWNING THE RIGHTS TO RECEIVE A MAJORITY OF THE

DISTRIBUTIONS AS LIMITED PARTNERS OF EACH DOMESTIC LIMITED

PARTNERSHIP THAT IS A PARTY TO THE PROPOSED TRANSACTION UNDER

THE PLAN AND, IF ANY CLASS OF LIMITED PARTNERS IS ENTITLED TO

VOTE THEREON AS A CLASS, [A MAJORITY OF THE VOTES CAST] THE

AFFIRMATIVE VOTE OR CONSENT OF LIMITED PARTNERS OWNING THE

RIGHTS TO RECEIVE A MAJORITY OF THE DISTRIBUTIONS AS LIMITED

PARTNERS IN EACH CLASS VOTE.

(2) A PROPOSED PLAN [MAY] SHALL NOT BE DEEMED TO HAVE

BEEN ADOPTED BY THE LIMITED PARTNERSHIP UNLESS IT HAS ALSO

BEEN APPROVED BY THE GENERAL PARTNERS, REGARDLESS OF THE FACT

THAT THE GENERAL PARTNERS HAVE DIRECTED OR SUFFERED THE

SUBMISSION OF THE PLAN TO THE LIMITED PARTNERS FOR ACTION.

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* * *

§ 336. EFFECT OF MERGER.

(A) GENERAL RULE.--WHEN A MERGER UNDER THIS SUBCHAPTER

BECOMES EFFECTIVE, ALL OF THE FOLLOWING APPLY:

* * *

(2) [EACH] THE SEPARATE EXISTENCE OF EACH MERGING

ASSOCIATION THAT IS NOT THE SURVIVING ASSOCIATION CEASES [TO

EXIST].

* * *

SECTION 2.1. SECTION 366(H) OF TITLE 15, ADDED OCTOBER 22,

2014 (P.L.2640, NO.172), IS AMENDED AND THE SECTION IS AMENDED

BY ADDING A SUBSECTION TO READ:

§ 366. STATEMENT OF DIVISION; EFFECTIVENESS.

* * *

(H) COORDINATION OF TRANSACTIONS.--A NEW ASSOCIATION MAY BE

A PARTY TO ANOTHER TRANSACTION UNDER THIS CHAPTER THAT TAKES

EFFECT SIMULTANEOUSLY WITH THE DIVISION. THE NEW ASSOCIATION

SHALL BE DEEMED TO EXIST BEFORE THE EFFECTIVENESS OF THE OTHER

TRANSACTION, BUT SOLELY FOR THE PURPOSE OF BEING A PARTY TO THE

OTHER TRANSACTION. THE PLAN RELATING TO THE OTHER TRANSACTION

SHALL BE DEEMED TO HAVE BEEN APPROVED BY THE NEW ASSOCIATION IF

THE PLAN IS APPROVED BY THE DIVIDING ASSOCIATION IN CONNECTION

WITH ITS APPROVAL OF THE PLAN OF DIVISION. THE STATEMENT THAT IS

DELIVERED TO THE DEPARTMENT FOR FILING WITH RESPECT TO THE OTHER

TRANSACTION SHALL STATE THAT IT WAS APPROVED BY THE NEW

ASSOCIATION UNDER THIS SUBSECTION.

[(H)] (I) CROSS REFERENCES.--SEE SECTIONS 134 (RELATING TO

DOCKETING STATEMENT) AND 135 (RELATING TO REQUIREMENTS TO BE MET

BY FILED DOCUMENTS).

SECTION 2.2. SECTIONS 367(A)(2) AND (6) AND 376(F) OF TITLE

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15, ADDED OCTOBER 22, 2014 (P.L.2640, NO.172), ARE AMENDED TO

READ:

§ 367. EFFECT OF DIVISION.

(A) GENERAL RULE.--WHEN A DIVISION BECOMES EFFECTIVE, ALL OF

THE FOLLOWING APPLY:

* * *

(2) IF THE DIVIDING ASSOCIATION IS NOT TO SURVIVE THE

DIVISION, THE SEPARATE EXISTENCE OF THE DIVIDING ASSOCIATION

CEASES [TO EXIST].

* * *

(6) THE LIABILITIES OF THE DIVIDING ASSOCIATION ARE

ALLOCATED BETWEEN OR AMONG THE RESULTING ASSOCIATIONS AS

PROVIDED IN SECTION 368 (RELATING TO ALLOCATION OF

LIABILITIES IN DIVISION)[.] AND THE RESULTING ASSOCIATIONS TO

WHICH LIABILITIES ARE ALLOCATED ARE LIABLE FOR THOSE

LIABILITIES AS SUCCESSORS TO THE DIVIDING ASSOCIATION, AND

NOT BY TRANSFER, WHETHER DIRECTLY, INDIRECTLY OR BY OPERATION

OF LAW.

* * *

§ 376. EFFECT OF DOMESTICATION.

* * *

[(F) SERVICE OF PROCESS.--WHEN A DOMESTICATION BECOMES

EFFECTIVE, A FOREIGN DOMESTICATED ENTITY MAY BE SERVED WITH

PROCESS IN THIS COMMONWEALTH FOR THE COLLECTION AND ENFORCEMENT

OF ANY OF ITS DEBTS, OBLIGATIONS AND OTHER LIABILITIES IN

ACCORDANCE WITH APPLICABLE LAW.]

* * *

SECTION 2.3. SECTION 402 OF TITLE 15 IS AMENDED BY ADDING A

SUBSECTION TO READ:

§ 402. GOVERNING LAW.

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* * *

(G) DEFENSE OF USURY.--A FOREIGN ASSOCIATION SHALL BE

SUBJECT TO SECTION 1510 (RELATING TO CERTAIN SPECIFICALLY

AUTHORIZED DEBT TERMS) WITH RESPECT TO OBLIGATIONS, AS DEFINED

IN THAT SECTION, GOVERNED BY THE LAWS OF THIS COMMONWEALTH OR

AFFECTING REAL PROPERTY SITUATED IN THIS COMMONWEALTH, TO THE

SAME EXTENT AS IF THE FOREIGN ASSOCIATION WERE A DOMESTIC

BUSINESS CORPORATION.

Section 3. Sections 521, 522 and 523(a) AND (B) of Title 15

are amended to read:

§ 521. Pensions and allowances.

A banking institution [or a savings association] may grant

allowances or pensions to officers, directors and employees for

faithful and long-continued services and, after the death of the

officer, director or employee either while in the service of the

corporation or after retirement, pensions or allowances may be

granted or continued to their dependents. The allowances to

dependents shall be reasonable in amount and paid only for a

limited time and, unless part of an employee benefit plan or

employment contract in effect at the time of retirement or death

of the officer, director or employee, shall not exceed in total

the amount of the compensation paid to the officer, director or

employee during the 12 months preceding retirement or death.

§ 522. Indemnification of authorized representatives.

A banking institution [or a savings association] shall be

governed by the provisions of Subchapter D of Chapter 17

(relating to indemnification).

§ 523. Actions by shareholders or members to enforce a

secondary right.

(a) General rule.--In any action brought to enforce a

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secondary right on the part of one or more shareholders or

members against any officer or director or former officer or

director of a banking institution [or a savings association],

because the corporation refuses to enforce rights which may

properly be asserted by it, the plaintiff or plaintiffs must

aver and it must be made to appear that the plaintiff or each

plaintiff was a shareholder or was a member of the corporation

at the time of the transaction of which he complains or that his

stock or membership devolved upon him by operation of law from a

person who was a shareholder or member at that time.

(B) SECURITY FOR COSTS.--IN ANY SUCH ACTION INSTITUTED OR

MAINTAINED BY A HOLDER OR HOLDERS OF LESS THAN 5% OF THE

OUTSTANDING SHARES OF ANY CLASS OF THE CORPORATION OR VOTING

TRUST CERTIFICATES THEREFOR, OR BY A MEMBER OR MEMBERS OF A

CORPORATION ORGANIZED WITHOUT CAPITAL STOCK WHICH HAS

OUTSTANDING CONTRACTS OR ACCOUNTS WITH ITS MEMBERS IF THE VALUE

OF THE CONTRACTS OR ACCOUNTS HELD OR OWNED BY THE MEMBER OR

MEMBERS INSTITUTING OR MAINTAINING THE SUIT IS LESS THAN 5% OF

THE VALUE OF ALL THE CONTRACTS OR ACCOUNTS OUTSTANDING, THE

CORPORATION IN WHOSE RIGHT THE ACTION IS BROUGHT SHALL BE

ENTITLED, AT ANY STAGE OF THE PROCEEDINGS, TO REQUIRE THE

PLAINTIFF OR PLAINTIFFS TO GIVE SECURITY FOR THE REASONABLE

EXPENSES, INCLUDING ATTORNEYS' FEES, WHICH MAY BE INCURRED BY

[IT] THE CORPORATION IN CONNECTION THEREWITH [AND] OR FOR WHICH

IT MAY BECOME LIABLE PURSUANT TO SECTION 522 (RELATING TO

INDEMNIFICATION OF AUTHORIZED REPRESENTATIVES) (BUT ONLY INSOFAR

AS RELATES TO MANDATORY INDEMNIFICATION IN ACTIONS BY OR IN THE

RIGHT OF THE CORPORATION) TO WHICH SECURITY THE CORPORATION

SHALL HAVE RECOURSE IN SUCH AMOUNT AS THE COURT HAVING

JURISDICTION SHALL DETERMINE UPON THE TERMINATION OF THE ACTION.

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THE AMOUNT OF THE SECURITY MAY, FROM TIME TO TIME, BE INCREASED

OR DECREASED IN THE DISCRETION OF THE COURT HAVING JURISDICTION

OF THE ACTION UPON SHOWING THAT THE SECURITY PROVIDED HAS OR

[MAY] IS LIKELY TO BECOME INADEQUATE OR EXCESSIVE. THE SECURITY

MAY BE DENIED OR LIMITED BY THE COURT IF THE COURT FINDS AFTER

AN EVIDENTIARY HEARING THAT UNDUE HARDSHIP ON PLAINTIFFS AND

SERIOUS INJUSTICE WOULD RESULT.

* * *

Section 4. Section 1551(b) of Title 15 is amended and the

section is amended by adding a subsection to read:

§ 1551. Distributions to shareholders.

* * *

(b) Limitation.--A distribution, including a distribution

under Subchapter F (relating to voluntary dissolution and

winding up) or H (relating to postdissolution provision for

liabilities) of Chapter 19, may not be made if, after giving

effect thereto:

(1) the corporation would be unable to pay its debts as

they become due in the usual course of its business; or

(2) the total assets of the corporation would be less

than the sum of its total liabilities plus (unless otherwise

provided in the articles) the amount that would be needed, if

the corporation were to be dissolved at the time as of which

the distribution is measured, to satisfy the preferential

rights upon dissolution of shareholders whose preferential

rights are superior to those receiving the distribution.

* * *

(d.1) Distribution in winding up.--In measuring the effect

of a distribution under Subchapter F or H of Chapter 19, the

liabilities of a dissolved corporation do not include any

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liabilities for which adequate provision has been made or any

claim that has been barred under those subchapters.

* * *

Section 5. Sections 1781 and 1782 heading AND (C) of Title

15 are amended to read:

§ 1781. [(Reserved).] Derivative action.

(a) General rule.--Subject to section 1782 (relating to

eligible derivative SHAREHOLDER plaintiffs and security for

costs) and subsection (b), a shareholder PLAINTIFF may maintain

a derivative action to enforce a right of a business corporation

only if:

(1) the shareholder PLAINTIFF first makes a demand on

THE CORPORATION OR the board of directors requesting that it

cause the corporation to bring an action to enforce the

right, unless demand is excused under subsection (b); and

(2) both:

(i) a special litigation committee is not appointed

under section 1783 (relating to special litigation

committee); and

(ii) the board does not bring the action within a

reasonable time. AND:

(I) IF A SPECIAL LITIGATION COMMITTEE IS NOT

APPOINTED UNDER SECTION 1783 (RELATING TO SPECIAL

LITIGATION COMMITTEE), THE CORPORATION DOES NOT BRING THE

ACTION WITHIN A REASONABLE TIME; OR

(II) IF A SPECIAL LITIGATION COMMITTEE IS APPOINTED

UNDER SECTION 1783, A DETERMINATION IS MADE:

(A) UNDER SECTION 1783(E)(1) THAT THE

CORPORATION NOT OBJECT TO THE ACTION; OR

(B) UNDER SECTION 1783(E)(5)(I) THAT THE

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PLAINTIFF CONTINUE THE ACTION;

(2) DEMAND IS EXCUSED UNDER SUBSECTION (B);

(3) THE ACTION IS MAINTAINED FOR THE LIMITED PURPOSE OF

SEEKING COURT REVIEW UNDER SECTION 1783(F); OR

(4) THE COURT HAS ALLOWED THE ACTION TO CONTINUE UNDER

THE CONTROL OF THE PLAINTIFF UNDER SECTION 1783(F)(3)(II).

(b) Prior demand excused.--

(1) A demand under subsection (a)(1) is excused only if

the shareholder PLAINTIFF makes a specific showing that

IMMEDIATE AND irreparable harm to the business corporation

would otherwise result.

(2) If demand is excused under paragraph (1), demand

shall be made promptly after UPON commencement of the action.

(c) Contents of demand.--A demand under this section shall

MUST BE IN RECORD FORM AND give notice with reasonable

specificity of the essential facts relied upon to support each

of the claims made in the demand.

(d) Additional claims.--If a derivative action is commenced

after a demand has been made under this section and includes a

claim that was not fairly subsumed under the demand, a new

demand must be made with respect to that claim. THE NEW DEMAND

SHALL NOT RELATE BACK TO THE DATE OF THE ORIGINAL DEMAND FOR

PURPOSES OF SUBSECTION (E).

(e) Statute of limitations.--The making of a demand tolls

any applicable statute of limitations with respect to a claim

asserted in the demand until the later EARLIER of the date:

(1) the shareholder PLAINTIFF making the demand is

notified either:

(i) that the board of directors has decided not to

bring an action and not to appoint a special litigation

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committee; or

(ii) of the determination under section 1783(e) of a

special litigation committee that has been appointed as

provided in section 1783; or

(II) OF A DETERMINATION UNDER SECTION 1783(E) AFTER

THE APPOINTMENT OF A SPECIAL LITIGATION COMMITTEE UNDER

SECTION 1783; OR

(2) the court determines under section 1783(f) either

to:

(i) enforce the determination of the special

litigation committee; or

(ii) allow the action to continue under the control

of the plaintiff. PLAINTIFF COMMENCES AN ACTION ASSERTING

THE CLAIM.

(f) Certain provisions of articles ineffective.--This

section may not be relaxed by any provision of the articles.

§ 1782. [Actions against directors and officers] Eligible

derivative SHAREHOLDER plaintiffs and security for

costs.

* * *

(C) SECURITY FOR COSTS.--IN ANY ACTION OR PROCEEDING

INSTITUTED OR MAINTAINED BY HOLDERS OR OWNERS OF LESS THAN 5% OF

THE OUTSTANDING SHARES OF ANY CLASS OF THE CORPORATION, UNLESS

THE SHARES HELD OR OWNED BY THE HOLDERS OR OWNERS HAVE AN

AGGREGATE FAIR MARKET VALUE IN EXCESS OF $200,000, THE

CORPORATION IN WHOSE RIGHT THE ACTION OR PROCEEDING IS BROUGHT

SHALL BE ENTITLED AT ANY STAGE OF THE PROCEEDINGS TO REQUIRE THE

PLAINTIFFS TO GIVE SECURITY FOR THE REASONABLE EXPENSES,

INCLUDING ATTORNEYS' FEES, THAT MAY BE INCURRED BY [IT] THE

CORPORATION IN CONNECTION THEREWITH OR FOR WHICH IT MAY BECOME

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LIABLE PURSUANT TO SECTION 1743 (RELATING TO MANDATORY

INDEMNIFICATION) (BUT ONLY INSOFAR AS RELATES TO ACTIONS BY OR

IN THE RIGHT OF THE CORPORATION) TO WHICH SECURITY THE

CORPORATION SHALL HAVE RECOURSE IN SUCH AMOUNT AS THE COURT

DETERMINES UPON THE TERMINATION OF THE ACTION OR PROCEEDING. THE

AMOUNT OF SECURITY MAY, FROM TIME TO TIME, BE INCREASED OR

DECREASED IN THE DISCRETION OF THE COURT UPON SHOWING THAT THE

SECURITY PROVIDED HAS OR [MAY] IS LIKELY TO BECOME INADEQUATE OR

EXCESSIVE. THE SECURITY MAY BE DENIED OR LIMITED [IN THE

DISCRETION OF] BY THE COURT [UPON PRELIMINARY SHOWING TO THE

COURT, BY APPLICATION AND UPON SUCH VERIFIED STATEMENTS AND

DEPOSITIONS AS MAY BE REQUIRED BY THE COURT, ESTABLISHING PRIMA

FACIE THAT THE REQUIREMENT OF FULL OR PARTIAL SECURITY WOULD

IMPOSE] IF THE COURT FINDS AFTER AN EVIDENTIARY HEARING THAT

UNDUE HARDSHIP ON PLAINTIFFS AND SERIOUS INJUSTICE WOULD RESULT.

* * *

Section 6. Title 15 is amended by adding sections to read:

§ 1783. Special litigation committee.

(a) General rule.--If a business corporation receives a

demand to bring an action to enforce a right of the corporation,

or if a derivative action is commenced before demand has been

made on the corporation, the corporation may appoint a special

litigation committee to investigate the claims asserted in the

demand or action and to determine on the basis of that

investigation whether pursuing any of the claims asserted is in

the best interests of the corporation. A committee may not be

appointed under this section if every shareholder of the

corporation is also a director of the corporation.

(b) Discovery stay.--If the corporation appoints a special

litigation committee and an action is commenced before the

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committee has made a determination under subsection (e):

(1) On motion by the committee made in the name of the

corporation, except for good cause shown, the court shall

stay discovery for the time reasonably necessary to permit

the committee to complete its investigation.

(2) The time for the defendants to plead shall be tolled

until the process provided for under subsection (f) has been

completed.

(c) Composition of committee.--A special litigation

committee shall be composed of two or more individuals who:

(1) are not interested in the action;

(2) are capable as a group of objective judgment in the

circumstances; and

(3) may, but need not, be shareholders or directors.

(d) Appointment of committee.--A special litigation

committee may be appointed:

(1) by a majority of the directors not named as actual

or potential parties in the demand or action; or

(2) if all the directors are named as actual or

potential parties in the demand or action, by a majority of

the directors so named.

(e) Determination by committee.--After appropriate

investigation, a special litigation committee may determine that

it is in the best interests of the business corporation that:

(1) an action based on some or all the claims asserted

in the demand not be brought by the corporation but that the

corporation not object to an action being brought by the

party that made the demand;

(2) an action based on some or all of the claims

asserted in the demand be brought by the corporation;

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(3) some or all of the claims asserted in the demand be

settled on terms approved by the committee;

(4) an action not be brought based on any of the claims

asserted in the demand;

(5) an action already commenced continue under the

control of:

(i) the plaintiff; or

(ii) the committee;

(6) some or all of the claims asserted in an action

already commenced be settled on terms approved by the

committee; or

(7) an action already commenced be dismissed.

(f) Court review and action.--If a special litigation

committee is appointed and an action is commenced before the

committee makes a determination under subsection (e):

(1) The business corporation shall file with the court

after the committee makes a determination under subsection

(e) a statement of the committee's determination and a report

supporting the determination. The corporation shall serve

each party with a copy of the determination and report. If

the corporation moves to file the report under seal, the

report shall be served on the parties subject to an

appropriate protective order agreed to by the parties or

ordered by the court.

(2) The corporation shall file with the court a motion,

pleading or notice consistent with the determination of the

committee under subsection (e).

(3) If the committee makes a determination described in

subsection (e)(2), (3), (4), (5)(ii), (6) or (7), the court

shall determine whether the members of the committee met the

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qualifications required under subsection (c)(1) and (2) and

whether the committee conducted its investigation and made

its recommendation in good faith, independently and with

reasonable care. If the court finds that the members of the

committee met the qualifications required under subsection

(c)(1) and (2) and that the committee acted in good faith,

independently and with reasonable care, the court shall

enforce the determination of the committee. Otherwise, the

court shall:

(i) dissolve any stay of discovery entered under

subsection (b);

(ii) allow the action to continue under the control

of the plaintiff; and

(iii) permit the defendants to file preliminary

objections and other appropriate motions and pleadings.

(g) Certain provisions of articles ineffective.--The

provisions of this section may not be varied by the articles.

§ 1783. SPECIAL LITIGATION COMMITTEE.

(A) GENERAL RULE.--IF A BUSINESS CORPORATION OR THE BOARD OF

DIRECTORS RECEIVES A DEMAND TO BRING AN ACTION TO ENFORCE A

RIGHT OF THE CORPORATION, OR IF A DERIVATIVE ACTION IS COMMENCED

BEFORE DEMAND HAS BEEN MADE ON THE CORPORATION OR THE BOARD, THE

BOARD MAY APPOINT A SPECIAL LITIGATION COMMITTEE TO INVESTIGATE

THE CLAIMS ASSERTED IN THE DEMAND OR ACTION AND TO DETERMINE ON

BEHALF OF THE CORPORATION OR RECOMMEND TO THE BOARD WHETHER

PURSUING ANY OF THE CLAIMS ASSERTED IS IN THE BEST INTERESTS OF

THE CORPORATION. THE CORPORATION SHALL SEND A NOTICE IN RECORD

FORM TO THE PLAINTIFF PROMPTLY AFTER THE APPOINTMENT OF A

COMMITTEE UNDER THIS SECTION NOTIFYING THE PLAINTIFF THAT A

COMMITTEE HAS BEEN APPOINTED AND IDENTIFYING BY NAME THE MEMBERS

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OF THE COMMITTEE. A COMMITTEE MAY NOT BE APPOINTED UNDER THIS

SECTION IF EVERY SHAREHOLDER OF THE CORPORATION IS ALSO A

DIRECTOR OF THE CORPORATION.

(B) DISCOVERY STAY.--IF THE BOARD OF DIRECTORS APPOINTS A

SPECIAL LITIGATION COMMITTEE AND AN ACTION IS COMMENCED BEFORE A

DETERMINATION HAS BEEN MADE UNDER SUBSECTION (E):

(1) ON MOTION BY THE COMMITTEE MADE IN THE NAME OF THE

BUSINESS CORPORATION, THE COURT SHALL STAY DISCOVERY FOR THE

TIME REASONABLY NECESSARY TO PERMIT THE COMMITTEE TO COMPLETE

ITS INVESTIGATION, EXCEPT FOR GOOD CAUSE SHOWN.

(2) THE TIME FOR THE DEFENDANTS TO PLEAD SHALL BE TOLLED

UNTIL THE PROCESS PROVIDED FOR UNDER SUBSECTION (F) HAS BEEN

COMPLETED.

(C) COMPOSITION OF COMMITTEE.--A SPECIAL LITIGATION

COMMITTEE SHALL BE COMPOSED OF TWO OR MORE INDIVIDUALS WHO:

(1) ARE NOT INTERESTED IN THE CLAIMS ASSERTED IN THE

DEMAND OR ACTION;

(2) ARE CAPABLE AS A GROUP OF OBJECTIVE JUDGMENT IN THE

CIRCUMSTANCES; AND

(3) MAY, BUT NEED NOT, BE SHAREHOLDERS OR DIRECTORS.

(D) APPOINTMENT OF COMMITTEE.--A SPECIAL LITIGATION

COMMITTEE MAY BE APPOINTED:

(1) BY A MAJORITY OF THE DIRECTORS NOT NAMED AS ACTUAL

OR POTENTIAL PARTIES IN THE DEMAND OR ACTION; OR

(2) IF ALL THE DIRECTORS ARE NAMED AS ACTUAL OR

POTENTIAL PARTIES IN THE DEMAND OR ACTION, BY A MAJORITY OF

THE DIRECTORS SO NAMED.

(E) DETERMINATION.--AFTER APPROPRIATE INVESTIGATION BY A

SPECIAL LITIGATION COMMITTEE, THE COMMITTEE OR THE BOARD OF

DIRECTORS MAY DETERMINE THAT IT IS IN THE BEST INTERESTS OF THE

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BUSINESS CORPORATION THAT:

(1) AN ACTION BASED ON SOME OR ALL OF THE CLAIMS

ASSERTED IN THE DEMAND NOT BE BROUGHT BY THE CORPORATION BUT

THAT THE CORPORATION NOT OBJECT TO AN ACTION BEING BROUGHT BY

THE PARTY THAT MADE THE DEMAND;

(2) AN ACTION BASED ON SOME OR ALL OF THE CLAIMS

ASSERTED IN THE DEMAND BE BROUGHT BY THE CORPORATION;

(3) SOME OR ALL OF THE CLAIMS ASSERTED IN THE DEMAND BE

SETTLED ON TERMS APPROVED BY THE COMMITTEE;

(4) AN ACTION NOT BE BROUGHT BASED ON ANY OF THE CLAIMS

ASSERTED IN THE DEMAND;

(5) AN ACTION ALREADY COMMENCED CONTINUE UNDER THE

CONTROL OF:

(I) THE PLAINTIFF;

(II) THE CORPORATION; OR

(III) THE COMMITTEE;

(6) SOME OR ALL THE CLAIMS ASSERTED IN AN ACTION ALREADY

COMMENCED BE SETTLED ON TERMS APPROVED BY THE COMMITTEE; OR

(7) AN ACTION ALREADY COMMENCED BE DISMISSED.

(F) COURT REVIEW AND ACTION.--IF A SPECIAL LITIGATION

COMMITTEE IS APPOINTED AND A DERIVATIVE ACTION IS COMMENCED

EITHER BEFORE OR AFTER A DETERMINATION IS MADE UNDER SUBSECTION

(E):

(1) THE BUSINESS CORPORATION SHALL FILE WITH THE COURT

AFTER A DETERMINATION IS MADE UNDER SUBSECTION (E) A

STATEMENT OF THE DETERMINATION AND A REPORT OF THE COMMITTEE

SUPPORTING THE DETERMINATION. THE CORPORATION SHALL SERVE

EACH PARTY WITH A COPY OF THE DETERMINATION AND REPORT. IF

THE CORPORATION MOVES TO FILE THE REPORT UNDER SEAL, THE

REPORT SHALL BE SERVED ON THE PARTIES SUBJECT TO AN

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APPROPRIATE STIPULATION AGREED TO BY THE PARTIES OR A

PROTECTIVE ORDER ISSUED BY THE COURT.

(2) THE CORPORATION SHALL FILE WITH THE COURT A MOTION,

PLEADING OR NOTICE CONSISTENT WITH THE DETERMINATION UNDER

SUBSECTION (E).

(3) IF THE DETERMINATION IS ONE DESCRIBED IN SUBSECTION

(E)(2), (3), (4), (5)(II), (6) OR (7), THE COURT SHALL

DETERMINE WHETHER THE MEMBERS OF THE COMMITTEE MET THE

QUALIFICATIONS REQUIRED UNDER SUBSECTION (C)(1) AND (2) AND

WHETHER THE COMMITTEE CONDUCTED ITS INVESTIGATION AND MADE

ITS RECOMMENDATION IN GOOD FAITH, INDEPENDENTLY AND WITH

REASONABLE CARE. IF THE COURT FINDS THAT THE MEMBERS OF THE

COMMITTEE MET THE QUALIFICATIONS REQUIRED UNDER SUBSECTION

(C)(1) AND (2) AND THAT THE COMMITTEE ACTED IN GOOD FAITH,

INDEPENDENTLY AND WITH REASONABLE CARE, THE COURT SHALL

ENFORCE THE DETERMINATION OF THE COMMITTEE. OTHERWISE, THE

COURT SHALL:

(I) DISSOLVE ANY STAY OF DISCOVERY ENTERED UNDER

SUBSECTION (B);

(II) ALLOW THE ACTION TO CONTINUE UNDER THE CONTROL

OF THE PLAINTIFF; AND

(III) PERMIT THE DEFENDANTS TO FILE PRELIMINARY

OBJECTIONS, OTHER APPROPRIATE PLEADINGS AND MOTIONS.

(G) CERTAIN PROVISIONS OF ARTICLES INEFFECTIVE.--THE

PROVISIONS OF THIS SECTION MAY NOT BE VARIED BY THE ARTICLES.

§ 1784. Proceeds and expenses.

(a) Proceeds.--Except as provided in subsection (b):

(1) any proceeds or other benefits of a derivative

action, whether by judgment, compromise or settlement, belong

to the business corporation and not to the plaintiff; and

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(2) if the plaintiff OR ITS COUNSEL receives any

proceeds, the plaintiff shall remit them PROCEEDS SHALL BE

REMITTED immediately to the corporation.

(b) Expenses.--If a derivative action is successful in whole

or in part, the court may award the plaintiff reasonable

expenses, including reasonable attorney fees and costs, from the

recovery of the business corporation . , BUT IN NO EVENT SHALL THE

ATTORNEY FEES AWARDED EXCEED A REASONABLE PROPORTION OF THE

VALUE OF THE RELIEF, INCLUDING NONPECUNIARY RELIEF, OBTAINED BY

THE PLAINTIFF FOR THE CORPORATION.

(c) Certain provisions of articles ineffective.--This

section may not be relaxed by any provision of the articles.

Section 7. Section 1907 4146 of Title 15 is amended to read:

§ 1907. Purpose of fundamental transactions.

A transaction under Chapter 3 (relating to entity

transactions) or this chapter does not require an independent

business purpose in order for the transaction to be lawful.

§ 4146. PROVISIONS APPLICABLE TO ALL FOREIGN CORPORATIONS.

THE FOLLOWING PROVISIONS OF THIS SUBPART SHALL, EXCEPT AS

OTHERWISE PROVIDED IN THIS SECTION, BE APPLICABLE TO EVERY

FOREIGN CORPORATION FOR PROFIT, WHETHER OR NOT REQUIRED TO

[PROCURE A CERTIFICATE OF AUTHORITY UNDER THIS CHAPTER] REGISTER

UNDER CHAPTER 4 (RELATING TO FOREIGN ASSOCIATIONS):

SECTION 1503 (RELATING TO DEFENSE OF ULTRA VIRES), AS TO

CONTRACTS AND CONVEYANCES GOVERNED BY THE LAWS OF THIS

COMMONWEALTH AND CONVEYANCES AFFECTING REAL PROPERTY SITUATED IN

THIS COMMONWEALTH.

SECTION 1506 (RELATING TO FORM OF EXECUTION OF INSTRUMENTS),

AS TO INSTRUMENTS OR OTHER DOCUMENTS GOVERNED BY THE LAWS OF

THIS COMMONWEALTH OR AFFECTING REAL PROPERTY SITUATED IN THIS

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COMMONWEALTH.

SECTION 1510 (RELATING TO CERTAIN SPECIFICALLY AUTHORIZED

DEBT TERMS), AS TO OBLIGATIONS (AS DEFINED IN THE SECTION)

GOVERNED BY THE LAWS OF THIS COMMONWEALTH OR AFFECTING REAL

PROPERTY SITUATED IN THIS COMMONWEALTH.

SECTION 1782 (RELATING TO [ACTIONS AGAINST DIRECTORS AND

OFFICERS] ELIGIBLE SHAREHOLDER PLAINTIFFS AND SECURITY FOR

COSTS), AS TO ANY DERIVATIVE ACTION [OR PROCEEDING] BROUGHT IN A

COURT OF THIS COMMONWEALTH.

SUBCHAPTER F OF CHAPTER 25 (RELATING TO BUSINESS

COMBINATIONS), TO THE EXTENT PROVIDED IN SECTION 2551(C)

(RELATING TO CONTINUING APPLICABILITY).

Section 8. The definition of "charitable purposes" in

section 5103(a) of Title 15 is amended to read:

§ 5103. Definitions.

(a) General definitions.--Subject to additional definitions

contained in subsequent provisions of this subpart that are

applicable to specific provisions of this subpart, the following

words and phrases when used in this subpart shall have the

meanings given to them in this section unless the context

clearly indicates otherwise:

* * *

["Charitable purposes." The relief of poverty, the

advancement and provision of education, including postsecondary

education, the advancement of religion, the prevention and

treatment of disease or injury, including mental retardation and

mental disorders, governmental or municipal purposes, and any

other purpose the accomplishment of which is recognized as

important and beneficial to the public.]

* * *

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Section 9. Title 15 is amended by adding a section to read:

§ 5781. Derivative action.

(a) General rule.--Subject to section 5782 (relating to

eligible derivative MEMBER plaintiffs and security for costs)

and subsection (b), a member PLAINTIFF may maintain a derivative

action to enforce a right of a nonprofit corporation only if:

(1) the member PLAINTIFF first makes a demand on THE

CORPORATION OR the board of directors, requesting that it

cause the corporation to bring an action to enforce the

right, unless demand is excused under subsection (b); and

(2) both:

(i) a special litigation committee is not appointed

under section 5783 (relating to special litigation

committee); and

(ii) the board does not bring the action within a

reasonable time. AND:

(I) IF A SPECIAL LITIGATION COMMITTEE IS NOT

APPOINTED UNDER SECTION 5783 (RELATING TO SPECIAL

LITIGATION COMMITTEE), THE CORPORATION DOES NOT BRING THE

ACTION WITHIN A REASONABLE TIME; OR

(II) IF A SPECIAL LITIGATION COMMITTEE IS APPOINTED

UNDER SECTION 5783, A DETERMINATION IS MADE:

(A) UNDER SECTION 5783(E)(1) THAT THE

CORPORATION NOT OBJECT TO THE ACTION; OR

(B) UNDER SECTION 5783(E)(5)(I) THAT THE

PLAINTIFF CONTINUE THE ACTION;

(2) DEMAND IS EXCUSED UNDER SUBSECTION (B);

(3) THE ACTION IS MAINTAINED FOR THE LIMITED PURPOSE OF

SEEKING COURT REVIEW UNDER SECTION 5783(F); OR

(4) THE COURT HAS ALLOWED THE ACTION TO CONTINUE UNDER

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THE CONTROL OF THE PLAINTIFF UNDER SECTION 5783(F)(3)(II).

(b) Prior demand excused.--

(1) A demand under subsection (a)(1) is excused only if

the member makes a specific showing that IMMEDIATE AND

irreparable harm to the business NONPROFIT corporation would

otherwise result.

(2) If demand is excused under paragraph (1), demand

shall be made promptly after commencement of the action.

(c) Contents of demand.--A demand under this section shall

MUST BE IN RECORD FORM AND give notice with reasonable

specificity of the essential facts relied upon to support each

of the claims made in the demand.

(d) Additional claims.--If a derivative action is commenced

after a demand has been made under this section and includes a

claim that was not fairly subsumed under the demand, a new

demand must be made with respect to that claim. THE NEW DEMAND

SHALL NOT RELATE BACK TO THE DATE OF THE ORIGINAL DEMAND FOR

PURPOSES OF SUBSECTION (E).

(e) Statute of limitations.--The making of a demand tolls

any applicable statute of limitations with respect to a claim

asserted in the demand until the later EARLIER of the date:

(1) the member PLAINTIFF making the demand is notified

either:

(i) that the board of directors has decided not to

bring an action and not to appoint a special litigation

committee; or

(ii) of the determination under section 5783(e)

(relating to special litigation committee) of a special

litigation committee that has been appointed as provided

in section 5783; or

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(2) the court determines under section 5783(f) either

to:

(i) enforce the determination of the special

litigation committee; or

(ii) allow the action to continue under the control

of the plaintiff.

(II) OF A DETERMINATION UNDER SECTION 5783(E) AFTER

THE APPOINTMENT OF A SPECIAL LITIGATION COMMITTEE UNDER

SECTION 5783; OR

(2) THE PLAINTIFF COMMENCES AN ACTION ASSERTING THE

CLAIM.

Section 10. Section 5782 heading AND (C) of Title 15 is ARE

amended to read:

§ 5782. [Actions against directors, members of an other body

and officers] Eligible derivative MEMBER plaintiffs

and security for costs .

* * *

(C) SECURITY FOR COSTS.--IN ANY ACTION OR PROCEEDING

INSTITUTED OR MAINTAINED BY LESS THAN THE SMALLER OF 50 MEMBERS

OF ANY CLASS OR 5% OF THE MEMBERS OF ANY CLASS OF THE

CORPORATION, THE CORPORATION IN WHOSE RIGHT THE ACTION OR

PROCEEDING IS BROUGHT SHALL BE ENTITLED AT ANY STAGE OF THE

PROCEEDINGS TO REQUIRE THE PLAINTIFFS TO GIVE SECURITY FOR THE

REASONABLE EXPENSES, INCLUDING ATTORNEY FEES, THAT MAY BE

INCURRED BY [IT] THE CORPORATION IN CONNECTION THEREWITH OR FOR

WHICH IT MAY BECOME LIABLE PURSUANT TO SECTION 5743 (RELATING TO

MANDATORY INDEMNIFICATION), BUT ONLY INSOFAR AS RELATES TO

ACTIONS BY OR IN THE RIGHT OF THE CORPORATION, TO WHICH SECURITY

THE CORPORATION SHALL HAVE RECOURSE IN SUCH AMOUNT AS THE COURT

DETERMINES UPON THE TERMINATION OF THE ACTION OR PROCEEDING. THE

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AMOUNT OF SECURITY MAY FROM TIME TO TIME BE INCREASED OR

DECREASED IN THE DISCRETION OF THE COURT UPON SHOWING THAT THE

SECURITY PROVIDED HAS OR [MAY] IS LIKELY TO BECOME INADEQUATE OR

EXCESSIVE. THE SECURITY MAY BE DENIED OR LIMITED [IN THE

DISCRETION OF] BY THE COURT [UPON PRELIMINARY SHOWING TO THE

COURT, BY APPLICATION AND UPON SUCH VERIFIED STATEMENTS AND

DEPOSITIONS AS MAY BE REQUIRED BY THE COURT, ESTABLISHING PRIMA

FACIE THAT THE REQUIREMENT OF FULL OR PARTIAL SECURITY WOULD

IMPOSE] IF THE COURT FINDS AFTER AN EVIDENTIARY HEARING THAT

UNDUE HARDSHIP ON PLAINTIFFS AND SERIOUS INJUSTICE WOULD RESULT.

* * *

Section 11. Title 15 is amended by adding sections to read:

§ 5783. Special litigation committee.

(a) General rule.--If a nonprofit corporation receives a

demand to bring an action to enforce a right of the corporation,

or if a derivative action is commenced before demand has been

made on the corporation, the corporation may appoint a special

litigation committee to investigate the claims asserted in the

demand or action and to determine on the basis of that

investigation whether pursuing any of the claims asserted is in

the best interests of the corporation.

(b) Discovery stay.--If the corporation appoints a special

litigation committee and an action is commenced before the

committee has made a determination under subsection (e):

(1) On motion by the committee made in the name of the

corporation, except for good cause shown, the court shall

stay discovery for the time reasonably necessary to permit

the committee to complete its investigation.

(2) The time for the defendants to plead shall be tolled

until the process provided for under subsection (f) has been

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completed.

(c) Composition of committee.--A special litigation

committee shall be composed of two or more individuals who:

(1) are not interested in the action;

(2) are capable as a group of objective judgment in the

circumstances; and

(3) may, but need not, be members, directors or members

of an other body.

(d) Appointment of committee.--A special litigation

committee may be appointed:

(1) by a majority of the directors not named as actual

or potential parties in the demand or action; or

(2) if all the directors are named as actual or

potential parties in the demand or action, by a majority of:

(i) the members of an other body not named as

parties in the proceeding if the other body has the

authority to appoint a special litigation committee; or

(ii) the directors so named.

(e) Determination by committee.--After appropriate

investigation, a special litigation committee may determine that

it is in the best interests of the nonprofit corporation that:

(1) an action based on some or all of the claims

asserted in the demand not be brought by the corporation but

that the corporation not object to an action being brought by

the party that made the demand:

(2) an action based on some or all of the claims

asserted in the demand be brought by the corporation;

(3) some or all of the claims asserted in the demand be

settled on terms approved by the committee;

(4) an action not be brought based on any of the claims

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asserted in the demand;

(5) an action already commenced continue under the

control of:

(i) the plaintiff; or

(ii) the committee;

(6) some or all of the claims asserted in an action

already commenced be settled on terms approved by the

committee; or

(7) an action already commenced be dismissed.

(f) Court review and action.--If a special litigation

committee is appointed and an action is commenced before the

committee makes a determination under subsection (e):

(1) The nonprofit corporation shall file with the court

after the committee makes a determination under subsection

(e) a statement of the committee's determination and a report

supporting the determination. The corporation shall serve

each party with a copy of the determination and report. If

the corporation moves to file the report under seal, the

report shall be served on the parties subject to an

appropriate protective order agreed to by the parties or

ordered by the court.

(2) The corporation shall file with the court a motion,

pleading or notice consistent with the determination of the

committee under subsection (e).

(3) If the committee makes a determination described in

subsection (e)(2), (3), (4), (5)(ii), (6) or (7), the court

shall determine whether the members of the committee met the

qualifications required under subsection (c)(1) and (2) and

whether the committee conducted its investigation and made

its recommendation in good faith, independently and with

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reasonable care. If the court finds that the members of the

committee met the qualifications required under subsection

(c)(1) and (2) and that the committee acted in good faith,

independently and with reasonable care, the court shall

enforce the determination of the committee. Otherwise, the

court shall:

(i) dissolve any stay of discovery entered under

subsection (b);

(ii) allow the action to continue under the control

of the plaintiff; and

(iii) permit the defendants to file preliminary

objections and other appropriate motions and pleadings.

(A) GENERAL RULE.--IF A NONPROFIT CORPORATION OR THE BOARD

OF DIRECTORS RECEIVES A DEMAND TO BRING AN ACTION TO ENFORCE A

RIGHT OF THE CORPORATION, OR IF A DERIVATIVE ACTION IS COMMENCED

BEFORE DEMAND HAS BEEN MADE ON THE CORPORATION OR THE BOARD, THE

BOARD MAY APPOINT A SPECIAL LITIGATION COMMITTEE TO INVESTIGATE

THE CLAIMS ASSERTED IN THE DEMAND OR ACTION AND TO DETERMINE ON

BEHALF OF THE CORPORATION OR RECOMMEND TO THE BOARD WHETHER

PURSUING ANY OF THE CLAIMS ASSERTED IS IN THE BEST INTERESTS OF

THE CORPORATION. THE CORPORATION SHALL SEND A NOTICE IN RECORD

FORM TO THE PLAINTIFF PROMPTLY AFTER THE APPOINTMENT OF A

COMMITTEE UNDER THIS SECTION NOTIFYING THE PLAINTIFF THAT A

COMMITTEE HAS BEEN APPOINTED AND IDENTIFYING BY NAME THE MEMBERS

OF THE COMMITTEE.

(B) DISCOVERY STAY.--IF THE BOARD OF DIRECTORS APPOINTS A

SPECIAL LITIGATION COMMITTEE AND AN ACTION IS COMMENCED BEFORE A

DETERMINATION HAS BEEN MADE UNDER SUBSECTION (E):

(1) ON MOTION BY THE COMMITTEE MADE IN THE NAME OF THE

NONPROFIT CORPORATION, THE COURT SHALL STAY DISCOVERY FOR THE

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TIME REASONABLY NECESSARY TO PERMIT THE COMMITTEE TO COMPLETE

ITS INVESTIGATION, EXCEPT FOR GOOD CAUSE SHOWN.

(2) THE TIME FOR THE DEFENDANTS TO PLEAD SHALL BE TOLLED

UNTIL THE PROCESS PROVIDED FOR UNDER SUBSECTION (F) HAS BEEN

COMPLETED.

(C) COMPOSITION OF COMMITTEE.--A SPECIAL LITIGATION

COMMITTEE SHALL BE COMPOSED OF TWO OR MORE INDIVIDUALS WHO:

(1) ARE NOT INTERESTED IN THE CLAIMS ASSERTED IN THE

DEMAND OR ACTION;

(2) ARE CAPABLE AS A GROUP OF OBJECTIVE JUDGMENT IN THE

CIRCUMSTANCES; AND

(3) MAY, BUT NEED NOT, BE MEMBERS, DIRECTORS OR MEMBERS

OF ANOTHER BODY.

(D) APPOINTMENT OF COMMITTEE.--A SPECIAL LITIGATION

COMMITTEE MAY BE APPOINTED:

(1) BY A MAJORITY OF THE DIRECTORS NOT NAMED AS ACTUAL

OR POTENTIAL PARTIES IN THE DEMAND OR ACTION; OR

(2) IF ALL THE DIRECTORS ARE NAMED AS ACTUAL OR

POTENTIAL PARTIES IN THE DEMAND OR ACTION, BY A MAJORITY OF:

(I) THE MEMBERS OF ANOTHER BODY NOT NAMED AS PARTIES

IN THE PROCEEDING IF THE OTHER BODY HAS THE AUTHORITY TO

APPOINT A SPECIAL LITIGATION COMMITTEE; OR

(II) THE DIRECTORS SO NAMED.

(E) DETERMINATION.--AFTER APPROPRIATE INVESTIGATION BY A

SPECIAL LITIGATION COMMITTEE, THE COMMITTEE OR THE BOARD OF

DIRECTORS MAY DETERMINE THAT IT IS IN THE BEST INTERESTS OF THE

NONPROFIT CORPORATION THAT:

(1) AN ACTION BASED ON SOME OR ALL OF THE CLAIMS

ASSERTED IN THE DEMAND NOT BE BROUGHT BY THE CORPORATION BUT

THAT THE CORPORATION NOT OBJECT TO AN ACTION BEING BROUGHT BY

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THE PARTY THAT MADE THE DEMAND;

(2) AN ACTION BASED ON SOME OR ALL OF THE CLAIMS

ASSERTED IN THE DEMAND BE BROUGHT BY THE CORPORATION;

(3) SOME OR ALL OF THE CLAIMS ASSERTED IN THE DEMAND BE

SETTLED ON TERMS APPROVED BY THE COMMITTEE;

(4) AN ACTION NOT BE BROUGHT BASED ON ANY OF THE CLAIMS

ASSERTED IN THE DEMAND;

(5) AN ACTION ALREADY COMMENCED CONTINUE UNDER THE

CONTROL OF:

(I) THE PLAINTIFF;

(II) THE CORPORATION; OR

(III) THE COMMITTEE;

(6) SOME OR ALL THE CLAIMS ASSERTED IN AN ACTION ALREADY

COMMENCED BE SETTLED ON TERMS APPROVED BY THE COMMITTEE; OR

(7) AN ACTION ALREADY COMMENCED BE DISMISSED.

(F) COURT REVIEW AND ACTION.--IF A SPECIAL LITIGATION

COMMITTEE IS APPOINTED AND A DERIVATIVE ACTION IS COMMENCED

BEFORE OR AFTER A DETERMINATION IS MADE UNDER SUBSECTION (E):

(1) THE NONPROFIT CORPORATION SHALL FILE WITH THE COURT

AFTER A DETERMINATION IS MADE UNDER SUBSECTION (E) A

STATEMENT OF THE DETERMINATION AND A REPORT SUPPORTING THE

DETERMINATION. THE CORPORATION SHALL SERVE EACH PARTY WITH A

COPY OF THE DETERMINATION AND REPORT. IF THE CORPORATION

MOVES TO FILE THE REPORT UNDER SEAL, THE REPORT SHALL BE

SERVED ON THE PARTIES SUBJECT TO AN APPROPRIATE STIPULATION

AGREED TO BY THE PARTIES OR A PROTECTIVE ORDER ISSUED BY THE

COURT.

(2) THE CORPORATION SHALL FILE WITH THE COURT A MOTION,

PLEADING OR NOTICE CONSISTENT WITH THE DETERMINATION UNDER

SUBSECTION (E).

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(3) IF THE DETERMINATION IS ONE DESCRIBED IN SUBSECTION

(E)(2), (3), (4), (5)(II), (6) OR (7), THE COURT SHALL

DETERMINE WHETHER THE MEMBERS OF THE COMMITTEE MET THE

QUALIFICATIONS REQUIRED UNDER SUBSECTION (C)(1) AND (2) AND

WHETHER THE COMMITTEE CONDUCTED ITS INVESTIGATION AND MADE

ITS RECOMMENDATION IN GOOD FAITH, INDEPENDENTLY AND WITH

REASONABLE CARE. IF THE COURT FINDS THAT THE MEMBERS OF THE

COMMITTEE MET THE QUALIFICATIONS REQUIRED UNDER SUBSECTION

(C)(1) AND (2) AND THAT THE COMMITTEE ACTED IN GOOD FAITH,

INDEPENDENTLY AND WITH REASONABLE CARE, THE COURT SHALL

ENFORCE THE DETERMINATION OF THE COMMITTEE. OTHERWISE, THE

COURT SHALL:

(I) DISSOLVE ANY STAY OF DISCOVERY ENTERED UNDER

SUBSECTION (B);

(II) ALLOW THE ACTION TO CONTINUE UNDER THE CONTROL

OF THE PLAINTIFF; AND

(III) PERMIT THE DEFENDANTS TO FILE PRELIMINARY

OBJECTIONS, OTHER APPROPRIATE PLEADINGS AND MOTIONS.

(G) ATTORNEY GENERAL.--NOTHING IN THIS SECTION LIMITS THE

RIGHTS, POWERS AND DUTIES OF THE ATTORNEY GENERAL UNDER OTHER

APPLICABLE LAW WITH RESPECT TO A NONPROFIT CORPORATION.

§ 5784. Proceeds and expenses.

(a) Proceeds.--Except as provided in subsection (b):

(1) any proceeds or other benefits of a derivative

action, whether by judgment, compromise or settlement, belong

to the nonprofit corporation and not to the plaintiff; and

(2) if the plaintiff OR ITS COUNSEL receives any

proceeds, the plaintiff shall remit them immediately PROCEEDS

SHALL BE REMITTED to the corporation.

(b) Expenses.--If a derivative action is successful in whole

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or in part, the court may award the plaintiff reasonable

expenses, including reasonable attorney fees and costs, from the

recovery of the nonprofit corporation . , BUT IN NO EVENT SHALL

THE ATTORNEY FEES AWARDED EXCEED A REASONABLE PROPORTION OF THE

VALUE OF THE RELIEF, INCLUDING NONPECUNIARY RELIEF, OBTAINED BY

THE PLAINTIFF FOR THE CORPORATION.

Section 12. Sections 6146, 8102 and 8105 of Title 15 are

amended to read:

§ 6146. PROVISIONS APPLICABLE TO ALL FOREIGN CORPORATIONS.

THE FOLLOWING PROVISIONS OF THIS SUBPART SHALL, EXCEPT AS

OTHERWISE PROVIDED IN THIS SECTION, BE APPLICABLE TO EVERY

FOREIGN CORPORATION NOT-FOR-PROFIT, WHETHER OR NOT REQUIRED TO

[PROCURE A CERTIFICATE OF AUTHORITY UNDER THIS CHAPTER] REGISTER

UNDER CHAPTER 4 (RELATING TO FOREIGN ASSOCIATIONS):

SECTION 5503 (RELATING TO DEFENSE OF ULTRA VIRES) AS TO

CONTRACTS AND CONVEYANCES GOVERNED BY THE LAWS OF THIS

COMMONWEALTH AND CONVEYANCES AFFECTING REAL PROPERTY SITUATED IN

THIS COMMONWEALTH.

SECTION 5506 (RELATING TO FORM OF EXECUTION OF INSTRUMENTS)

AS TO INSTRUMENTS OR OTHER DOCUMENTS GOVERNED BY THE LAWS OF

THIS COMMONWEALTH OR AFFECTING REAL PROPERTY SITUATED IN THIS

COMMONWEALTH.

SECTION 5510 (RELATING TO CERTAIN SPECIFICALLY AUTHORIZED

DEBT TERMS) AS TO OBLIGATIONS (AS DEFINED IN THE SECTION)

GOVERNED BY THE LAWS OF THIS COMMONWEALTH OR AFFECTING REAL

PROPERTY SITUATED IN THIS COMMONWEALTH.

SECTION 5782 (RELATING TO [ACTIONS AGAINST DIRECTORS, MEMBERS

OF AN OTHER BODY AND OFFICERS] ELIGIBLE MEMBER PLAINTIFFS AND

SECURITY FOR COSTS) AS TO ANY DERIVATIVE ACTION [OR PROCEEDING]

BROUGHT IN A COURT OF THIS COMMONWEALTH.

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§ 8102. Interchangeability of partnership, limited liability

company and corporate forms of organization.

(a) General rule.--Subject to any restrictions on a specific

line of business made applicable by section 103 (relating to

subordination of title to regulatory laws):

(1) Any business that may be conducted in a corporate

form may also be conducted as a partnership or a limited

liability company.

(2) A domestic or foreign partnership or limited

liability company may exercise any right, power, franchise or

privilege that a domestic or foreign corporation engaged in

the same line of business might exercise under the laws of

this Commonwealth, including powers conferred by section 1511

(relating to additional powers of certain public utility

corporations) or other provisions of law granting the right

to a duly authorized corporation to take or occupy property

and make compensation therefor.

(b) Exceptions.--Subsection (a) shall not:

(1) Affect any law relating to the taxation of

partnerships, limited liability companies or corporations.

(2) [Apply to a banking institution, credit union,

insurance corporation or savings association,] Authorize the

conduct of the business of banking or insurance ACTING AS A

BANKING INSTITUTION, CREDIT UNION OR INSURER unless the laws

relating thereto or this part expressly [contemplate] permit

the conduct of [the regulated] that business in partnership

or limited liability company form. See [section 8911

(relating to purposes).] sections 8620(b) (relating to

characteristics of limited partnership) and 8818(b) (relating

to characteristics of limited liability company).

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(3) Except as otherwise provided by law, permit a

partnership to provide full limited liability for all of the

investors therein or otherwise fail to preserve the intrinsic

differences between the partnership and corporate forms.

§ 8105. Ownership of certain professional partnerships AND

LIMITED LIABILITY COMPANIES.

(a) General rule.--Except as otherwise provided by statute,

rule or regulation applicable to a particular profession, all of

the ultimate beneficial owners of the [partnership] interests in

a [partnership that renders one or more restricted professional

services shall] general partnership, limited partnership,

electing partnership or limited liability company, and all of

the governors of the entity, must be licensed persons[. As used

in this section, the term "restricted professional services"

shall have the meaning specified in section 8903 (relating to

definitions and index of definitions).] in the profession the

entity practices if the entity renders any of the following

professional services:

(1) chiropractic;

(2) dentistry;

(3) law;

(4) medicine and surgery;

(5) optometry;

(6) osteopathic medicine and surgery;

(7) podiatric medicine;

(8) public accounting;

(9) psychology; or

(10) veterinary medicine.

(b) Transitional provision.--Subsection (a) shall not apply

to a person that holds only a transferable interest that was

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acquired before [the Legislative Reference Bureau shall insert

here the effective date of this act].

Section 13. Title 15 is amended by adding a section to read:

§ 8106. Failure to observe formalities.

The failure of a limited liability partnership, limited

partnership, limited liability limited partnership, electing

partnership or limited liability company to observe formalities

relating to the exercise of its powers or management of its

activities and affairs is not a ground for imposing liability on

a partner, member or manager of the entity for a debt,

obligation or other liability of the entity.

Section 14. Chapter 82 heading of Title 15 is amended to

read:

CHAPTER 82

[REGISTERED] LIMITED LIABILITY PARTNERSHIPS AND

LIMITED LIABILITY LIMITED PARTNERSHIPS

Section 15. Chapter 82 Subchapter A heading of Title 15 is

amended to read:

SUBCHAPTER A

DOMESTIC [REGISTERED]

LIMITED LIABILITY PARTNERSHIPS AND

LIMITED LIABILITY LIMITED PARTNERSHIPS

Section 16. Section 8201 of Title 15 is amended to read:

§ 8201. Scope.

(a) Application of subchapter.--This subchapter applies to a

general or limited partnership WHOSE INTERNAL AFFAIRS ARE

GOVERNED BY OR THAT IS formed under the laws of this

Commonwealth AND that registers under this section. Any

partnership that desires to register under this subchapter or to

amend or terminate its registration shall [file in] DELIVER TO

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the Department of State FOR FILING a statement of registration,

amendment or termination, as the case may be, which shall be

signed by a general partner and shall set forth:

(1) The name of the partnership.

(2) Either:

(i) the address of the principal place of business

of the partnership, in the case of a general partnership;

or

(ii) subject to section 109 (relating to name of

commercial registered office provider in lieu of

registered address), the address, including street and

number, if any, of the registered office of the

partnership, in the case of a limited partnership.

(3) A statement that the partnership registers under

this subchapter or that the registration of the partnership

under this subchapter shall be amended or terminated, as the

case may be. If the statement relates to an amendment, the

amendment shall restate in full the statement of

registration.

(4) A statement that:

(i) the registration, amendment or termination has

been authorized by at least a majority in interest of the

partners[.]; and

(ii) in the case of a termination, the termination

has also been authorized by all of the general partners.

(b) Effect of filing.--Upon the filing of the statement of

registration, amendment or termination in the department, the

registration under this subchapter shall be effective, amended

or terminated, as the case may be. The effectiveness, amendment

or termination of the registration of a partnership under this

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subchapter shall not be deemed to cause a dissolution of the

partnership.

(c) Effect of registration.--As long as the registration

under this subchapter is in effect, the partnership shall be

governed by the provisions of this subchapter and, to the extent

not inconsistent with this subchapter, Chapter [83] 84 (relating

to general partnerships) [and, if a limited partnership, in

addition, Chapter 85] or 86 (relating to limited partnerships).

Without limiting the generality of the foregoing, a domestic or

foreign [registered] limited liability partnership or limited

liability limited partnership shall be treated the same as if it

were not registered under this subchapter for purposes of:

(1) determining whether it is a permissible form of

entity in which to conduct the practice of a profession; or

(2) the imposition by the Commonwealth or any political

subdivision of any tax or license fee on or with respect to

any income, property, privilege, transaction, subject or

occupation.

(d) Continuation of registration.--If a [registered] limited

liability partnership or limited liability limited partnership

is dissolved and its business is continued without liquidation

of the partnership affairs, the registration under this

subchapter of the dissolved partnership shall continue to be

applicable to the partnership continuing the business, and it

shall not be necessary to make a new filing under this section

until such time, if any, as the registration is to be amended or

terminated.

(e) Prohibited termination.--A registration under this

subchapter may not be terminated while the partnership is a

[bankrupt as that term is defined in section 8903 (relating to

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definitions and index of definitions)] debtor in bankruptcy. See

section 8221(f) (relating to annual registration).

(f) Alternative procedure.--In lieu of filing a statement of

registration as provided in subsection (a), a limited

partnership may register as a [registered] limited liability

limited partnership by including in its certificate of limited

partnership, either originally or by amendment, the statements

required by subsection (a)(3) and (4). To terminate its

registration, a limited partnership that uses the procedure

authorized by this subsection shall amend its certificate of

limited partnership to delete the statements required by this

subsection.

(g) Constructive notice.--[Filing] REGISTRATION under this

section shall constitute constructive notice that the

partnership is a [registered] limited liability partnership or

limited liability limited partnership and that the partners are

entitled to the protections from liability provided by this

subchapter.

(h) Approval of termination.--In addition to any required

approvals under the partnership agreement, the termination of a

statement of registration must be approved by the affirmative

vote or consent of all the general partners.

(i) Cross references.--See sections 134 (relating to

docketing statement) and 135 (relating to requirements to be met

by filed documents).

Section 17. The definitions of "foreign registered limited

liability partnership," "partner" and "registered limited

liability partnership" or "domestic registered limited liability

partnership" in section 8202 are amended and the section is

amended by adding a definition to read:

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§ 8202. Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Distribution." A transfer of money or other property from a

limited liability partnership to a person on account of a

transferable interest or in a person's capacity as a partner.

The term:

(1) includes:

(i) a redemption or other purchase by a partnership

of a transferable interest; and

(ii) a transfer to a partner in return for the

partner's relinquishment of any right to participate as a

partner in the management or conduct of the partnership's

business or to have access to records or other

information concerning the partnership's business ; and

(2) d oes not include:

(i) amounts constituting reasonable compensation for

present or past service or payments made in the ordinary

course of business under a bona fide retirement plan or

other bona fide benefits program;

(ii) the making of, or payment or performance on, a

guaranty or similar arrangement by a partnership for the

benefit of any or all of its partners;

(iii) a direct or indirect allocation or transfer

effected under Chapter 3 (relating to entity

transactions) with the approval of the members PARTNERS ;

or

(iv) a direct or indirect transfer of:

(A) a governance or transferable interest; or

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(B) options, rights or warrants to acquire a

governance or transferable interest.

["Foreign registered limited liability partnership." A

partnership that has registered under a law of any jurisdiction

other than this Commonwealth similar to this subchapter, whether

or not the partnership is required to register under section

8211 (relating to foreign registered limited liability

partnerships).]

"Partner." Includes a person who is or was a partner in a

[registered] limited liability partnership or A GENERAL PARTNER

IN A limited liability limited partnership at any time while the

registration of the partnership under this subchapter is or was

in effect.

["Registered limited liability partnership" or "domestic

registered limited liability partnership." A partnership as to

which a registration under section 8201(a) (relating to scope)

is in effect.]

Section 18. Section 8204 of Title 15 is amended to read:

§ 8204. Limitation on liability of partners.

(a) General rule.--Except as provided in subsection (b), a

partner in a [registered] limited liability partnership or

limited liability limited partnership shall not be

[individually] liable directly or indirectly, whether by way of

indemnification, contribution, assessment or otherwise, [for

debts and obligations] under an order of court or in any other

manner for any debts, obligations or other liabilities of, or

chargeable to, the partnership, whether sounding in contract or

tort or otherwise, that arise [from any negligent or wrongful

acts or misconduct committed by another partner or other

representative of the partnership] while the registration of the

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partnership under this subchapter is in effect.

(b) Exceptions.--

(2) Subsection (a) shall not affect the liability of a

partner:

(i) Individually for any negligent or wrongful acts

or misconduct committed by [him or by any person under

his direct supervision and control] the partner.

(ii) For any debts [or], obligations or other

liabilities of the partnership:

[(A) arising from any cause other than those

specified in subsection (a); or]

(B) as to which the partner has agreed in

[writing] record form to be liable[.]; or

(C) that:

(I) arose before [the Legislative Reference

Bureau shall insert here the effective date of

this clause]; and

(II) did not arise from any negligent or

wrongful acts or misconduct committed by a

partner or other representative of the

partnership.

(iii) To the extent expressly undertaken in the

partnership agreement or the certificate of limited

partnership.

(3) Subsection (a) shall not affect in any way:

(i) the liability of the partnership itself for all

its debts [and obligations], obligations and other

liabilities;

(ii) the availability of the entire assets of the

partnership to satisfy its debts [and obligations],

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obligations and other liabilities; or

(iii) any obligation undertaken by a partner in

[writing] RECORD FORM to individually indemnify another

partner of the partnership or to individually contribute

toward a liability of another partner.

(c) Continuation of limited liability.--Neither the

termination of the registration of a partnership under this

subchapter nor the dissolution, winding up or termination of the

partnership shall affect the limitation on the liability of a

partner in the partnership under this section with respect to

[negligent or wrongful acts or misconduct occurring] debts,

obligations and other liabilities that arose while the

registration under this subchapter was in effect.

(d) Proper parties.--A partner in a limited liability

partnership or limited liability limited partnership is not a

proper party to an action or proceeding by or against the

partnership, the object of which is to recover damages or

enforce debts, obligations or other liabilities for which the

partner is not liable.

(e) Cross reference.--See section 103 (relating to

subordination of title to regulatory laws).

Section 19. Section 8205 of Title 15 is repealed:

[§ 8205. Liability of withdrawing partner.

(a) General rule.--Except as provided in subsection (b), if

the business of a registered limited liability partnership is

continued without liquidation of the partnership affairs

following the dissolution of the partnership as a result of the

withdrawal for any reason of a partner, the withdrawing partner

shall not be individually liable directly or indirectly, whether

by way of indemnification, contribution or otherwise, for the

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debts and obligations of either the dissolved partnership or any

partnership continuing the business if a statement of withdrawal

is filed as provided in this section.

(b) Exceptions.--Subsection (a) shall not affect the

liability of a partner:

(1) Individually for any negligent or wrongful acts or

misconduct committed by him or by any person under his direct

supervision and control.

(2) For any debts or obligations of the partnership as

to which the withdrawing partner has agreed in writing to be

liable.

(3) To the partnership for damages if the partnership

agreement prohibits the withdrawal of the partner or the

withdrawal otherwise violates the partnership agreement.

(4) Under section 8334 (relating to partner accountable

as fiduciary).

(5) To the extent a debt or obligation of the

partnership has been expressly undertaken by the partner in

the partnership agreement or the certificate of limited

partnership.

(6) If the partnership subsequently dissolves within one

year after the date of withdrawal of the partner and the

business of the partnership is not continued following such

subsequent dissolution. This paragraph shall not be

applicable in the case of a withdrawal caused by:

(i) the death of the partner; or

(ii) the retirement of the partner pursuant to a

retirement policy of the dissolved partnership that has

been in effect prior to the retirement of the partner for

the shorter of one year or the period that the

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partnership has been in existence.

(7) For any obligation undertaken by a partner in

writing to individually indemnify another partner of the

partnership or to individually contribute toward a liability

of another partner.

(c) Statement of withdrawal.--A statement of withdrawal

shall be executed by the withdrawing partner or his personal

representative and shall set forth:

(1) The name of the registered limited liability

partnership.

(2) The name of the withdrawing partner.

(d) Filing and effectiveness.--The statement of withdrawal

shall be filed in the Department of State and shall be effective

upon filing. The withdrawing partner shall send a copy of the

filed statement of withdrawal to the registered limited

liability partnership.

(e) Permissive filing.--Filing under this section is

permissive, and failure to make a filing under this section by a

partner entitled to do so shall not affect the right of that

partner to the limitation on liability provided by section 8204

(relating to limitation on liability of partners).

(f) Constructive notice.--Filing under this section shall

constitute constructive notice that the partner has withdrawn

from the partnership and is entitled to the protection from

liability provided by this section.

(g) Variation of section.--A written provision of the

partnership agreement may restrict or condition the application

of this section to some or all of the partners of the

partnership.

(h) Application of section.--A partner in a foreign

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registered limited liability partnership, regardless of whether

or not it has registered to do business in this Commonwealth

under section 8211 (relating to foreign registered limited

liability partnerships), shall not be entitled to make a filing

under this section with regard to that partnership.

(i) Cross references.--See sections 134 (relating to

docketing statement) and 135 (relating to requirements to be met

by filed documents).]

Section 20. Section 8207 of Title 15 is amended to read:

§ 8207. Extraterritorial application of subchapter.

[(a) Legislative intent.--It is the intent of the General

Assembly in enacting this subchapter that the legal existence of

registered limited liability partnerships organized in this

Commonwealth be recognized outside the boundaries of this

Commonwealth and that, subject to any reasonable requirement of

registration, a domestic registered limited liability

partnership transacting business outside this Commonwealth be

granted protection of full faith and credit under the

Constitution of the United States.]

(b) Basis for determining liability of partners.--The

liability of partners in a [registered] domestic limited

liability partnership or domestic limited liability limited

partnership shall at all times be determined under Chapters [83]

84 (relating to general partnerships) and [85] 86 (relating to

limited partnerships) as modified by the provisions of this

subchapter.

(c) Conflict of laws.--The personal liability of a partner

of a [registered] domestic limited liability partnership or

domestic limited liability limited partnership to any person or

in any action or proceeding for the debts, obligations or other

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liabilities of the partnership or for the acts or omissions of

other partners or representatives of the partnership shall be

governed solely and exclusively by the laws of this

Commonwealth. Whenever a conflict arises between the laws of

this Commonwealth and the laws of any other state with regard to

the liability of partners of a [registered] domestic limited

liability partnership [registered under this subchapter] or

domestic limited liability limited partnership for the debts,

obligations and other liabilities of the partnership or for the

acts or omissions of the other partners or representatives of

the partnership, the laws of this Commonwealth shall govern in

determining such liability.

Section 21. Subchapter B of Chapter 82 of Title 15 is

repealed:

[SUBCHAPTER B

FOREIGN REGISTERED

LIMITED LIABILITY PARTNERSHIPS

§ 8211. Foreign registered limited liability partnerships.

(a) Governing law.--Subject to the Constitution of

Pennsylvania:

(1) The laws of the jurisdiction under which a foreign

registered limited liability partnership is organized govern

its organization and internal affairs and the liability of

its partners except as provided in subsection (c).

(2) A foreign registered limited liability partnership

may not be denied registration by reason of any difference

between those laws and the laws of this Commonwealth.

(c) Exception.--The liability of the partners in a foreign

registered limited liability partnership shall be governed by

the laws of the jurisdiction under which it is organized, except

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that the partners shall not be entitled to greater protection

from liability than is available to the partners in a domestic

registered limited liability partnership.]

Section 22. Section 8221 of Title 15 is amended to read:

§ 8221. Annual registration.

(a) General rule.--Every domestic [registered] limited

liability partnership or limited liability limited partnership

in existence on December 31 of any year and every foreign

[registered] limited liability partnership or limited liability

limited partnership that is registered to do business in this

Commonwealth on December 31 of any year shall [file in] DELIVER

TO the Department of State FOR FILING with respect to that year,

and on or before April 15 of the following year, a certificate

of annual registration on a form provided by the department,

signed by a general partner and accompanied by the annual

registration fee prescribed by subsection (b). The department

shall not charge a fee other than the annual registration fee

for filing the certificate of annual registration.

(b) Annual registration fee.--

(1) The annual registration fee to be paid when filing a

certificate of annual registration shall be equal to a base

fee of $200 times the number of persons who were general

partners of the partnership on December 31 of the year with

respect to which the certificate of annual registration is

being filed and who:

(i) in the case of a natural person, had his

principal residence on that date in this Commonwealth; or

(ii) in the case of any other person, was

incorporated or otherwise organized or existing on that

date under the laws of this Commonwealth.

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(2) The base fee of $200 shall be increased on December

31, 1997, and December 31 of every third year thereafter by

the percentage increase in the Consumer Price Index for Urban

Workers during the most recent three calendar years for which

that index is available on the date of adjustment. Each

adjustment under this paragraph shall be rounded up to the

nearest $10.

(c) Notice of annual registration.--Not later than February

1 of each year, the department shall give notice to every

partnership required to file a certificate of annual

registration with respect to the preceding year of the

requirement to file the certificate. The notice shall state the

amount of the base fee payable under subsection (b)(1), as

adjusted pursuant to subsection (b)(2), if applicable, and shall

be accompanied by the form of certificate of annual registration

to be filed. Failure by the department to give notice to any

party, or failure by any party to receive notice, of the annual

registration requirement shall not relieve the party of the

obligation to file the certificate of annual registration.

(d) Credit to Corporation Bureau Restricted Account.--The

annual registration fee shall not be deemed to be an amount

received by the department under Subchapter C of Chapter 1 for

purposes of section 155 (relating to disposition of funds),

except that $25 of the fee shall be credited to the Corporation

Bureau Restricted Account.

(e) Failure to FILE OR pay annual fee.--

(1) Failure to file the certificate of annual

registration required by this section for five consecutive

years shall result in the automatic termination of:

(i) the status of the [registered] limited liability

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partnership [as such.] or limited liability limited

partnership as such, if it is a domestic partnership; or

(ii) the registration of the limited liability

partnership or limited liability limited partnership, if

it is a foreign partnership.

(1.1) [In addition, any] Any annual registration fee

that is not paid when due shall be a lien in the manner

provided in this subsection from the time the annual

registration fee is due and payable. If a certificate of

annual registration is not filed within 30 days after the

date on which it is due, the department shall assess a

penalty of $500 against the partnership, which shall also be

a lien in the manner provided in this subsection. The

imposition of that penalty shall not be construed to relieve

the partnership from liability for any other penalty or

interest provided for under other applicable law.

(2) If the annual registration fee paid by a [registered

limited liability] partnership is subsequently determined to

be less than should have been paid because it was based on an

incorrect number of general partners or was otherwise

incorrectly computed, that fact shall not affect the

existence [or status of the registered limited liability

partnership as such], status or foreign registration of the

partnership, but the amount of the additional annual

registration fee that should have been paid shall be a lien

in the manner provided in this subsection from the time the

incorrect payment is discovered by the department.

(3) The annual registration fee shall bear simple

interest from the date that it becomes due and payable until

paid. The interest rate shall be that provided for in section

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806 of the act of April 9, 1929 (P.L.343, No.176), known as

The Fiscal Code, with respect to unpaid taxes. The penalty

provided for in paragraph (1) shall not bear interest. The

payment of interest shall not relieve the [registered limited

liability] partnership from liability for any other penalty

or interest provided for under other applicable law.

(4) The lien created by this subsection shall attach to

all of the property and proceeds thereof of the [registered

limited liability] partnership in which a security interest

can be perfected in whole or in part by filing in the

department under 13 Pa.C.S. Div. 9 (relating to secured

transactions; sales of accounts, contract rights and chattel

paper), whether the property and proceeds are owned by the

partnership at the time the annual registration fee or any

penalty or interest becomes due and payable or whether the

property and proceeds are acquired thereafter. Except as

otherwise provided by statute, the lien created by this

subsection shall have priority over all other liens, security

interests or other charges, except liens for taxes or other

charges due the Commonwealth. The lien created by this

subsection shall be entered on the records of the department

and indexed in the same manner as a financing statement filed

under 13 Pa.C.S. Div. 9. At the time an annual registration

fee, penalty or interest that has resulted in the creation of

a lien under this subsection is paid, the department shall

terminate the lien with respect to that annual registration

fee, penalty or interest without requiring a separate filing

by the partnership for that purpose.

(5) If the annual registration fee paid by a [registered

limited liability] partnership is subsequently determined to

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be more than should have been paid for any reason, no refund

of the additional fee shall be made.

(6) Termination of the status [of a registered limited

liability partnership as such] or foreign registration of a

partnership under this section, whether voluntarily or

involuntarily, shall not release it from the obligation to

pay any accrued fees, penalties and interest and shall not

release the lien created by this subsection.

(f) Exception for bankrupt partnerships.--A partnership that

would otherwise be required to pay the annual registration fee

set forth in subsection (b) shall not be required to pay that

fee with respect to any year during any part of which the

partnership is a [bankrupt as defined in section 8903 (relating

to definitions and index of definitions)] debtor in bankruptcy.

The partnership shall, instead, indicate on its certificate of

annual registration for that year that it is exempt from payment

of the annual registration fee pursuant to this subsection. If

the partnership fails to file timely a certificate of annual

registration, a lien shall be entered on the records of the

department pursuant to subsection (e) which shall not be removed

until the partnership files a certificate of annual registration

indicating its entitlement to an exemption from payment of the

annual registration fee as provided in this subsection. See

section 8201(e) (relating to scope).

Section 23. Chapter 82 of Title 15 is amended by adding

subchapters to read:

SUBCHAPTER D

DISTRIBUTIONS

Sec.

8231. Limitations on distributions by limited liability

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partnership.

8232. Liability for improper distributions by limited liability

partnership.

§ 8231. Limitations on distributions by limited liability

partnership.

(a) General rule.--A domestic limited liability partnership

may not make a distribution, including a distribution under

section 8486 (relating to disposition of assets in winding up

and required contributions), if after the distribution:

(1) the partnership would not be able to pay its debts

as they become due in the ordinary course of the

partnership's business; or

(2) the partnership's total assets would be less than

the sum of its total liabilities plus the amount that would

be needed, if the partnership were to be dissolved and wound

up at the time of the distribution, to satisfy the

preferential rights upon dissolution and winding up of

partners and transferees whose preferential rights are

superior to the rights of persons receiving the distribution.

(b) Valuation.--A domestic limited liability partnership may

base a determination that a distribution is not prohibited under

subsection (a)(2) on:

(1) the book values of the assets and liabilities of the

partnership, as reflected on its books and records;

(2) a valuation that takes into consideration unrealized

appreciation and depreciation or other changes in value of

the assets and liabilities of the partnership;

(3) the current value of the assets and liabilities of

the partnership, either valued separately or valued in

segments or as an entirety as a going concern; or

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(4) any other method that is reasonable in the

circumstances.

(c) Excluded liabilities.--In determining whether a

distribution is prohibited under subsection (a)(2), the

partnership need not consider obligations and liabilities unless

they are required to be reflected on a balance sheet, not

including the notes to the balance sheet, prepared on the basis

of generally accepted accounting principles, or other such

accounting practices and principles as are used generally by the

partnership in the maintenance of its books and records and as

are reasonable in the circumstances.

(d) Measuring date of distribution.--Except as provided in

subsection (e), the effect of a distribution under subsection

(a) is measured:

(1) as of the date specified by the partnership when it

authorizes the distribution if the distribution occurs within

125 days of the earlier of the date so specified or the date

of authorization; or

(2) as of the date of distribution in all other cases.

(e) Date of redemption.--In the case of a distribution as

described in paragraph (1) of the definition of "distribution"

in section 8412 8202 (relating to definitions), the distribution

is deemed to occur as of the earlier of the date money or other

property is transferred or debt is incurred by the partnership,

or 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.

(f) Status of distribution debt.--The indebtedness of a

domestic limited liability partnership to a partner or

transferee incurred by reason of a distribution made in

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accordance with this section shall be at least on a parity with

the partnership's indebtedness to its general, unsecured

creditors, except to the extent subordinated by agreement.

(g) Certain subordinated debt.--The indebtedness of a

domestic limited liability partnership, including indebtedness

issued as a distribution, is not a liability for purposes of

subsection (a) if the terms of the indebtedness provide that

payment of principal and interest is made only if and to the

extent that a payment of a distribution could then be made under

this section. If the indebtedness is issued as a distribution,

each payment of principal or interest is treated as a

distribution, the effect of which is measured on the date the

payment is made.

(h) Distributions in winding up.--In measuring the effect of

a distribution under section 8486, the liabilities of a

dissolved domestic limited liability partnership do not include

any claim that has been barred under section 8241 (relating to

known claims against dissolved limited liability partnership) or

8242 (relating to other claims against dissolved limited

liability partnership) or for which security has been provided

under section 8243 (relating to court proceedings).

(i) Cross references.--See sections 8415(d)(1) (relating to

contents of partnership agreement) and 8447 (relating to

standards of conduct for partners).

§ 8232. Liability for improper distributions by limited

liability partnership.

(a) General rule.-- Except as provided in subsection (b), if

IF a partner of a limited liability partnership consents to a

distribution made in violation of section 8231 (relating to

limitations on distributions by limited liability partnership)

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and in consenting to the distribution fails to comply with

section 8447 (relating to standards of conduct for partners),

the partner is personally liable to the partnership for the

amount of the distribution which exceeds the amount that could

have been distributed without the violation of section 8231.

(b) Partners without authority.--To the extent the

partnership agreement of a limited liability partnership

expressly relieves a partner of the authority and responsibility

to consent to distributions and imposes that authority and

responsibility on one or more other partners, the liability in

subsection (a) applies to the other partners and not to the

partner that the partnership agreement relieves of the authority

and responsibility.

(c) (B) Recipients.--A person that receives a distribution

knowing that the distribution violated section 8231 is

personally liable to the limited liability partnership, but only

to the extent that the distribution received by the person

exceeded the amount that could have been properly paid under

section 8231.

(d) (C) Contribution.--A person against which an action is

commenced because the person is liable under subsection (a) may:

(1) join any other person that is liable under

subsection (a) and seek to enforce a right of contribution

from the person; and

(2) join any person that received a distribution in

violation of subsection (c) (B) and seek to enforce a right

of contribution from the person in the amount the person

received in violation of subsection (c) (B) .

(e) (D) Statute of repose.--An action under this section is

barred unless commenced within two years after the distribution.

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SUBCHAPTER E

DISSOLUTION

Sec.

8241. Known claims against dissolved limited liability

partnership.

8242. Other claims against dissolved limited liability

partnership.

8243. Court proceedings.

8244. Liability of partner when claim against partnership

barred.

§ 8241. Known claims against dissolved limited liability

partnership.

(a) General rule.--Except as provided in subsection (d), a

dissolved limited liability partnership may give notice of a

known claim under subsection (b), which has the effect provided

in subsection (c).

(b) Required notice NOTICE .--A dissolved limited liability

partnership may notify in record form its known claimants of the

dissolution. The notice must:

(1) specify the information required to be included in a

claim;

(2) state that a claim must be in writing and provide a

mailing address to which the claim is to be sent;

(3) state the deadline for receipt of a claim, which may

not be less than 120 days after the date the notice is

received by the claimant;

(4) state that the claim will be barred if not received

by the deadline; and

(5) unless the partnership has been throughout its

existence a limited liability partnership, state that the

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barring of a claim against the partnership will also bar any

corresponding claim against any partner or person dissociated

as a partner which is based on section 8436 (relating to

partner's liability).

(c) Claims barred.--A claim against a dissolved limited

liability partnership is barred if the requirements of

subsection (b) are met and:

(1) the claim is not received by the specified deadline;

or

(2) if the claim is timely received but rejected by the

partnership:

(i) the partnership causes the claimant to receive a

notice in record form stating that the claim is rejected

and will be barred unless the claimant commences an

action against the partnership to enforce the claim

within 90 days after the claimant receives the notice;

and

(ii) the claimant does not commence the required

action within 90 days after the claimant receives the

notice.

(d) Later arising claims.--This section shall not apply to a

claim based on an event occurring after the date of dissolution

or a liability that on that date is contingent.

§ 8242. Other claims against dissolved limited liability

partnership.

(a) Permissive notice.--A dissolved limited liability

partnership may publish notice of its dissolution and request

persons having claims against the partnership to present them in

accordance with the notice.

(b) Notice procedure.--A notice under subsection (a) must:

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(1) be officially published one time;

(2) describe the information required to be contained in

a claim, state that the claim must be in writing and provide

a mailing address to which the claim is to be sent;

(3) state that a claim against the partnership is barred

unless an action to enforce the claim is commenced within two

years after publication of the notice; and

(4) unless the partnership has been throughout its

existence a limited liability partnership, state that the

barring of a claim against the partnership will also bar any

corresponding claim against any partner or person dissociated

as a partner which is based on section 8436 (relating to

partner's liability).

(c) Claims barred.--If a dissolved limited liability

partnership publishes a notice in accordance with subsection

(b), the claim of each of the following claimants is barred

unless the claimant commences an action to enforce the claim

against the partnership within two years after the publication

date of the notice:

(1) a claimant that did not receive notice in record

form under section 8241 (relating to known claims against

dissolved limited liability partnership);

(2) a claimant whose claim was timely sent to the

partnership but not acted on; and

(3) a claimant whose claim is contingent at, or based on

an event occurring after, the date of dissolution.

(d) Claims not barred.--A claim not barred under this

section or section 8241 may be enforced:

(1) against a dissolved limited liability partnership,

to the extent of its undistributed assets;

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(2) except as provided in section 8243 (relating to

court proceedings), if assets of the partnership have been

distributed after dissolution, against a partner or

transferee to the extent of that person's proportionate share

of the claim or of the partnership's assets distributed to

the partner or transferee after dissolution, whichever is

less, except that a person's total liability for all claims

under this paragraph may not exceed the total amount of

assets distributed to the person after dissolution; and

(3) against any person liable on the claim under

sections 8436, 8473 (relating to liability of person

dissociated as partner to other persons) and 8485 (relating

to liability after dissolution).

§ 8243. Court proceedings.

(a) Determination of security.--A dissolved limited

liability partnership that has published a notice under section

8242 (relating to other claims against dissolved limited

liability partnership) may file an application with the court of

common pleas embracing the county where the partnership's

principal office is located or, if the principal office is not

located in this Commonwealth, where its registered office is or

was last located, for a determination of the amount and form of

security to be provided for payment of claims that are

reasonably expected to arise after the date of dissolution based

on facts known to the partnership and:

(1) at the time of the application:

(i) are contingent; or

(ii) have not been made known to the partnership; or

(2) are based on an event occurring after the date of

dissolution.

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(b) When security not required.--Security is not required

for any claim that is or is reasonably anticipated to be barred

under section 8241 (relating to known claims against dissolved

limited liability partnership).

(c) Notice.--Within 10 days after the filing of an

application under subsection (a), the dissolved limited

liability partnership shall give notice of the proceeding to

each claimant holding a contingent claim known to the

partnership.

(d) Guardian ad litem.--In any proceeding under this

section, the court may appoint a guardian ad litem to represent

all claimants whose identities are unknown. The reasonable fees

and expenses of the guardian, including all reasonable expert

witness fees, must be paid by the dissolved limited liability

partnership.

(e) Effect on contingent claims.--A dissolved limited

liability partnership that provides security in the amount and

form ordered by the court under subsection (a) satisfies the

partnership's obligations with respect to claims that are

contingent, have not been made known to the partnership or are

based on an event occurring after the date of dissolution. The

claims may not be enforced against a partner or transferee on

account of assets received in liquidation.

§ 8244. Liability of partner when claim against partnership

barred.

If a claim against a dissolved LIMITED LIABILITY partnership

is barred under this subchapter, any corresponding claim under

sections 8436 (relating to partner's liability), 8473 (relating

to liability of person dissociated as partner to other person)

and 8485 (relating to liability after dissolution) is also

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barred.

Section 24. Repeals are as follows:

(1) The General Assembly finds and declares as follows:

(i) Over the last 25 years, there have been

significant changes in the business model for

partnerships; and statutory law must be updated to deal

with the new business model.

(ii) Statutory law on general partnerships has not

been addressed by the General Assembly since 1988.

(iii) Section 18 of this act adds a new chapter on

general partnerships. The new chapter extensively revises

existing statutory law to the degree that identification

of individual changes or reproduction of voluminous text

to be eliminated would inhibit rather than enhance

serious legal analysis.

(iv) The repeal under paragraph (2) is necessary to

carry out this paragraph.

(2) Chapter 83 of Title 15 is repealed.

Section 25. Title 15 is amended by adding a chapter to read:

CHAPTER 84

GENERAL PARTNERSHIPS

Subchapter

A. General Provisions

B. Nature of Partnership

C. Relations of Partners to Persons Dealing with Partnership

D. Relations of Partners to Each Other and to Partnership

E. Transferable Interests and Rights of Transferees and

Creditors

F. Dissociation

G. Dissociation as Partner if Business Not Wound Up

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H. Dissolution and Winding Up

SUBCHAPTER A

GENERAL PROVISIONS

Sec.

8411. Short title and application of chapter.

8412. Definitions.

8413. Knowledge and notice.

8414. Governing law.

8415. Contents of partnership agreement.

8416. Application of partnership agreement.

8417. Amendment and effect of partnership agreement.

8418. Signing of filed documents.

8419. Liability of general partner or other person for false or

missing information in filed document.

§ 8411. Short title and application of chapter.

(a) Short title.--This chapter shall be known and may be

cited as the Pennsylvania Uniform Partnership Act of 2015.

(b) Initial application.--Before July 1, 2016, this chapter

governs only:

(1) a partnership formed on or after [the Legislative

Reference Bureau shall insert here the effective date of this

chapter]; and

(2) except as provided in subsection (d), a partnership

formed before [the Legislative Reference Bureau shall insert

here the effective date of this chapter] which elects, in the

manner provided in its partnership agreement or by law for

amending the partnership agreement, to be subject to this

chapter.

(c) Full effective date.--Except as provided under

subsection (d), on and after July 1, 2016, this chapter governs

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all partnerships.

(d) Liabilities to third parties.--With respect to a

partnership that elects under subsection (b)(2) to be subject to

this chapter, after the election takes effect the provisions of

this chapter relating to the liability of the partnership's

partners to third parties apply:

(1) before July 1, 2016, to:

(i) a third party that had not done business with

the partnership in the year before the election took

effect; and

(ii) a third party that had done business with the

partnership in the year before the election took effect

only if the third party knows or has been notified of the

election; and

(2) on and after July 1, 2016, to all third parties,

except that those provisions remain inapplicable to any

obligation incurred while those provisions were inapplicable

under paragraph (1)(ii).

(e) Cross reference.--See section 8415(c)(5) (relating to

contents of partnership agreement).

§ 8412. Definitions.

(a) General definitions.-- The following words and phrases

when used in this chapter shall have the meanings given to them

in this subsection unless the context clearly indicates

otherwise:

"Business." Includes every trade, occupation and profession.

"Contribution." Property or a benefit described in section

8443 (relating to form of contribution) which is provided by a

person to a partnership to become a partner or in the person's

capacity as a partner.

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"Distribution." A transfer of money or other property from a

partnership to a person on account of a transferable interest or

in a person's capacity as a partner. The term:

(1) includes:

(i) a redemption or other purchase by a partnership

of a transferable interest; and

(ii) a transfer to a partner in return for the

partner's relinquishment of any right to participate as a

partner in the management or conduct of the partnership's

business or have access to records or other information

concerning the partnership's business; and

(2) does not include:

(i) amounts constituting reasonable compensation for

present or past service or payments made in the ordinary

course of business under a bona fide retirement plan or

other bona fide benefits program;

(ii) the making of, or payment or performance on, a

guaranty or similar arrangement by a partnership for the

benefit of any or all of its partners;

(iii) a direct or indirect allocation or transfer

effected under Chapter 3 (relating to entity

transactions) with the approval of the members PARTNERS ;

or

(iv) a direct or indirect transfer of:

(A) a governance or transferable interest; or

(B) options, rights or warrants to acquire a

governance or transferable interest.

"Partner." A person that:

(1) has become a partner in a partnership under section

8442 (relating to becoming partner) or was a partner in a

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partnership when the partnership became subject to this

chapter under section 8411 (relating to short title and

application of chapter); and

(2) has not dissociated as a partner under section 8461

(relating to events causing dissociation).

"Partnership." An association of two or more persons to

carry on as co-owners a business for profit formed under this

chapter or that becomes subject to this chapter under Chapter 3

(relating to entity transactions) or section 8411. The term

includes a limited liability partnership or an electing

partnership that is not also a limited partnership.

"Partnership agreement." The agreement, whether or not

referred to as a partnership agreement and whether oral,

implied, in record form or in any combination thereof, of all

the partners of a partnership concerning the matters described

in section 8415(a) (relating to contents of partnership

agreement). The term includes the agreement as amended or

restated.

"Partnership at will." A partnership in which the partners

have not agreed to remain partners until the expiration of a

definite term or the completion of a particular undertaking.

"Transferable interest." The right, as initially owned by a

person in the person's capacity as a partner, to receive

distributions from a partnership, whether or not the person

remains a partner or continues to own any part of the right. The

term applies to any fraction of the interest, by whomever owned.

"Transferee." A person to which all or part of a

transferable interest has been transferred, whether or not the

transferor is a partner.

(b) Index of definitions.--The following is a nonexclusive

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list of definitions in section 102 (relating to definitions)

that apply to this chapter :

"Act" or "action."

"Court."

"Debtor in bankruptcy."

"Department."

"Jurisdiction."

"Jurisdiction of formation."

"Obligation."

"Principal office."

"Professional services."

"Property."

"Record form."

"Sign."

"Transfer."

§ 8413. Knowledge and notice.

(a) Knowledge.--A person knows a fact if the person:

(1) has actual knowledge of it; or

(2) is deemed to know it under subsection (d)(1) or law

other than this chapter.

(b) Notice.--A person has notice of a fact if the person:

(1) has reason to know the fact from all the facts known

to the person at the time in question; or

(2) is deemed to have notice of the fact under

subsection (d)(2).

(c) Notification.--Except as provided under section 113(b)

(relating to delivery of document), a person notifies another

person of a fact by taking steps reasonably required to inform

the other person in ordinary course, whether or not those steps

cause the other person to know the fact.

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(d) Constructive KNOWLEDGE OR notice.--A person not a

partner is deemed:

(1) to know of a limitation on authority to transfer

real property as provided in section 8433(g) (relating to

certificate of partnership authority); and

(2) to have notice of:

(i) a person's dissociation as a partner 90 days

after a certificate of dissociation under section 8474

(relating to certificate of dissociation) becomes

effective;

(ii) the dissolution of the partnership 90 days

after a certificate of dissolution under section 8482(b)

(2)(i) (relating to winding up and filing of optional

certificates) is effective;

(iii) the termination of the partnership 90 days

after a certificate of termination under section 8482(b)

(2)(vi) is effective; and

(iv) participation in a merger, interest exchange,

conversion, division or domestication, 90 days after a

statement of merger, interest exchange, conversion,

division or domestication under Chapter 3 (relating to

entity transactions) is effective.

(e) Effect of partner's knowledge or notice.--A partner's

knowledge or notice of a fact relating to the partnership is

effective immediately as knowledge of or notice to the

partnership, except in the case of a fraud on the partnership

committed by or with the consent of that partner.

§ 8414. Governing law.

(a) General rule.--The internal affairs of a partnership and

the liability of a partner as a partner for the debts,

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obligations or other liabilities of the partnership are governed

by:

(1) in the case of a limited liability partnership, the

laws of this Commonwealth; and

(2) in the case of a partnership that is not a limited

liability partnership, the laws of:

(i) the jurisdiction chosen by a provision of the

partnership agreement in record form; or

(ii) the jurisdiction in which the partnership has

its principal office if there is no choice of law under

subparagraph (i).

(b) Enforceability of chosen law.--A choice of law under

subsection (a)(2)(i) is enforceable even though:

(1) The chosen jurisdiction has no substantial

relationship to the partners or the partnership and there is

no other reasonable basis for the parties' choice.

(2) Application of the chosen law would be contrary to a

fundamental policy of a jurisdiction that has a materially

greater interest in the determination of the particular issue

than does the jurisdiction whose law has been chosen.

(c) Cross reference.--See section 8415(c)(6) (relating to

contents of partnership agreement).

§ 8415. Contents of partnership agreement.

(a) Scope of partnership agreement.--Except as provided in

subsections (c) and (d), the partnership agreement governs:

(1) relations among the partners as partners and between

the partners and the partnership;

(2) the rights and duties under this title of a person

in the capacity of a partner;

(3) the business of the partnership and the conduct of

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that business;

(4) the means and conditions for amending the

partnership agreement; and

(5) the means and conditions for approving a transaction

under Chapter 3 (relating to entity transactions).

(b) Title applies generally.--To the extent the partnership

agreement does not provide for a matter described in subsection

(a), this title governs the matter.

(c) Limitations.--A partnership agreement may not do any of

the following:

(1) Vary a provision of Chapter 1 (relating to general

provisions) or Subchapter A of Chapter 2 (relating to names).

(2) Vary the right of a partner to approve a merger,

interest exchange, conversion, division or domestication

under section 333(a)(2) (relating to approval of merger),

343(a)(2) (relating to approval of interest exchange), 353(a)

(2) 353(A)(3) (relating to approval of conversion), 363(a)(2)

(relating to approval of division) or 373(a)(2) (relating to

approval of domestication).

(3) Vary the required contents of a plan of merger under

section 332(a) (relating to plan of merger), plan of interest

exchange under section 342(a) (relating to plan of interest

exchange), plan of conversion under section 352(a) (relating

to plan of conversion), plan of division under section 362(a)

(relating to plan of division) or plan of domestication under

section 372(a) (relating to plan of domestication).

(4) Vary a provision of Chapter 81 (relating to general

provisions) or 82 (relating to limited liability partnerships

and limited liability limited partnerships) , EXCEPT AS

PROVIDED IN SUBSECTION (D) .

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(5) Vary the provisions of section 8411(b), (c) and (d)

(relating to short title and application of chapter).

(6) Vary the law applicable under section 8414 8414(A)

(1) (relating to governing law).

(7) Vary any requirement, procedure or other provision

of this title pertaining to:

(i) registered offices; or

(ii) the department, including provisions pertaining

to documents authorized or required to be delivered to

the department for filing under this title.

(8) Vary the provisions of section 8437 (relating to

actions by and against partnership and partners).

(9) Unreasonably restrict the duties and rights under

section 8446 (relating to rights to information), except as

provided in subsection (d).

(10) Eliminate the duty of loyalty provided for under

section 8447(b)(1)(i) or (ii) or (2) (relating to standards

of conduct for partners) or the duty of care, except as

provided in subsection (d).

(11) Vary the contractual obligation of good faith and

fair dealing under section 8447(d), except as provided under

subsection (d).

(12) Unreasonably restrict the right of a person to

maintain an action under section 8448(b) (relating to actions

by partnership and partners).

(13) Provide indemnification against, or relieve or

exonerate a person from, liability for an action that has

been determined by a court to constitute recklessness,

willful misconduct or a knowing violation of law. OR

EXONERATION IN VIOLATION OF THE LIMITATIONS IN SECTIONS

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8441(M) (RELATING TO PARTNER'S RIGHTS AND DUTIES) AND

8447(I).

(14) Vary the power of a person to dissociate as a

partner under section 8462(a) (relating to power to

dissociate as partner and wrongful dissociation), except to

require that the notice under section 8461(1) (relating to

events causing dissociation) be in record form.

( 15 ) Vary the causes of dissolution specified in section

8481(4) 8481(A)(4) or (5) (relating to events causing

dissolution).

( 16 ) Vary the requirement to wind up the partnership's

business as specified in section 8482(a), (b)(1) and (d)

(relating to winding up and filing of optional certificates).

(17) Except as provided in section 8417(b) (relating to

amendment and effect of partnership agreement), restrict the

rights under this title of a person other than a partner.

(d) Permitted terms.--Subject to subsection (c)(13), the

following rules apply:

(1) The partnership agreement may:

(i) specify the method by which a specific act or

transaction that would otherwise violate the duty of

loyalty may be authorized or ratified by one or more

disinterested and independent persons after full

disclosure of all material facts;

(ii) alter the prohibition in section 8231(a)(2)

(relating to limitations on distributions by limited

liability partnership ) so that the prohibition requires

only that the partnership's total assets not be less than

the sum of its total liabilities; and

(iii) impose reasonable restrictions on the

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availability and use of information obtained under

section 8446 and may define appropriate remedies,

including liquidated damages, for a breach of any

reasonable restriction on use.

(2) To the extent the partnership agreement expressly

relieves a partner of a responsibility that the partner would

otherwise have under this title and imposes the

responsibility on one or more other partners, the agreement

also may eliminate or limit any fiduciary duty of the partner

relieved of the responsibility which would have pertained to

the responsibility.

(3) If not manifestly unreasonable, the partnership

agreement may:

(i) alter the aspects of the duty of loyalty stated

in section 8447(b)(1)(i) or (ii) or (2);

(ii) prescribe the standards by which the

performance of the contractual obligation of good faith

and fair dealing under section 8447(d) is to be measured;

(iii) identify specific types or categories of

activities that do not violate the duty of loyalty;

(iv) alter the duty of care; and

(v) alter or eliminate any other fiduciary duty.

(e) Determination of manifest unreasonableness.--The court

shall decide as a matter of law whether a term of a partnership

agreement is manifestly unreasonable under subsection (d)(3).

The court:

(1) shall make its determination as of the time the

challenged term became part of the partnership agreement and

by considering only circumstances existing at that time; and

(2) may invalidate the term only if, in light of the

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purposes and business of the partnership, it is readily

apparent that:

(i) the objective of the term is unreasonable; or

(ii) the term is an unreasonable means to achieve

the term's objective.

§ 8416. Application of partnership agreement.

(a) Partnership bound.--A partnership is bound by and may

enforce the partnership agreement, whether or not the

partnership has itself manifested assent to the agreement.

(b) Deemed assent.--A person that becomes a partner is

deemed to assent to the partnership agreement.

(c) Preformation agreement.--Two or more persons intending

to become the initial partners of a partnership may make an

agreement providing that upon the formation of the partnership

the agreement will become the partnership agreement.

(d) Cross reference.--See section 8422(a) (relating to

formation of partnership).

§ 8417. Amendment and effect of partnership agreement.

(a) Approval of amendments.--A partnership agreement may

specify that its amendment requires the approval of a person

that is not a party to the agreement or the satisfaction of a

condition. An amendment is ineffective if its adoption does not

include the required approval or satisfy the specified

condition. See section 8441(j) (relating to partner's rights and

duties).

(b) Obligations to nonpartners.--The obligations of a

partnership and its partners to a person in the person's

capacity as a transferee or person dissociated as a partner are

governed by the partnership agreement. Except as provided in

section 8445(d) (relating to sharing of and right to

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distribution before dissolution) or in a court order issued

under section 8454(b)(2) (relating to charging order) to

effectuate a charging order, an amendment to the partnership

agreement made after a person becomes a transferee or is

dissociated as a partner:

(1) is effective with regard to any debt, obligation or

other liability of the partnership or its partners to the

person in the person's capacity as a transferee or person

dissociated as a partner; and

(2) is not effective to the extent the amendment:

(i) imposes a new debt, obligation or other

liability on the transferee or person dissociated as a

partner; or

(ii) prejudices the rights under section 8471

(relating to purchase of interest of person dissociated

as partner) of a person that dissociated as a partner

before the amendment was made.

(c) Provisions in filed documents.--If a document delivered

by a partnership to the department for filing becomes effective

and contains a provision that would be ineffective under section

8415(c) or (d)(3) (relating to contents of partnership

agreement) if contained in the partnership agreement, the

provision is ineffective in the document.

(d) Conflicts with partnership agreement.--Subject to

subsection (c), if a document delivered by a partnership to the

department for filing becomes effective and conflicts with a

provision of the partnership agreement:

(1) the agreement prevails as to partners, persons

dissociated as partners and transferees; and

(2) the document prevails as to other persons to the

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extent they reasonably rely on the document.

(e) Prohibition of oral amendments.--If a provision of a

partnership agreement in record form provides that the

partnership agreement cannot be amended, modified or rescinded

except in record form, an oral agreement, amendment,

modification or rescission shall not be enforceable.

§ 8418. Signing of filed documents.

(a) Required signatures.-- A EXCEPT AS PROVIDED IN THIS

TITLE, A document delivered to the department for filing under

this title relating to a partnership must be signed as follows:

(1) Except as provided under paragraphs (2) and (3), a

document signed on behalf of a partnership must be signed by

a person authorized by the partnership.

(2) A document filed on behalf of a dissolved

partnership that has no partner must be signed by the person

winding up the partnership's business under section 8482(c)

(relating to winding up and filing of optional certificates)

or a person appointed under section 8482(d) to wind up the

business.

(3) A certificate of denial by a person under section

8434 (relating to certificate of denial) must be signed by

that person.

(4) Any other document delivered on behalf of a person

to the department for filing must be signed by that person.

(b) Cross reference.--See section 142 (relating to effect of

signing filings).

§ 8419. Liability of general partner or other person for false

or missing information in filed document.

(a) General rule.--If a document delivered to the department

for filing under this title and filed by the department contains

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a materially false statement or fails to state a material fact

required to be stated, a person that suffers loss by reasonable

reliance on the statement or failure to state a material fact

may recover damages for the loss from:

(1) a person that signed the document or caused another

to sign it on the person's behalf and knew there was false or

missing information in the document at the time it was

signed; and

(2) subject to subsection (b), a partner if:

(i) the document was delivered for filing on behalf

of the partnership; and

(ii) the partner knew or had notice there was false

or missing information for a reasonably sufficient time

before the document was relied upon so that, before the

reliance, the partner reasonably could have:

(A) filed a petition under section 144 (relating

to signing and filing pursuant to judicial order); or

(B) delivered to the department for filing a

statement of correction under section 138 (relating

to statement of correction) or a statement of

abandonment under section 141 (relating to

abandonment of filing before effectiveness).

(b) Partner relieved of responsibility.--To the extent the

partnership agreement expressly relieves a partner of

responsibility for maintaining the accuracy of information

contained in records delivered on behalf of the partnership to

the department for filing under this title and imposes that

responsibility on one or more other partners, the liability

stated in subsection (a)(2) applies to those other partners and

not to the partner that the partnership agreement relieves of

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the responsibility.

(c) Cross reference.--See section 143 (relating to liability

for inaccurate information in filing).

SUBCHAPTER B

NATURE OF PARTNERSHIP

Sec.

8421. Partnership as entity.

8422. Formation of partnership.

8423. Partnership property.

8424. When property is partnership property.

§ 8421. Partnership as entity.

(a) General rule.--A partnership is an entity distinct from

its partners.

(b) Limited liability partnership.--A partnership is the

same entity regardless of whether the partnership has a

statement of registration in effect under section 8201 (relating

to scope).

§ 8422. Formation of partnership.

(a) General rule.--Except as provided in subsection (b), the

association of two or more persons to carry on as co-owners a

business for profit forms a partnership, whether or not the

persons intend to form a partnership.

(b) Excluded associations.--An association formed under a

statute other than this chapter, a predecessor statute or a

comparable statute of another jurisdiction is not a partnership

under this chapter.

(c) Rules for determining formation of partnership.--In

determining whether a partnership is formed, the following rules

apply:

(1) Joint tenancy, tenancy in common, tenancy by the

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entireties, joint property, common property or part ownership

does not by itself establish a partnership, even if the co-

owners share profits made by the use of the property.

(2) The sharing of gross returns does not by itself

establish a partnership, even if the persons sharing them

have a joint or common right or interest in property from

which the returns are derived.

(3) A person who receives a share of the profits of a

business is presumed to be a partner in the business, unless

the profits were received in payment:

(i) of a debt by installments or otherwise;

(ii) for services as an independent contractor or of

wages or other compensation to an employee;

(iii) of rent;

(iv) of an annuity or other retirement or health

benefit to a deceased or retired partner or a

beneficiary, representative or designee of a deceased or

retired partner;

(v) of interest or other charge on a loan, even if

the amount of payment varies with the profits of the

business, including a direct or indirect present or

future ownership of the collateral, rights to income,

proceeds or increase in value derived from the

collateral; or

(vi) for the sale of the goodwill of a business or

other property by installments or otherwise.

(d) Cross reference.--See section 8416(c) (relating to

application of partnership agreement).

§ 8423. Partnership property.

Property acquired by a partnership is property of the

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partnership and not of the partners individually.

§ 8424. When property is partnership property.

(a) General rule.--Property is partnership property if

acquired in the name of:

(1) the partnership; or

(2) one or more partners with an indication in the

instrument transferring title to the property of the person's

capacity as a partner or of the existence of a partnership

but without an indication of the name of the partnership.

(b) Property acquired in name of partnership.--Property is

acquired in the name of the partnership by a transfer to:

(1) the partnership in its name; or

(2) one or more partners in their capacity as partners

in the partnership, if the name of the partnership is

indicated in the instrument transferring title to the

property.

(c) Property purchased with partnership assets.--Property is

presumed to be partnership property if purchased with

partnership assets, even if not acquired in the name of the

partnership or of one or more partners with an indication in the

instrument transferring title to the property of the person's

capacity as a partner or of the existence of a partnership.

(d) Property acquired in name of partner.--Property acquired

in the name of one or more of the partners, without an

indication in the instrument transferring title to the property

of the person's capacity as a partner or of the existence of a

partnership and without use of partnership assets, is presumed

to be separate property, even if used for partnership purposes.

SUBCHAPTER C

RELATIONS OF PARTNERS TO PERSONS

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DEALING WITH PARTNERSHIP

Sec.

8431. Partner agent of partnership.

8432. Transfer of partnership property.

8433. Certificate of partnership authority.

8434. Certificate of denial.

8435. Partnership liable for partner's actionable conduct.

8436. Partner's liability.

8437. Actions by and against partnership and partners.

8438. Liability of purported partner.

§ 8431. Partner agent of partnership.

Subject to the effect of a certificate of partnership

authority under section 8433 (relating to certificate of

partnership authority), the following rules apply:

(1) Each partner is an agent of the partnership for the

purpose of its business. An act of a partner, including the

signing of an instrument in the partnership name, for

apparently carrying on in the ordinary course the partnership

business or business of the kind carried on by the

partnership binds the partnership, unless the partner did not

have authority to act for the partnership in the particular

matter and the person with which the partner was dealing knew

or had notice that the partner lacked authority.

(2) An act of a partner which is not apparently for

carrying on in the ordinary course the partnership's business

or business of the kind carried on by the partnership binds

the partnership only if the partner had actual authority to

take the action.

§ 8432. Transfer of partnership property.

(a) General rule.--Partnership property may be transferred

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as follows:

(1) Subject to the effect of a certificate of

partnership authority under section 8433 (relating to

certificate of partnership authority), partnership property

held in the name of the partnership may be transferred by an

instrument of transfer signed by a partner in the partnership

name.

(2) Partnership property held in the name of one or more

partners with an indication in the instrument transferring

the property to them of their capacity as partners or of the

existence of a partnership, but without an indication of the

name of the partnership, may be transferred by an instrument

of transfer signed by the persons in whose name the property

is held.

(3) Partnership property held in the name of one or more

persons other than the partnership, without an indication in

the instrument transferring the property to them of their

capacity as partners or of the existence of a partnership,

may be transferred by an instrument of transfer signed by the

persons in whose name the property is held.

(b) Recovery of property by partnership.--A partnership may

recover partnership property from a transferee only if it proves

that the signing of the instrument of initial transfer did not

bind the partnership under section 8431 (relating to partner

agent of partnership) and:

(1) as to a subsequent transferee who gave value for

property transferred under subsection (a)(1) and OR (2),

proves that the subsequent transferee knew or had been

notified NOTICE that the person who signed the instrument of

initial transfer lacked authority to bind the partnership; or

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(2) as to a transferee who gave value for property

transferred under subsection (a)(3), proves that the

transferee knew or had been notified NOTICE that the property

was partnership property and that the person who signed the

instrument of initial transfer lacked authority to bind the

partnership.

(c) Subsequent transferees.--A partnership may not recover

partnership property from a subsequent transferee if the

partnership would not have been entitled to recover the property

under subsection (b) from any earlier transferee of the

property.

(d) Sole partner.--If one person holds all the interests in

a partnership, all the partnership property vests in that

person. The person may sign a document in the name of the

partnership to evidence vesting of the property in that person

and may file or record the document.

§ 8433. Certificate of partnership authority.

(a) General rule.--A partnership may deliver to the

department for filing a certificate of partnership authority.

The certificate:

(1) must include the name of the partnership and:

(i) if the partnership is not a registered foreign

limited liability partnership, the street and mailing

addresses of its principal office; or

(ii) if the partnership is a registered foreign

limited liability partnership, subject to section 109

(relating to name of commercial registered office

provider in lieu of registered address), the address,

including street and number, if any, of its registered

office;

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(2) with respect to any position that exists in or with

respect to the partnership, may state the authority, or

limitations on the authority, of all persons holding the

position to:

(i) sign an instrument transferring real property

held in the name of the partnership; or

(ii) enter into other transactions on behalf of, or

otherwise act for or bind, the partnership; and

(3) may state the authority, or limitations on the

authority, of a specific person to:

(i) sign an instrument transferring real property

held in the name of the partnership; or

(ii) enter into other transactions on behalf of, or

otherwise act for or bind, the partnership.

(b) Amendment or cancellation.--To amend or cancel a

certificate of authority filed by the department, a partnership

must deliver to the department for filing an amendment or

cancellation stating:

(1) the name of the partnership;

(2) if the partnership is not a registered foreign

limited liability partnership, the street and mailing

addresses of the partnership's principal office;

(3) if the partnership is a registered foreign limited

liability partnership, subject to section 109, the address,

including street and number, if any, of its registered

office;

(4) the date the certificate being affected became

effective; and

(5) the contents of the amendment or a statement that

the certificate is canceled.

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(c) Effect of certificate.--A certificate of authority:

(1) affects only the power of a person to bind a

partnership to persons that are not partners; and

(2) is not binding on the department for purposes of the

administration of this title or any other provision of law.

(d) Effect of limitation on authority.--Subject to

subsection (c) and section 8413(d)(1) (relating to knowledge and

notice), and except as provided in subsections (f), (g) and (h),

a limitation on the authority of a person or a position

contained in an effective certificate of authority is not by

itself evidence of any person's knowledge or notice of the

limitation.

(e) Authority not relating to real property.--A grant of

authority not pertaining to transfers of real property and

contained in an effective certificate of authority is conclusive

in favor of a person that gives value in reliance on the grant,

except to the extent that if UNLESS WHEN the person gives value:

(1) the person has knowledge to the contrary;

(2) the certificate has been canceled or restrictively

amended under subsection (b); or

(3) a limitation on the grant is contained in another

certificate of authority that became effective after the

certificate containing the grant became effective.

(f) Authority relating to real property.--An effective

certificate of authority that grants authority to transfer real

property held in the name of the partnership, a certified copy

of which certificate is recorded in the office of the recorder

of deeds for the county in which the real property is located,

is conclusive in favor of a person that gives value in reliance

on the grant without knowledge to the contrary, except to the

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extent that when the person gives value:

(1) the certificate has been canceled or restrictively

amended under subsection (b), and a certified copy of the

cancellation or restrictive amendment has been recorded in

the office of the recorder of deeds for the county in which

the real property is located; or

(2) a limitation on the grant is contained in another

certificate of authority that became effective after the

certificate containing the grant became effective and a

certified copy of the later-effective certificate is recorded

in the office of the recorder of deeds for the county in

which the real property is located.

(g) Constructive notice KNOWLEDGE of limitation.--Subject to

subsection (c), if a certified copy of an effective certificate

containing a limitation on the authority to transfer real

property held in the name of a partnership is recorded in the

office of the recorder of deeds for the county in which real

property is located, all persons are deemed to know of the

limitation.

(h) Effect of certificate of dissolution.--Subject to

subsection (i), an effective certificate of dissolution is a

cancellation of any filed certificate of authority for the

purposes of subsection (f) and is a limitation on authority for

purposes of subsection (g).

(i) Post-dissolution certificate of authority.--After a

certificate of dissolution becomes effective, a partnership may

deliver to the department for filing and, if appropriate, may

record a certificate of authority that is designated as a post-

dissolution certificate of authority. The certificate operates

as provided in subsections (f) and (g).

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(j) Cancellation by operation of law.--Unless canceled

earlier, an effective certificate of authority is canceled by

operation of law five years after the date on which the

certificate, or its most recent amendment, becomes effective.

The cancellation is effective without recording under subsection

(f) or (g).

(k) Effect of certificate of denial.--An effective

certificate of denial under section 8434 (relating to

certificate of denial):

(1) operates as a restrictive amendment under this

section and a certified copy may be recorded as provided in

subsection (f)(1) by the partnership or the person that

delivered the certificate of denial to the department for

filing; and

(2) affects only the authority of a person to bind a

partnership with respect to persons that are not partners.

(l) Foreign partnerships.--A foreign partnership, regardless

of whether it is registered to do business in this Commonwealth,

may deliver a certificate of authority to the department for

filing and may record a copy as provided in this section in the

same manner and with the same effect is if it were a domestic

partnership.

(m) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8418 (relating to signing of filed documents).

Section 8482 (relating to winding up and filing of

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optional certificates).

§ 8434. Certificate of denial.

(a) General rule.--A person named in a filed certificate of

authority granting that person authority may deliver to the

department for filing a certificate of denial that:

(1) provides the name of the partnership and:

(i) if the partnership is not a registered foreign

limited liability partnership, the street and mailing

addresses of its principal office; or

(ii) if the partnership is a registered foreign

limited liability partnership, subject to section 109

(relating to name of commercial registered office

provider in lieu of registered address), the address,

including street and number, if any, of its registered

office;

(2) states the caption of the certificate of authority

to which the certificate of denial pertains; and

(3) denies the grant of authority.

(b) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8418 (relating to signing of filed documents).

§ 8435. Partnership liable for partner's actionable conduct.

(a) General rule.--A partnership is liable for loss or

injury caused to a person, or for a penalty incurred, as a

result of a wrongful act or other actionable conduct, of a

partner acting in the ordinary course of business of the

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partnership or with the actual or apparent authority of the

partnership.

(b) Misapplication of property.--If, in the course of the

partnership's business or while acting with actual or apparent

authority of the partnership, a partner receives or causes the

partnership to receive money or property of a person not a

partner and the money or property is misapplied by a partner,

the partnership is liable for the loss.

§ 8436. Partner's liability.

(a) General rule.--Except as provided in subsection (b) or

section 8204 (relating to limitation on liability of partners),

all partners are jointly and severally liable for all debts,

obligations and other liabilities of the partnership unless

otherwise agreed by the claimant or provided by law.

(b) Preexisting liabilities.--A person that becomes a

partner is not personally liable for a debt, obligation or other

liability of the partnership incurred before the person became a

partner.

§ 8437. Actions by and against partnership and partners.

(a) Partnership as party.--A partnership may sue and be sued

in the name of the partnership.

(b) Partner as party.--To the extent not inconsistent with

section 8436 (relating to partner's liability), a partner may be

joined in an action against the partnership or named in a

separate action.

(c) Judgment against partnership only.--A judgment against a

partnership:

(1) is not by itself a judgment against a partner; and

(2) except as provided in subsection (d), may not be

satisfied from a partner's assets.

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(d) Judgment against partnership and partner.--If there is a

judgment against a partnership and a partner on the same claim,

the judgment creditor may levy execution against the assets of

the partner if both of the following apply:

(1) The partner is personally liable for the claim under

section 8436.

(2) One of the following subparagraphs applies:

(i) A writ of execution on the judgment against the

partnership has been returned unsatisfied in whole or in

part.

(ii) The partnership is a debtor in bankruptcy.

(iii) The partner has agreed that the creditor need

not exhaust partnership assets.

(iv) A court grants permission to levy execution

based on a finding that:

(A) partnership assets subject to execution are

clearly insufficient to satisfy the judgment;

(B) exhaustion of partnership assets is

excessively burdensome; or

(C) the grant of permission is an appropriate

exercise of the court's equitable powers.

(v) Liability is imposed on the partner by law or

contract independent of the existence of the partnership.

(e) Liability for representations.--This section also

applies to any debt, liability or other obligation of a

partnership which results from a representation by a partner or

purported partner under section 8438 (relating to liability of

purported partner).

(f) Cross reference.--See section 8415(c)(8) (relating to

contents of partnership agreement).

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§ 8438. Liability of purported partner.

(a) General rule.--If a person, by words or conduct,

purports to be a partner, or consents to being represented by

another as a partner, in a partnership or with one or more

persons not partners, the purported partner is liable to a

person to whom the representation is made, if that person,

relying on the representation, enters into a transaction with

the actual or purported partnership. If the representation,

either by the purported partner or by a person with the

purported partner's consent, is made in a public manner, the

purported partner is liable to a person who relies upon the

purported partnership even if the purported partner is not aware

of being held out as a partner to the claimant. If partnership

liability results, the purported partner is liable with respect

to that liability as if the purported partner were a partner. If

no partnership liability results, the purported partner is

jointly and severally liable, with any other person consenting

to the representation, with respect to that liability.

(b) Authority of purported partner.--If a person is

represented in the manner described in subsection (a) to be a

partner in an existing partnership, or with one or more persons

not partners, the purported partner is an agent of persons

consenting to the representation to bind them to the same extent

and in the same manner as if the purported partner were a

partner with respect to persons who enter into transactions in

reliance upon the representation. If all the partners of the

existing partnership consent to the representation, a

partnership act or obligation results. If fewer than all the

partners of the existing partnership consent to the

representation, the person acting and the partners consenting to

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the representation are jointly and severally liable.

(c) Effect of certificate of partnership authority.--A

person is not liable as a partner merely because the person is

named by another as a partner in a certificate of partnership

authority.

(d) No effect of failure to disclaim authority.--A person

does not continue to be liable as a partner merely because of a

failure to file a certificate of dissociation or to amend a

certificate of partnership authority to indicate the person's

dissociation as a partner.

(e) Nonliability of persons not partners.--Except as

provided in subsections (a) and (b), persons who are not

partners as to each other are not liable as partners to other

persons.

SUBCHAPTER D

RELATIONS OF PARTNERS TO EACH OTHER

AND TO PARTNERSHIP

Sec.

8441. Partner's rights and duties.

8442. Becoming a partner.

8443. Form of contribution.

8444. Liability for contribution.

8445. Sharing of and right to distribution before dissolution.

8446. Rights to information.

8447. Standards of conduct for partners.

8448. Actions by partnership and partners.

8449. Continuation of partnership beyond definite term or

particular undertaking.

§ 8441. Partner's rights and duties.

(a) Distributions and losses.--Each partner is entitled to

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an equal share of distributions and, except in the case of a

limited liability partnership, is chargeable with a share of the

partnership losses in proportion to the partner's share of

distributions. SHARE IN DISTRIBUTIONS AS PROVIDED IN SECTION

8445 (RELATING TO SHARING OF AND RIGHT TO DISTRIBUTION BEFORE

DISSOLUTION).

(b) Reimbursement.--A partnership shall reimburse a partner

for:

(1) Any payment made by the partner in the course of

the partner's activities on behalf of the partnership, if the

partner complied with this section and section 8447 (relating

to standards of conduct for partners) in making the payment.

(2) An advance to the partnership beyond the amount of

capital the partner agreed to contribute.

(c) Indemnification.--A partnership shall indemnify and hold

harmless a person with respect to any claim or demand against

the person and any debt, obligation or other liability incurred

by the person by reason of the person ' s former or present

capacity as partner, if the claim, demand, debt, obligation or

other liability does not arise from the person's breach of this

section or section 823 2 (relating to liability for improper

distributions by limited liability partnership) or 8447.

(d) Advances.--In the ordinary course of its business, a

partnership may advance reasonable expenses, including attorney

fees and costs, incurred by a person in connection with a claim

or demand against the person by reason of the person's former or

present capacity as a partner, if the person promises to repay

the partnership if the person ultimately is determined not to be

entitled to be indemnified under subsection (c).

(e) Insurance.--A partnership may purchase and maintain

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insurance on behalf of a partner against liability asserted

against or incurred by the partner in that capacity or arising

from that status even if, under section 8415(c)(13) (relating to

contents of partnership agreement) SUBSECTION (M) , the

partnership agreement could not eliminate or limit the person's

liability to the partnership for the conduct giving rise to the

liability.

(f) Loan to partnership.--A payment or advance made by a

partner which gives rise to a partnership obligation under

subsection (b) constitutes a loan to the partnership which

accrues interest from the date of the payment or advance.

(g) Management rights.--Each partner has equal rights in the

management and conduct of the partnership's business.

(h) Rights to property.--A partner may use or possess

partnership property only on behalf of the partnership.

(i) Compensation for services.--A partner is not entitled to

remuneration for services performed for the partnership, except

for reasonable compensation for services rendered in winding up

the business of the partnership.

(j) Required approvals by partners.--A difference arising as

to a matter in the ordinary course of business of a partnership

may be decided by a majority of the partners. An act outside the

ordinary course of business of a partnership and an amendment to

the partnership agreement may be undertaken only with the

affirmative vote or consent of all the partners.

(k) Nonexclusivity.--The rights provided by subsections (b),

(c), (d) and (e) shall not be deemed exclusive of any other

rights to which a person seeking reimbursement, indemnification

advancement of expenses or insurance may be entitled under the

partnership agreement, vote of partners, contract or otherwise,

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both as to action in his official capacity and as to action in

another capacity while holding that position. Section 8447(f)

shall be applicable to a vote, contract or other action under

this subsection. A partnership may create a fund of any nature,

which may, but need not be, under the control of a trustee, or

otherwise secure or insure in any manner its indemnification

obligations, whether arising under this section or otherwise.

(l) Grounds.--Indemnification under subsection (k) may be

granted for any action taken and may be made whether or not the

partnership would have the power to indemnify the person under

any other provision of law except as provided in section 8415(c)

(13) THIS SECTION and whether or not the indemnified liability

arises or arose from any threatened, pending or completed action

by or in the right of the partnership. Indemnification under

subsection (k) is declared to be consistent with the public

policy of this Commonwealth.

(M) LIMITATION.--INDEMNIFICATION UNDER THIS SECTION SHALL

NOT BE MADE IN ANY CASE WHERE THE ACT GIVING RISE TO THE CLAIM

FOR INDEMNIFICATION IS DETERMINED BY A COURT TO CONSTITUTE

RECKLESSNESS, WILLFUL MISCONDUCT OR A KNOWING VIOLATION OF LAW.

§ 8442. Becoming a partner.

(a) Upon formation .--Upon formation of a partnership, a

person becomes a partner under section 8422(a) (relating to

formation of partnership).

(b) After formation.--After formation of a partnership, a

person becomes a partner:

(1) as provided in the partnership agreement;

(2) as a result of a transaction effective under Chapter

3 (relating to entity transactions); or

(3) with the affirmative vote or consent of all the

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partners.

(c) Noneconomic partners.--A person may become a partner

without:

(1) acquiring a transferable interest; or

(2) making or being obligated to make a contribution to

the partnership.

(d) Nature of interest.--The interest of a partner in a

partnership is personal property.

§ 8443. Form of contribution.

A contribution may consist of:

(1) property transferred to, services performed for or

another benefit provided to the partnership;

(2) an agreement to transfer property to, perform

services for or provide another benefit to the partnership;

or

(3) any combination of items listed in paragraphs (1)

and (2).

§ 8444. Liability for contribution.

(a) Obligation not excused.--A person's obligation to make a

contribution to a partnership is not excused by the person's

death, disability, termination or other inability to perform

personally.

(b) Substitute payment.--If a person does not fulfill an

obligation to make a contribution other than money, the person

is obligated, at the option of the partnership, to contribute

money equal to the value, as stated in the records of the

partnership, of the part of the contribution which has not been

made.

(c) Compromise of obligation.--The obligation of a person to

make a contribution may be compromised only by the affirmative

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vote or consent of all the partners. If a creditor of a limited

liability partnership extends credit or otherwise acts in

reliance on an obligation described under subsection (a) without

knowledge or notice of a compromise under this subsection, the

creditor may enforce the obligation.

§ 8445. Sharing of and right to distribution before

dissolution.

(a) Distributions before dissolution.--Any distribution made

by a partnership before its dissolution and winding up shall be

in equal shares among partners and persons dissociated as

partners whose interests in the partnership have not been

purchased under section 8471 (relating to purchase of interest

of person dissociated as partner), except to the extent

necessary to comply with a transfer effective under AS PROVIDED

IN section 8453 8453(B) (relating to transfer of transferable

interest) or TO THE EXTENT NECESSARY TO COMPLY WITH A charging

order in effect under section 8454 (relating to charging order).

(b) No right to distribution.--Subject to section 8471, a

person has a right to a distribution before the dissolution and

winding up of a partnership only if the partnership decides to

make an interim distribution.

(c) Form of distribution.--A person does not have a right to

demand or receive a distribution from a partnership in any form

other than money. Except as provided in section 8486 (relating

to disposition of assets in winding up and required

contributions), a partnership may distribute an asset in kind

only if each part of the asset is fungible with each other part

and each person receives a percentage of the asset equal in

value to the person's share of distributions.

(d) Status as creditor.--If a partner or transferee becomes

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entitled to receive a distribution, the partner or transferee

has the status of, and is entitled to all remedies available to,

a creditor of the partnership with respect to the distribution.

The partnership's obligation to make a distribution is subject

to offset for any amount owed to the partnership by the partner

or a person dissociated as partner on whose account the

distribution is made.

§ 8446. Rights to information.

(a) Location of records.--A partnership shall keep its books

and records, if any, at its principal office.

(b) Right to inspection.--On reasonable notice, a partner

may inspect and copy during regular business hours, at a

reasonable location specified by the partnership, any record

maintained by the partnership regarding the partnership's

business, financial condition and other circumstances , to the

extent the information is material to the partner's rights and

duties under the partnership agreement or this title .

(c) Required MATERIAL information.--The partnership shall

furnish to each partner :

(1) , without demand, any information concerning the

partnership's business, financial condition and other

circumstances which the partnership knows and is material to

the proper exercise of the partner's rights and duties under

the partnership agreement or this title, except to the extent

the partnership can establish that it reasonably believes the

member already knows the information . ; and

(2) on demand, any other information concerning the

partnership's business, financial condition and other

circumstances, except to the extent the demand or the

information demanded is unreasonable or otherwise improper

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under the circumstances.

(d) Duty of partners.--The duty to furnish information under

subsection (c) also applies to each partner to the extent the

partner knows any of the information described in subsection

(c).

(e) Rights after dissociation.--Subject to subsection (j),

within 10 days after receipt by a partnership of a demand made

in record form, a person dissociated as a partner may have

access to information to which the person was entitled while a

partner if:

(1) the information pertains to the period during which

the person was a partner;

(2) the person seeks the information in good faith; and

(3) the person satisfies the requirements imposed on a

partner by subsection (b). THE INFORMATION IS MATERIAL TO THE

PERSON'S RIGHTS AND DUTIES UNDER THE PARTNERSHIP AGREEMENT OR

THIS TITLE.

(f) Partnership response to demand.--Within 10 days after

receiving a demand under subsection (e), the partnership shall,

in record form, inform the person that made the demand of:

(1) the information that the partnership will provide in

response to the demand and when and where the partnership

will provide the information; and

(2) the partnership's reasons for declining, if the

partnership declines to provide any demanded information.

(g) Costs of copying.--A partnership may charge a person

that makes a demand under this section the reasonable costs of

copying , limited to the costs of labor and material .

(h) Exercise of rights.--A partner or person dissociated as

a partner may exercise the rights under this section through an

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agent or, in the case of an incapacitated person, a guardian.

Any restriction or condition imposed by the partnership

agreement or under subsection (j) applies both to the agent or

guardian and to the partner or person dissociated as a partner.

(i) No rights of transferee.--Subject to section 8455

(relating to power of personal representative of deceased

partner), the rights under this section do not extend to a

person as transferee.

(j) Reasonable restrictions permitted.--In addition to any

restriction or condition stated in its partnership agreement, a

partnership, as a matter within the ordinary course of its

business, may impose reasonable restrictions and conditions on

access to and use of information to be furnished under this

section, including designating information confidential and

imposing nondisclosure and safeguarding obligations on the

recipient. In a dispute concerning the reasonableness of a

restriction under this subsection, the partnership has the

burden of proving reasonableness.

(k) Cross reference.--See section 8415 (relating to contents

of partnership agreement).

§ 8447. Standards of conduct for partners.

(a) General rule.--A partner owes to the partnership and the

other partners the duties of loyalty and care stated in

subsections (b) and (c).

(b) Duty of loyalty.--The fiduciary duty of loyalty of a

partner includes the duties:

(1) to account to the partnership and hold as trustee

for it any property, profit or benefit derived by the

partner:

(i) in the conduct or winding up of the

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partnership's business;

(ii) from a use by the partner of the partnership's

property; or

(iii) from the appropriation of a partnership

opportunity;

(2) to refrain from dealing with the partnership in the

conduct or winding up of the partnership business as or on

behalf of a person having an interest adverse to the

partnership; and

(3) to refrain from competing with the partnership in

the conduct of the partnership's business before the

dissolution of the partnership.

(c) Duty of care.--The duty of care of a partner in the

conduct or winding up of the partnership business is to refrain

from engaging in gross negligence, recklessness, willful

misconduct or a knowing violation of law.

(d) Good faith and fair dealing.--A partner shall discharge

the duties and obligations under this title or under the

partnership agreement and exercise any rights consistent with

the contractual obligation of good faith and fair dealing.

(e) Self-serving conduct.--A partner does not violate a duty

or obligation under this title or under the partnership

agreement solely because the partner's conduct furthers the

partner's own interest.

(f) Authorization or ratification.--All the partners may

authorize or ratify, after disclosure of all material facts, a

specific act or transaction that otherwise would violate the

duty of loyalty of a partner.

(g) Fairness as a defense.--It is a defense to a claim under

subsection (b)(2) and any comparable claim in equity or at

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common law that the transaction was fair to the partnership at

the time it was authorized or ratified under subsection (f).

(h) Rights and obligations in approved transaction.--If a

partner enters into a transaction with the partnership which

otherwise would be prohibited under subsection (b)(2), but the

transaction is authorized or ratified as provided under

subsection (f) or the partnership agreement, the partner's

rights and obligations arising from the transaction are the same

as those of a person that is not a partner.

(I) EXONERATION.--THE PARTNERSHIP AGREEMENT MAY PROVIDE THAT

A PARTNER SHALL NOT BE PERSONALLY LIABLE FOR MONETARY DAMAGES TO

THE PARTNERSHIP OR THE OTHER PARTNERS FOR A BREACH OF SUBSECTION

(C), EXCEPT THAT A PARTNER MAY NOT BE EXONERATED FOR AN ACT THAT

CONSTITUTES RECKLESSNESS, WILLFUL MISCONDUCT OR A KNOWING

VIOLATION OF LAW.

(i) (J) Cross reference.--See section 8415 (relating to

contents of partnership agreement).

§ 8448. Actions by partnership and partners.

(a) Action by partnership.--A partnership may maintain an

action against a partner for either of the following that causes

or threatens harm to the partnership:

(1) a breach of the partnership agreement; or

(2) the violation of a duty to the partnership.

(b) Action by partner.--A partner may maintain an action

against the partnership or another partner, with or without an

accounting as to partnership business, to enforce the partner's

rights and protect the partner's interests, including rights and

interests under the partnership agreement or this title or

arising independently of the partnership relationship.

(c) Claims not revived.--A right to an accounting on

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dissolution and winding up does not revive a claim barred by

law.

(d) Cross reference.--See section 8415(c)(12)(relating to

contents of partnership agreement).

§ 8449. Continuation of partnership beyond definite term or

particular undertaking.

(a) Effect of continuation.--If a partnership for a definite

term or particular undertaking is continued, without an express

agreement, after the expiration of the term or completion of the

undertaking, the rights and duties of the partners remain the

same as they were at the expiration or completion, so far as is

consistent with a partnership at will.

(b) Presumed agreement to continue partnership.--If the

partners, or those partners who habitually acted in the business

during the term or undertaking, continue the business without

any settlement or liquidation of the partnership, they are

presumed to have agreed that the partnership will continue.

SUBCHAPTER E

TRANSFERABLE INTERESTS AND RIGHTS

OF TRANSFEREES AND CREDITORS

Sec.

8451. Partner not co-owner of partnership property.

8452. Nature of transferable interest.

8453. Transfer of transferable interest.

8454. Charging order.

8455. Power of personal representative of deceased partner.

§ 8451. Partner not co-owner of partnership property.

A partner is not a co-owner of partnership property and has

no interest in partnership property which can be transferred,

either voluntarily or involuntarily.

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§ 8452. Nature of transferable interest.

(a) Personal property.--A transferable interest is personal

property.

(b) Only right that may be transferred.--A person may not

transfer to a person not a partner any rights in a partnership

other than a transferable interest.

§ 8453. Transfer of transferable interest.

(a) General rule.--A transfer, in whole or in part, of a

transferable interest:

(1) is permissible;

(2) does not by itself cause the dissociation of the

transferor as a partner or a dissolution and winding up of

the partnership's business; and

(3) subject to section 8455 (relating to power of

personal representative of deceased partner), does not

entitle the transferee to:

(i) participate in the management or conduct of the

partnership's business; or

(ii) except as provided in subsection (c), have

access to records or other information concerning the

partnership's business.

(b) Rights of transferee.--A transferee has the right to:

(1) receive, in accordance with the terms of the

transfer:

(i) distributions to which the transferor would

otherwise be entitled; and

(ii) allocations of income, gain, loss, deduction or

credit or similar item which would otherwise be made to

the transferor; and

(2) seek under section 8481 (a)(5) (relating to events

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causing dissolution) a judicial determination that it is

equitable to wind up the partnership business.

(c) Right to account on dissolution.--In a dissolution and

winding up of a partnership, a transferee is entitled to an

account of the partnership's transactions only from the date of

dissolution.

(d) Recognition of transferee's rights.--A partnership need

not give effect to a transferee's rights under this section

until the partnership knows or has notice of the transfer.

(e) Transfer restrictions.--A transfer of a transferable

interest in violation of a restriction on transfer contained in

the partnership agreement is ineffective if the intended

transferee has knowledge or notice of the restriction at the

time of transfer.

(f) Rights retained by transferor.--Except as provided in

section 8461(4)(ii) (relating to events causing dissociation),

if a partner transfers a transferable interest, the transferor

retains the rights of a partner other than the transferable

interest transferred and retains all the duties and obligations

of a partner.

§ 8454. Charging order.

(a) General rule.--On application by a judgment creditor of

a partner or transferee, a court may enter a charging order

against the transferable interest of the judgment debtor for the

unsatisfied amount of the judgment. A charging order constitutes

a lien on a judgment debtor's transferable interest and requires

the partnership to pay over to the person to which the charging

order was issued any distribution that otherwise would be paid

to the judgment debtor.

(b) Available relief.--To the extent necessary to effectuate

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the collection of distributions pursuant to a charging order in

effect under subsection (a), the court may:

(1) appoint a receiver of the distributions subject to

the charging order, with the power to make all inquiries the

judgment debtor might have made; and

(2) make all other orders necessary to give effect to

the charging order.

(c) Foreclosure.--Upon a showing that distributions under a

charging order will not pay the judgment debt within a

reasonable time, the court may foreclose the lien and order the

sale of the transferable interest. The purchaser at the

foreclosure sale obtains only the transferable interest, does

not thereby become a partner and is subject to section 8453

(relating to transfer of transferable interest).

(d) Satisfaction of judgment.--At any time before

foreclosure under subsection (c), the partner or transferee

whose transferable interest is subject to a charging order under

subsection (a) may extinguish the charging order by satisfying

the judgment and filing a certified copy of the satisfaction

with the court that issued the charging order.

(e) Purchase of rights.--At any time before foreclosure

under subsection (c), a partnership or one or more partners

whose transferable interests are not subject to the charging

order may pay to the judgment creditor the full amount due under

the judgment and thereby succeed to the rights of the judgment

creditor, including the charging order.

(f) Exemption laws preserved.--This chapter shall not

deprive any partner or transferee of the benefit of any

exemption law applicable to the transferable interest of the

partner or transferee.

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(g) Exclusive remedy.--This section provides the exclusive

remedy by which a person seeking, in the capacity of a judgment

creditor, to enforce a judgment against a partner or transferee

may satisfy the judgment from the judgment debtor's transferable

interest.

§ 8455. Power of personal representative of deceased partner.

If a partner dies, the deceased partner's personal

representative may exercise:

(1) the rights of a transferee provided in section

8453(c) (relating to transfer of transferable interest); and

(2) for purposes of settling the estate, the rights the

deceased partner had under section 8446 (relating to rights

to information).

SUBCHAPTER F

DISSOCIATION

Sec.

8461. Events causing dissociation.

8462. Power to dissociate as partner and wrongful dissociation.

8463. Effects of dissociation.

§ 8461. Events causing dissociation.

A person is dissociated as a partner when any of the

following occurs:

(1) The partnership knows or has notice of the person's

express will to withdraw as a partner, except that, if the

person has specified a withdrawal date later than the date

the partnership knew or had notice, on that later date.

(2) An event stated in the partnership agreement as

causing the person's dissociation occurs.

(3) The person is expelled as a partner pursuant to the

partnership agreement.

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(4) The person is expelled as a partner by the

affirmative vote or consent of all the other partners if:

(i) it is unlawful to carry on the partnership

business with the person as a partner;

(ii) there has been a transfer of all of the

person's transferable interest in the partnership, other

than:

(A) a transfer for security purposes; or

(B) a charging order in effect under section

8454 (relating to charging order) which has not been

foreclosed;

(iii) the person is an entity ASSOCIATION and:

(A) the partnership notifies the person that the

person will be expelled as a partner because:

(I) the person has filed a certificate of

dissolution or the equivalent;

(II) the person has been administratively

dissolved;

(III) the person's charter or the equivalent

has been revoked; or

(IV) the person's right to conduct business

has been suspended by the person's jurisdiction

of formation; and

(B) within 90 days after the notification:

(I) the certificate of dissolution or the

equivalent has not been withdrawn, rescinded or

revoked;

(II) the person has not been reinstated;

(III) the person's charter or the equivalent

has not been reinstated; or

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(IV) the person's right to conduct business

has not been reinstated; or

(iv) the person is an unincorporated entity

ASSOCIATION that has been dissolved and whose activities

and affairs are being wound up.

(5) On application by the partnership or another

partner, the person is expelled as a partner by judicial

order because the person:

(i) has engaged or is engaging in wrongful conduct

that has affected adversely and materially, or will

affect adversely and materially, the partnership's

business;

(ii) has committed willfully or persistently, or is

committing willfully or persistently, a material breach

of the partnership agreement or a duty or obligation

under section 8447 (relating to standards of conduct for

partners); or

(iii) has engaged or is engaging in conduct relating

to the partnership's business which makes it not

reasonably practicable to carry on the business with the

person as a partner.

(6) The person:

(i) becomes a debtor in bankruptcy;

(ii) makes an assignment for the benefit of

creditors; or

(iii) seeks, consents to or acquiesces in the

appointment of a trustee, receiver or liquidator of the

person or of all or substantially all the person's

property.

(7) In the case of an individual:

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(i) the individual dies;

(ii) a guardian for the individual is appointed; or

(iii) a court orders that the individual has

otherwise become incapable of performing the individual's

duties as a partner under this title or the partnership

agreement.

(8) In the case of a person that is a testamentary or

inter vivos trust or is acting as a partner by virtue of

being a trustee of such a trust, the trust's entire

transferable interest in the partnership is distributed.

(9) In the case of a person that is an estate or is

acting as a partner by virtue of being a personal

representative of an estate, the estate's entire transferable

interest in the partnership is distributed.

(10) In the case of a person that is not an individual,

the existence of the person terminates.

(11) The partnership participates in a merger under

Chapter 3 (relating to entity transactions) and:

(i) the partnership is not the surviving entity; or

(ii) otherwise as a result of the merger, the person

ceases to be a partner.

(12) The partnership participates in an interest

exchange under Chapter 3 and, as a result of the interest

exchange, the person ceases to be a partner.

(13) The partnership participates in a conversion under

Chapter 3.

(14) The partnership participates in a division under

Chapter 3 and:

(i) the partnership is not a resulting association;

or

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(ii) as a result of the division, the person ceases

to be a partner.

(15) The partnership participates in a domestication

under Chapter 3 and, as a result of the domestication, the

person ceases to be a partner.

(16) The partnership dissolves and completes winding up.

§ 8462. Power to dissociate as partner and wrongful

dissociation.

(a) Power to dissociate.--A person has the power to

dissociate as a partner at any time, rightfully or wrongfully,

by withdrawing as a partner by express will under section

8461(1) (relating to events causing dissociation).

(b) Wrongful dissociation.--A person's dissociation as a

partner is wrongful only if the dissociation:

(1) is in breach of an express provision of the

partnership agreement; or

(2) in the case of a partnership for a definite term or

particular undertaking, occurs before the expiration of the

term or the completion of the undertaking and:

(i) the person withdraws as a partner by express

will, unless the withdrawal follows within 90 days after

another person's dissociation by death or otherwise under

section 8461(6), (7), (8), (9) or (10) or wrongful

dissociation under this subsection;

(ii) the person is expelled as a partner by judicial

order under section 8461(5);

(iii) the person is dissociated under section

8461(6); or

(iv) in the case of a person that is not a trust

other than a business or statutory trust, an estate or an

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individual, the person is expelled or otherwise

dissociated because it willfully dissolved or terminated.

(c) Damages for wrongful dissociation.--A person that

wrongfully dissociates as a partner is liable to the partnership

and to the other partners for damages caused by the

dissociation. The liability is in addition to any debt,

obligation or other liability of the partner to the partnership

or the other partners.

(d) Cross reference.--See section 8415(c)(14) (relating to

contents of partnership agreement).

§ 8463. Effects of dissociation.

(a) Effects on partnership.--If a person's dissociation

results in a dissolution and winding up of the partnership

business, Subchapter H (relating to dissolution and winding up)

applies; otherwise, Subchapter G (relating to dissociation as

partner if business not wound up) applies.

(b) Effects on person dissociated as partner.--If a person

is dissociated as a partner:

(1) The person's right to participate in the management

and conduct of the partnership's business terminates, except

as provided under section 8482(c) (relating to winding up and

filing of optional certificates).

(2) The person's duties and obligations under section

8447 (relating to standards of conduct for partners) end with

regard to matters arising and events occurring after the

person's dissociation, except to the extent the partner

participates in winding up the partnership's business under

section 8482.

(3) Any transferable interest owned by the person in the

person's capacity as a general partner immediately before

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dissociation that is not subsequently purchased from the

person or canceled or exchanged in a transaction under

Chapter 3 (relating to entity transactions) is owned by the

person solely as a transferee.

(c) Existing obligations not discharged.--A person's

dissociation does not of itself discharge the person from any

debt, obligation or other liability to the partnership or the

other partners which the person incurred while a partner.

SUBCHAPTER G

DISSOCIATION AS PARTNER

IF BUSINESS NOT WOUND UP

Sec.

8471. Purchase of interest of person dissociated as partner.

8472. Power to bind and liability of person dissociated as

partner.

8473. Liability of person dissociated as partner to other

persons.

8474. Certificate of dissociation.

8475. Continued use of partnership name.

§ 8471. Purchase of interest of person dissociated as partner.

(a) Right to buyout.--If a person is dissociated as a

partner without the dissociation resulting in a dissolution and

winding up of the partnership business under section 8481

(relating to events causing dissolution), the partnership shall

cause the person's interest in the partnership to be purchased

for a buyout price determined under subsection (b).

(b) Buyout price.--The buyout price of the interest of a

person dissociated as a partner is the amount that would have

been distributable to the person under section 8486(b) (relating

to disposition of assets in winding up and required

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contributions) if, on the date of dissociation, the assets of

the partnership were sold and the partnership were wound up,

with the sale price equal to the greater of:

(1) the liquidation value; or

(2) the value based on a sale of the entire business as

a going concern without the person.

(c) Interest and offsets.--Interest accrues on the buyout

price from the date of dissociation to the date of payment,

except that damages for wrongful dissociation under section

8462(b) (relating to power to dissociate as partner and wrongful

dissociation) and all other amounts owing, whether or not

presently due, from the person dissociated as a partner to the

partnership must be offset against the buyout price.

(d) Indemnification.--A partnership shall defend, indemnify

and hold harmless a person dissociated as a partner whose

interest is being purchased against all partnership liabilities,

whether incurred before or after the dissociation, except

liabilities incurred by an act of the person under section 8472

(relating to power to bind and liability of person dissociated

as partner).

(e) Payment of partnership's estimate.--If an agreement for

the purchase of the interest of a person dissociated as a

partner is not reached within 120 days after a demand in record

form for payment, the partnership shall pay, or cause to be

paid, in money to the person the amount the partnership

estimates to be the buyout price and accrued interest, reduced

by any offsets and accrued interest under subsection (c).

(f) Buyout of deferred payment.--If a deferred payment is

authorized under subsection (h), the partnership may tender an

offer in record form to pay the amount it estimates to be the

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buyout price and accrued interest, reduced by any offsets under

subsection (c), stating the time of payment, the amount and type

of security for payment and the other terms and conditions of

the obligation.

(g) Information accompanying payment.--The payment or tender

required by subsection (e) or (f) must be accompanied by the

following:

(1) a statement of partnership assets and liabilities as

of the date of dissociation;

(2) the latest available partnership balance sheet and

income statement, if any;

(3) an explanation of how the estimated amount of the

payment was calculated; and

(4) notice in record form that the payment is in full

satisfaction of the obligation to purchase unless, within 120

days after the notice, the person dissociated as a partner

commences an action to determine the buyout price, any

offsets under subsection (c) or other terms of the obligation

to purchase.

(h) Deferred payment on wrongful dissociation.--A person

that wrongfully dissociates as a partner before the expiration

of a definite term or the completion of a particular undertaking

is not entitled to payment of any part of the buyout price until

the expiration of the term or completion of the undertaking,

unless the person establishes to the satisfaction of the court

that earlier payment will not cause undue hardship to the

business of the partnership. A deferred payment must be

adequately secured and bear interest.

(i) Right to bring action.--A person dissociated as a

partner may maintain an action against the partnership, under

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section 8448(b) (relating to actions by partnership and

partners), to determine the buyout price of that person's

interest, any offsets under subsection (c) or other terms of the

obligation to purchase. The action must be commenced within 120

days after the partnership has tendered payment or an offer to

pay or within one year after demand in record form for payment

if no payment or offer to pay is tendered. The court shall

determine the buyout price of the person's interest, any offset

due under subsection (c), and accrued interest, and enter

judgment for any additional payment or refund. If deferred

payment is authorized under subsection (h), the court shall also

determine the security for payment and other terms of the

obligation to purchase. The court may assess reasonable attorney

fees and the fees and expenses of appraisers or other experts

for a party to the action, in amounts the court finds equitable,

against a party that the court finds acted arbitrarily,

vexatiously or not in good faith. The finding may be based on

the partnership's failure to tender payment or an offer to pay

or to comply with subsection (g).

§ 8472. Power to bind and liability of person dissociated as

partner.

(a) When partnership bound.--After a person is dissociated

as a partner without the dissociation resulting in a dissolution

and winding up of the partnership business and before the

partnership is merged or divided out of existence, converted or

domesticated under Chapter 3 (relating to entity transaction),

or dissolved, the partnership is bound by an act of the person

only if:

(1) the act would have bound the partnership under

section 8431 (relating to partner agent of partnership)

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before dissociation; and

(2) at the time the other party enters into the

transaction:

(i) less than two years have passed since the

dissociation; and

(ii) the other party does not know or have notice of

the dissociation and reasonably believes that the person

is a partner.

(b) Liability of person dissociated as partner.--If a

partnership is bound under subsection (a), the person

dissociated as a partner which caused the partnership to be

bound is liable:

(1) to the partnership for any damage caused to the

partnership arising from the obligation incurred under

subsection (a); and

(2) if a partner or another person dissociated as a

partner is liable for the obligation, to the partner or other

person for any damage caused to the partner or other person

arising from the liability.

§ 8473. Liability of person dissociated as partner to other

persons.

(a) General rule.--Except as provided in subsection (b), a

person dissociated as a partner is not liable for a partnership

obligation incurred after dissociation.

(b) Exception.--A person that is dissociated as a partner is

liable on a transaction entered into by the partnership after

the dissociation only if:

(1) a partner would be liable on the transaction; and

(2) at the time the other party enters into the

transaction:

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(i) less than two years have passed since the

dissociation; and

(ii) the other party does not have knowledge or

notice of the dissociation and reasonably believes that

the person is a partner.

(c) Constructive release by creditor.--A person dissociated

as a partner is released from liability for a debt, obligation

or other liability of the partnership if the partnership's

creditor, with knowledge or notice of the person's dissociation

but without the person's consent, agrees to a material

alteration in the nature or time of payment of the debt,

obligation or other liability. The release from liability under

this subsection applies whether the liability arises directly or

indirectly, by way of contribution or otherwise, but only if the

liability arises solely by reason of having been a partner.

§ 8474. Certificate of dissociation.

(a) Right to file certificate.--A person dissociated as a

partner or the partnership may deliver to the department for

filing a certificate of dissociation stating:

(1) the name of the partnership;

(2) if the partnership is a limited liability

partnership, subject to section 109 (relating to name of

commercial registered office provider in lieu of registered

address), the address, including street and number, if any,

of its registered office; and

(3) the name of the person and that the person has

dissociated from the partnership.

(b) Effect of certificate.--A certificate of dissociation is

a limitation on the authority of a person dissociated as a

partner for the purposes of section 8433(d) and (e) 8433

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(relating to certificate of partnership authority).

(c) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8413(d)(2) (relating to knowledge and notice).

Section 8418 (relating to signing of filed documents).

§ 8475. Continued use of partnership name.

Continued use of a partnership name, or the name of a person

dissociated as a partner as part of the partnership name, by

partners continuing the business does not of itself make the

person dissociated as a partner liable for an obligation of the

partners or the partnership continuing the business.

SUBCHAPTER H

DISSOLUTION AND WINDING UP

Sec.

8481. Events causing dissolution.

8482. Winding up and filing of optional certificates.

8483. Rescinding dissolution (RESERVED) .

8484. Power to bind partnership after dissolution.

8485. Liability after dissolution.

8486. Disposition of assets in winding up and required

contributions.

§ 8481. Events causing dissolution.

(a) General rule.--A partnership is dissolved, and its

business shall be wound up, upon the occurrence of any of the

following:

(1) In a partnership at will, the partnership knows or

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has notice of a person's express will to withdraw as a

partner, other than a partner that has dissociated under

section 8461(2), (3), (4), (5), (6), (7), (8), (9) or (10)

(relating to events causing dissociation), except that, if

the person has specified a withdrawal date later than the

date the partnership knew or had notice, on the later date.

(2) In a partnership for a definite term or particular

undertaking:

(i) within 90 days after a person's dissociation by

death or otherwise under section 8461(6), (7), (8), (9)

or (10) or wrongful dissociation under section 8462(b)

(relating to power to dissociate as partner and wrongful

dissociation), the affirmative vote or consent of at

least half of the remaining partners to wind up the

partnership business, for which purpose a person's

rightful dissociation under section 8462(b)(2)(i)

constitutes the expression of that partner's expression

of consent to wind up the partnership business;

(ii) the affirmative vote or consent of all the

partners to wind up the partnership business; or

(iii) the expiration of the term or the completion

of the undertaking.

(3) An event or circumstance that the partnership

agreement states causes dissolution.

(4) On application by a partner, the entry by the court

of an order dissolving the partnership on the grounds that:

(i) the conduct of all or substantially all the

partnership's business is unlawful;

(ii) the economic purpose of the partnership is

likely to be unreasonably frustrated;

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(iii) another partner has engaged in conduct

relating to the partnership business which makes it not

reasonably practicable to carry on the business in

partnership with that partner; or

(iv) it is otherwise not reasonably practicable to

carry on the partnership business in conformity with the

partnership agreement.

(5) On application by a transferee, the entry by the

court of an order dissolving the partnership on the grounds

that it is equitable to wind up the partnership business:

(i) after the expiration of the term or completion

of the undertaking, if the partnership was for a definite

term or particular undertaking at the time of the

transfer or entry of the charging order that gave rise to

the transfer; or

(ii) at any time, if the partnership was a

partnership at will at the time of the transfer or entry

of the charging order that gave rise to the transfer.

(6) The passage of 90 consecutive days during which the

partnership does not have at least two partners.

(b) Cross reference.--See section 8415(c)(16) 8415(C)(15)

(relating to contents of partnership agreement).

§ 8482. Winding up and filing of optional certificates.

(a) General rule.--A dissolved partnership shall wind up its

business and , except as provided in section 8483 (relating to

rescinding dissolution), the partnership continues after

dissolution only for the purpose of winding up.

(b) Conduct of winding up.--In winding up its business, the

partnership:

(1) shall discharge the partnership's debts, obligations

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and other liabilities, settle and close the partnership's

business, and marshal and distribute the assets of the

partnership; and

(2) may:

(i) deliver to the department for filing a

certificate of dissolution stating:

(A) the name of the partnership;

(B) if the partnership is a limited liability

partnership, subject to section 109 (relating to name

of commercial registered office provider in lieu of

registered address), the address, including street

and number, if any, of its registered office; and

(C) that the partnership is dissolved;

(ii) preserve the partnership business and property

as a going concern for a reasonable time;

(iii) prosecute and defend actions and proceedings,

whether civil, criminal or administrative;

(iv) transfer the partnership's property;

(v) settle disputes by mediation or arbitration;

(vi) deliver to the department for filing the

certificates, if any, required by section 139 (relating

to tax clearance of certain fundamental transactions) and

a certificate of termination stating:

(A) the name of the partnership;

(B) if the partnership is a limited liability

partnership, subject to section 109, the address,

including street and number, if any, of its

registered office; and

(C) that the partnership is terminated; and

(vii) perform other acts necessary or appropriate to

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the winding up.

(c) Participation after dissociation.--A person whose

dissociation as a partner resulted in dissolution may

participate in winding up as if still a partner, unless the

dissociation was wrongful.

(d) Conduct of winding up when no partner.--If a dissolved

partnership does not have a partner and no person has the right

to participate in winding up under subsection (c), the personal

representative or guardian of the last person to have been a

partner may wind up the partnership's business. If the personal

representative or guardian does not exercise that right, a

person to wind up the partnership's business may be appointed by

the affirmative vote or consent of transferees owning a majority

of the rights to receive distributions at the time the consent

is to be effective. A person appointed under this subsection has

the powers of a partner under section 8484 (relating to power to

bind partnership after dissolution) but is not liable for the

debts, obligations and other liabilities of the partnership

solely by reason of having or exercising those powers or

otherwise acting to wind up the partnership's business.

(e) Judicial supervision.--On the application of any partner

or person entitled under subsection (c) to participate in

winding up, a court may order judicial supervision of the

winding up of a dissolved partnership, including the appointment

of a person to wind up the partnership's business, if:

(1) the partnership does not have a partner and within a

reasonable time following the dissolution no person has been

appointed under subsection (d); or

(2) the applicant establishes other good cause.

(f) Cross references.--See:

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Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8415(c)(17) 8415(C)(16) (relating to contents of

partnership agreement).

Section 8418 (relating to signing of filed documents).

§ 8483. Rescinding dissolution.

(a) General rule.--A partnership may rescind its

dissolution, unless a certificate of termination applicable to

the partnership is effective or the court has entered an order

under section 8481(a)(4) or (5) (relating to events causing

dissolution) dissolving the partnership.

(b) Procedure.--Rescinding dissolution under this section

requires:

(1) the affirmative vote or consent of each partner; and

(2) if the partnership has delivered to the department

for filing a certificate of dissolution and:

(i) the certificate of dissolution has not become

effective, delivery to the department for filing of a

statement of abandonment under section 141 (relating to

abandonment of filing before effectiveness) applicable to

the certificate of dissolution; or

(ii) the certificate of dissolution has become

effective, the delivery to the department for filing of a

certificate of rescission stating:

(A) the name of the partnership;

(B) if the partnership was a limited liability

partnership immediately before the filing of the

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certificate of dissolution, subject to section 109

(relating to name of commercial registered office

provider in lieu of registered address), the address,

including street and number, if any, of its

registered office; and

(C) that dissolution has been rescinded under

this section.

(c) Effects of rescission.--If a partnership rescinds its

dissolution:

(1) the partnership resumes carrying on its business as

if dissolution had never occurred;

(2) subject to paragraph (3), any liability incurred by

the partnership after the dissolution and before the

rescission is effective is determined as if dissolution had

never occurred; and

(3) the rights of a third party arising out of conduct

in reliance on the dissolution before the third party knew or

had notice of the rescission may not be adversely affected.

(d) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8418 (relating to signing of filed documents).

(RESERVED).

§ 8484. Power to bind partnership after dissolution.

(a) Power of partner.--A partnership is bound by a partner's

act after dissolution which:

(1) is appropriate for winding up the partnership

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business; or

(2) would have bound the partnership under section 8431

(relating to partner agent of partnership) before dissolution

if, at the time the other party enters into the transaction,

the other party does not know or have notice of the

dissolution.

(b) Power of person dissociated as partner.--A person

dissociated as a partner binds a partnership through an act

occurring after dissolution if:

(1) at the time the other party enters into the

transaction:

(i) less than two years have passed since the

dissociation; and

(ii) the other party does not know or have notice of

the dissociation and reasonably believes that the person

is a partner; and

(2) the act:

(i) is appropriate for winding up the partnership's

business; or

(ii) would have bound the partnership under section

8431 before dissolution and the other party does not know

or have notice of the dissolution at the time the other

party enters into the transaction.

§ 8485. Liability after dissolution.

(a) Liability of partner.--If a partner having knowledge of

the dissolution causes a partnership to incur an obligation

under section 8484(a)(2) (relating to power to bind partnership

after dissolution) by an act that is not appropriate for winding

up the partnership business, the partner is liable:

(1) to the partnership for any damage caused to the

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partnership arising from the obligation; and

(2) if another partner or person dissociated as a

partner is liable for the obligation, to that other partner

or person for any damage caused to that other partner or

person arising from the liability.

(b) Liability of person dissociated as partner.--Except as

provided under subsection (c), if a person dissociated as a

partner causes a partnership to incur an obligation under

section 8484(b), the person is liable:

(1) to the partnership for any damage caused to the

partnership arising from the obligation; and

(2) if a partner or another person dissociated as a

partner is liable for the obligation, to the partner or other

person for any damage caused to the partner or other person

arising from the obligation.

(c) Exception in winding up.--A person dissociated as a

partner is not liable under subsection (b) if:

(1) section 8482(c) (relating to winding up and filing

of optional certificates) permits the person to participate

in winding up; and

(2) the act that causes the partnership to be bound

under section 8484(b) is appropriate for winding up the

partnership's business.

§ 8486. Disposition of assets in winding up and required

contributions.

(a) Creditors.--In winding up its business, a partnership

shall apply its assets, including the contributions required by

this section, to discharge the partnership's obligations to

creditors, including partners that are creditors.

(b) Surplus.--After a partnership complies with subsection

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(a), any surplus shall be distributed in the following order,

subject to any charging order in effect under section 8454

(relating to charging order):

(1) to each owner of a transferable interest that

reflects contributions made and not previously returned, an

amount equal to the value of the unreturned contributions;

and

(2) among owners of transferable interests in proportion

to their respective rights to share in distributions

immediately before the dissolution of the partnership.

(c) Insufficient assets.--If a partnership's assets are

insufficient to satisfy all its obligations under subsection

(a), with respect to each unsatisfied obligation incurred when

the partnership was not a limited liability partnership, the

following rules apply:

(1) Each person that was a partner when the obligation

was incurred and that has not been released from the

obligation under section 8473(c) and (d) (relating to

liability of person dissociated as partner to other persons)

shall contribute to the partnership for the purpose of

enabling the partnership to satisfy the obligation. The

contribution due from each of those persons is in proportion

to the right to receive distributions when the obligation was

incurred.

(2) If a person does not contribute the full amount

required under paragraph (1) with respect to an unsatisfied

obligation of the partnership, the other persons required to

contribute under paragraph (1) on account of the obligation

shall contribute the additional amount necessary to discharge

the obligation. The additional contribution due from each of

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those other persons is in proportion to the right to receive

distributions when the obligation was incurred.

(3) If a person does not make the additional

contribution required under paragraph (2), further additional

contributions are determined and due in the same manner as

provided in that paragraph.

(d) Recovery of additional contributions.--A person that

makes an additional contribution under subsection (c)(2) or (3)

may recover from any person whose failure to contribute under

subsection (c)(1) or (2) necessitated the additional

contribution. A person may not recover under this subsection

more than the amount additionally contributed. A person's

liability under this subsection shall not exceed the amount the

person failed to contribute.

(e) Distributions when surplus insufficient.--If a

partnership does not have sufficient surplus to comply with

subsection (b)(1), the following shall apply:

(1) If the partnership has been a limited liability

partnership at any time during its existence, any surplus

must be distributed among the owners of transferable

interests in proportion to the value of the respective

unreturned contributions.

(2) If the partnership has never been a limited

liability partnership, the partners and any person whose

dissociation resulted in dissolution shall contribute to the

partnership funds sufficient to cause the insufficiency under

subsection (b)(1) to be allocated consistently with section

8441(a) (relating to partner's rights and duties).

(f) Form of payment.--All distributions made under

subsections (b) and (c) must be paid in money.

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Section 26. Repeals are as follows:

(1) The General Assembly finds and declares as follows:

(i) Over the last 25 years, there have been

significant changes in the business model for

partnerships; and statutory law must be updated to deal

with the new business model.

(ii) Existing statutory law on limited partnerships

was enacted in 1988. Discrete amendments were enacted in

1990, 1992, 1994, 1996 and 2001. A more comprehensive

legislative approach was taken in sections 48 through 53

of the act of October 22, 2014 (P.L.2640, No.172), known

as the Associations Transactions Act.

(iii) Section 20 of this act adds a new chapter on

limited partnerships. The new chapter, continuing the

approach under the Associations Transactions Act,

extensively revises existing statutory law to the degree

that identification of individual changes or reproduction

of voluminous text to be eliminated would inhibit rather

than enhance serious legal analysis.

(iv) The repeal under paragraph (2) is necessary to

carry out this paragraph.

(2) Chapter 85 of Title 15 is repealed.

Section 27. Title 15 is amended by adding a chapter to read:

CHAPTER 86

LIMITED PARTNERSHIPS

Subchapter

A. General Provisions

B. Formation and Filings

C. Limited Partners

D. General Partners

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E. Contributions and Distributions

F. Dissociation

G. Transferable Interests and Rights of Transferees and

Creditors

H. Dissolution and Winding Up

I. Actions by Partners

SUBCHAPTER A

GENERAL PROVISIONS

Sec.

8611. Short title and application of chapter.

8612. Definitions.

8613. Knowledge and notice.

8614. Governing law.

8615. Contents of partnership agreement.

8616. Application of partnership agreement.

8617. Amendment and effect of partnership agreement.

8618. Required information.

8619. Dual capacity.

8620. Characteristics of limited partnership.

§ 8611. Short title and application of chapter.

(a) Short title.--This chapter may be cited as the

Pennsylvania Uniform Limited Partnership Act of 2015.

(b) Initial application.--Before July 1, 2016, this chapter

governs only:

(1) a limited partnership formed on or after [the

Legislative Reference Bureau shall insert here the effective

date of this chapter]; and

(2) except as provided under subsections (c) and (d), a

limited partnership formed before [the Legislative Reference

Bureau shall insert here the effective date of this chapter]

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which elects, in the manner provided in its partnership

agreement or by law for amending the partnership agreement,

to be subject to this chapter.

(c) Full effective date.--Except as provided in subsections

(d) and (e), on and after July 1, 2016, this chapter governs all

limited partnerships.

(d) Transitional provisions.--With respect to a limited

partnership formed before [the Legislative Reference Bureau

shall insert here the effective date of this chapter], the

following rules apply except as the partners otherwise elect in

the manner provided in the partnership agreement or by law for

amending the partnership agreement:

(1) Section 8620(c) (relating to characteristics of

limited partnership) does not apply and the limited

partnership has whatever duration it had under the law

applicable immediately before [the Legislative Reference

Bureau shall insert here the effective date of this chapter].

(2) Sections 8661 (relating to dissociation as limited

partner) and 8662 (relating to effects of dissociation as

limited partner) do not apply and a limited partner has the

same right and power to dissociate from the limited

partnership, with the same consequences, as existed

immediately before [the Legislative Reference Bureau shall

insert here the effective date of this chapter].

(3) Section 8663(4) 8663(A)(4) (relating to dissociation

as general partner) shall not apply.

(4) Section 8663(5) 8663(A)(5) shall not apply and the

court has the same power to expel a general partner as the

court had immediately before [the Legislative Reference

Bureau shall insert here the effective date of this chapter].

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(5) Section 8681(a)(3) (relating to events causing

dissolution) shall not apply and the connection between a

person's dissociation as a general partner and the

dissolution of the limited partnership is the same as existed

immediately before [the Legislative Reference Bureau shall

insert here the effective date of this chapter].

(e) Liabilities to third parties.--With respect to a limited

partnership that elects under subsection (b)(2) to be subject to

this chapter, after the election takes effect, the provisions of

this chapter relating to the liability of the limited

partnership's general partners to third parties apply:

(1) before July 1, 2016, to:

(i) a third party that had not done business with

the limited partnership in the year before the election

took effect; and

(ii) a third party that had done business with the

limited partnership in the year before the election took

effect only if the third party knows or has been notified

of the election; a nd

(2) on and after July 1, 2016, to all third parties,

except that those provisions remain inapplicable to any

obligation incurred while those provisions were inapplicable

under paragraph (1)(ii).

(f) Cross reference.--See section 8615 (relating to contents

of partnership agreement).

§ 8612. Definitions.

(a) General definitions.-- The following words and phrases

when used in this chapter shall have the meanings given to them

in this section unless the context clearly indicates otherwise:

"Certificate of limited partnership." The certificate

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required by section 8621 (relating to formation of limited

partnership and certificate of limited partnership). The term

includes the certificate as amended or restated.

"Contribution." Property or a benefit described in section

8651 (relating to form of contribution) which is provided by a

person to a limited partnership to become a partner or in the

person's capacity as a partner.

"Distribution." A transfer of money or other property from a

limited partnership to a person on account of a transferable

interest or in the person's capacity as a partner. The term:

(1) Includes:

(i) a redemption or other purchase by a limited

partnership of a transferable interest; and

(ii) a transfer to a partner in return for the

partner's relinquishment of any right to participate as a

partner in the management or conduct of the partnership's

activities and affairs or to have access to records or

other information concerning the partnership's activities

and affairs.

(2) Does not include:

(i) amounts constituting reasonable compensation for

present or past service or payments made in the ordinary

course of business under a bona fide retirement plan or

other bona fide benefits program;

(ii) the making of, or payment or performance on, a

guaranty or similar arrangement by a partnership for the

benefit of any or all of its partners;

(iii) a direct or indirect allocation or transfer

effected under Chapter 3 (relating to entity

transactions) with the approval of the members; or

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(iv) a direct or indirect transfer of:

(A) a governance or transferable interest; or

(B) options, rights or warrants to acquire a

governance or transferable interest.

"General partner." A person that:

(1) has become a general partner under section 8641

(relating to becoming a general partner) or was a general

partner in a partnership when the partnership became subject

to this chapter under section 8611 (relating to short title

and application of chapter); and

(2) has not dissociated as a general partner under

section 8663 (relating to dissociation as general partner).

"Limited partner." A person that:

(1) has become a limited partner under section 8631

(relating to becoming a limited partner) or was a limited

partner in a limited partnership when the partnership became

subject to this chapter under section 8611; and

(2) has not dissociated as a limited partner under

section 8661 (relating to dissociation as limited partner).

"Limited partnership." An association formed under this

chapter or which becomes subject to this chapter under Chapter 3

(relating to entity transactions) or section 8611. The term

includes a limited liability limited partnership or an electing

partnership that is also a limited partnership.

"Partner." A limited partner or general partner.

"Partnership agreement." The agreement, whether or not

referred to as a partnership agreement and whether oral,

implied, in record form or in any combination thereof, of all

the partners of a limited partnership concerning the matters

described under section 8615(a) (relating to contents of

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partnership agreement). The term includes the agreement as

amended or restated.

"Required information." The information that a limited

partnership is required to maintain under section 8618 (relating

to required information).

"Transferable interest." The right, as initially owned by a

person in the person's capacity as a partner, to receive

distributions from a limited partnership, whether or not the

person remains a partner or continues to own any part of the

right. The term applies to any fraction of the interest, by

whomever owned.

"Transferee." A person to which all or part of a

transferable interest has been transferred, whether or not the

transferor is a partner. The term includes a person that owns a

transferable interest under section 8662(a)(3) (relating to

effects of dissociation as limited partner) or 8665(a)(4)

(relating to effects of dissociation as general partner).

(b) Index of definitions.--Following is a nonexclusive list

of definitions in section 102 (relating to definitions) that

apply to this chapter:

"Act" or "action."

"Court."

"Debtor in bankruptcy."

"Department."

"Jurisdiction."

"Jurisdiction of formation."

"Obligation."

"Professional services."

"Property."

"Record form."

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"Sign."

"Transfer."

§ 8613. Knowledge and notice.

(a) Knowledge.--A person knows a fact if the person:

(1) has actual knowledge of it; or

(2) is deemed to know it under law other than this

chapter.

(b) Notice.--A person has notice of a fact if the person:

(1) has reason to know the fact from all the facts known

to the person at the time in question; or

(2) is deemed to have notice of the fact under

subsection (c) or (d).

(c) Effect of certificate.--A certificate of limited

partnership on file in the department is notice that the

partnership is a limited partnership and the persons designated

in the certificate as general partners are general partners.

Except as provided under subsection (d) AND SECTION 8201(G)

(RELATING TO SCOPE) , the certificate is not notice of any other

fact.

(d) Constructive notice.--A person not a partner is deemed

to have notice of:

(1) another person's dissociation as a general partner

90 days after an amendment to the certificate of limited

partnership which states that the other person has

dissociated becomes effective or 90 days after a certificate

of dissociation pertaining to the other person becomes

effective, whichever occurs first;

(2) a limited partnership's:

(i) dissolution 90 days after an amendment to the

certificate of limited partnership stating that the

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limited partnership is dissolved is effective;

(ii) termination 90 days after a certificate of

termination under section 8682(b)(2)(vi) (relating to

winding up and filing of optional certificates) is

effective; and

(iii) participation in a merger, interest exchange,

conversion, division or domestication, 90 days after a

statement of merger, interest exchange, conversion,

division or domestication under Chapter 3 (relating to

entity transactions) is effective.

(e) Notification.--Except as provided in section 113(b)

(relating to delivery of document), a person notifies another

person of a fact by taking steps reasonably required to inform

the other person in ordinary course, whether or not those steps

cause the other person to know the fact.

(f) Effect of partner's knowledge or notice.--A general

partner's knowledge or notice of a fact relating to the limited

partnership is effective immediately as knowledge of or notice

to the partnership, except in the case of a fraud on the

partnership committed by or with the consent of the general

partner. A limited partner's knowledge or notice of a fact

relating to the partnership is not effective as knowledge of or

notice to the partnership.

§ 8614. Governing law.

(a) General rule.--The laws of this Commonwealth govern:

(1) the internal affairs of a limited partnership; and

(2) the liability of a partner as partner for the debts,

obligations or other liabilities of a limited partnership.

(b) Cross reference.--See section 8615(c)(6) (relating to

contents of partnership agreement).

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§ 8615. Contents of partnership agreement.

(a) Scope of partnership agreement.--Except as provided

under subsections (c) and (d), the partnership agreement

governs:

(1) relations among the partners as partners and between

the partners and the limited partnership;

(2) the rights and duties under this title of a person

in the capacity of a partner;

(3) the activities and affairs of the partnership and

the conduct of those activities and affairs;

(4) the means and conditions for amending the

partnership agreement; and

(5) the means and conditions for approving a transaction

under Chapter 3 (relating to entity transactions).

(b) Title applies generally.--To the extent the partnership

agreement does not provide for a matter described in subsection

(a), this title governs the matter.

(c) Limitations.--A partnership agreement may not do any of

the following:

(1) Vary a provision of Chapter 1 (relating to general

provisions) or Subchapter A of Chapter 2 (relating to names ).

(2) Vary the right of a partner to approve a merger,

interest exchange, conversion, division or domestication

under section 333(a)(2) (relating to approval of merger),

343(a)(2) (relating to approval of interest exchange), 353(a)

(2) 353(A)(3) (relating to approval of conversion), 363(a)(2)

(relating to approval of division) or 373(a)(2) (relating to

approval of domestication).

(3) Vary the required contents of a plan of merger under

section 332(a) (relating to plan of merger), plan of interest

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exchange under section 342(a) (relating to plan of interest

exchange), plan of conversion under section 352(a) (relating

to plan of conversion), plan of division under section 362(a)

(relating to plan of division) or plan of domestication under

section 372(a) (relating to plan of domestication).

(4) Vary a provision of Chapter 81 (relating to general

provisions) or 82 (relating to limited liability partnerships

and limited liability limited partnerships).

(5) Vary the provisions of section 8611(b), (c), (d) and

(e) (relating to short title and application of chapter).

(6) Vary the law applicable under section 8614 (relating

to governing law).

(7) Vary any requirement, procedure or other provision

of this title pertaining to:

(i) registered offices; or

(ii) the department, including provisions pertaining

to records DOCUMENTS authorized or required to be

delivered to the department for filing under this title.

(8) Vary a limited partnership's capacity under section

8620(d) (relating to characteristics of limited partnership)

to sue and be sued in its own name.

(9) Vary a provision of section 8620(e).

(10) Eliminate the duty of loyalty provided for in

section 8649(b)(1)(i) or (ii) or (2) (relating to standards

of conduct for general partners) or the duty of care, except

as provided in subsection (d).

(11) Vary the contractual obligation of good faith and

fair dealing under sections 8635(a) (relating to limited

duties of limited partners) and 8649(d), except as provided

in subsection (d).

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(12) Provide indemnification against, or relieve or

exonerate OR EXONERATION IN VIOLATION OF THE LIMITATIONS IN

SECTIONS 8648(G) (RELATING TO REIMBURSEMENT, INDEMNIFICATION,

ADVANCEMENT AND INSURANCE) AND 8649(I) TO a person from ,

liability for an action that has been determined by a court

to constitute recklessness, willful misconduct or a knowing

violation of law.

(13) Vary the information required under section 8618

(relating to required information) or unreasonably restrict

the duties and rights under section 8634 (relating to limited

partner rights to information) or 8647 (relating to general

partner rights to information), except as provided under

subsection (d).

(14) Vary the power of a person to dissociate as a

general partner under section 8664(a) (relating to power to

dissociate as general partner and wrongful dissociation),

except to require that the notice under section 8663(1)

8663(A)(1) (relating to dissociation as general partner) be

in record form.

(15) Vary the causes of dissolution specified in section

8681(a)(6) (relating to events causing dissolution).

(16) Vary the requirement to wind up the partnership's

activities and affairs as specified in section 8682(a), (b)

(1) and (d) (relating to winding up and filing of optional

certificates).

(17) Unreasonably restrict the right of a partner to

maintain an action under Subchapter I (relating to actions by

partners).

(18) Vary the provisions of section 8695 8694 (relating

to special litigation committee), except that the partnership

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agreement may provide that the partnership may not have a

special litigation committee.

(19) Except as provided in section 8617(b) (relating to

amendment and effect of partnership agreement), restrict the

rights under this title of a person other than a partner.

(d) Rules.--Subject to subsection (c)(12), the following

rules apply:

(1) The partnership agreement may:

(i) specify the method by which a specific act or

transaction that would otherwise violate the duty of

loyalty may be authorized or ratified by one or more

disinterested and independent persons after full

disclosure of all material facts;

(ii) alter the prohibition in section 8654(a)(2)

(relating to limitations on distributions) so that the

prohibition requires only that the partnership's total

assets not be less than the sum of its total liabilities;

and

(iii) impose reasonable restrictions on the

availability and use of information obtained under

section 8618, 8634 or 8647 and may define appropriate

remedies, including liquidated damages, for a breach of

any reasonable restriction on use.

(2) To the extent the partnership agreement expressly

relieves a partner of a responsibility that the partner would

otherwise have under this title and imposes the

responsibility on one or more other partners, the agreement

also may eliminate or limit any fiduciary duty of the partner

relieved of the responsibility which would have pertained to

the responsibility.

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(3) If not manifestly unreasonable, the partnership

agreement may:

(i) alter the aspects of the duty of loyalty stated

in section 8649(b)(1)(i) or (ii) or (2);

(ii) identify specific types or categories of

activities that do not violate the duty of loyalty;

(iii) alter the duty of care; and

( iv ) alter or eliminate any other fiduciary duty . ;

AND

(V) PRESCRIBE THE STANDARDS BY WHICH THE PERFORMANCE

OF THE CONTRACTUAL OBLIGATION OF GOOD FAITH AND FAIR

DEALING IS TO BE MEASURED.

(e) Determination of manifest unreasonableness.--A court

shall decide as a matter of law whether a term of a partnership

agreement is manifestly unreasonable under subsection (d)(3).

The court:

(1) shall make its determination as of the time the

challenged term became part of the partnership agreement and

by considering only circumstances existing at that time; and

(2) may invalidate the term only if, in light of the

purposes, activities and affairs of the limited partnership,

it is readily apparent that:

(i) the objective of the term is unreasonable; or

(ii) the term is an unreasonable means to achieve

the term's objective.

§ 8616. Application of partnership agreement.

(a) Partnership bound.--A limited partnership is bound by

and may enforce the partnership agreement, whether or not the

partnership has itself manifested assent to the agreement.

(b) Deemed assent.--A person that becomes a partner is

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deemed to assent to the partnership agreement.

(c) Preformation agreement.--Two or more persons intending

to become the initial partners of a limited partnership may make

an agreement providing that upon the formation of the

partnership the agreement will become the partnership agreement.

(d) Cross reference.--See section 8621 (relating to

formation of limited partnership and certificate of limited

partnership).

§ 8617. Amendment and effect of partnership agreement.

(a) Approval of amendments.--A partnership agreement may

specify that its amendment requires the approval of a person

that is not a party to the agreement or the satisfaction of a

condition. An amendment is ineffective if its adoption does not

include the required approval or satisfy the specified

condition.

(b) Obligations to nonpartners.--The obligations of a

limited partnership and its partners to a person in the person's

capacity as a transferee or person dissociated as a partner are

governed by the partnership agreement. Except as provided in

section 8653(d) (relating to sharing of and right to

distributions before dissolution) or in a court order issued

under section 8673(b)(2) (relating to charging order) to

effectuate a charging order, an amendment to the partnership

agreement made after a person becomes a transferee or is

dissociated as a partner:

(1) is effective with regard to any debt, obligation or

other liability of the partnership or its partners to the

person in the person's capacity as a transferee or person

dissociated as a partner; and

(2) is not effective to the extent the amendment imposes

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a new debt, obligation or other liability on the transferee

or person dissociated as a partner.

(c) Provisions in filed documents.--If a document delivered

by a limited partnership to the department for filing becomes

effective and contains a provision that would be ineffective

under section 8615(c) or (d)(3) (relating to contents of

partnership agreement) if contained in the partnership

agreement, the provision is ineffective in the document.

(d) Conflicts with partnership agreement.--Subject to

subsection (c):

(1) If a provision of the certificate of limited

partnership conflicts with a provision of the partnership

agreement, the provision of the certificate prevails.

(2) If a document other than its certificate of limited

partnership that has been delivered by a limited partnership

to the department for filing becomes effective and conflicts

with a provision of the partnership agreement:

(i) the agreement prevails as to partners, persons

dissociated as partners and transferees; and

(ii) the document prevails as to other persons to

the extent they reasonably rely on the document.

(e) Prohibition of oral amendments.--If a provision of a

partnership agreement in record form provides that the

partnership agreement cannot be amended, modified or rescinded

except in record form, an oral agreement, amendment,

modification or rescission shall not be enforceable.

(F) VOTING REQUIREMENTS.--A PARTNERSHIP AGREEMENT MAY

PROVIDE IN WRITING THAT, WHENEVER A PROVISION OF THIS TITLE

REQUIRES THE VOTE OR CONSENT OF A SPECIFIED NUMBER OR PERCENTAGE

OF PARTNERS OR OF A CLASS OF PARTNERS FOR THE TAKING OF ANY

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ACTION, A HIGHER NUMBER OR PERCENTAGE OF VOTES OR CONSENTS SHALL

BE REQUIRED FOR THE ACTION. EXCEPT AS OTHERWISE PROVIDED IN THE

PARTNERSHIP AGREEMENT, WHENEVER THE PARTNERSHIP AGREEMENT

REQUIRES FOR THE TAKING OF ANY ACTION BY THE PARTNERS OR A CLASS

OF PARTNERS A SPECIFIC NUMBER OR PERCENTAGE OF VOTES OR

CONSENTS, THE PROVISION OF THE PARTNERSHIP AGREEMENT SETTING

FORTH THAT REQUIREMENT SHALL NOT BE AMENDED OR REPEALED BY ANY

LESSER NUMBER OR PERCENTAGE OF VOTES OR CONSENTS OF THE PARTNERS

OR THE CLASS OF PARTNERS.

§ 8618. Required information.

(a) General rule.--A limited partnership shall maintain at

its principal office the following information:

(1) A current list showing the full name and last known

street and mailing address of each partner, separately

identifying the general partners, in alphabetical order, and

the limited partners, in alphabetical order.

(2) A copy of the initial certificate of limited

partnership and all amendments to and restatements of the

certificate, together with signed copies of any powers of

attorney under which any certificate, amendment or

restatement has been signed.

(3) A copy of any filed certificate or statement of

merger, interest exchange, conversion, division or

domestication.

(4) A copy of the partnership's Federal, State and local

income tax returns and reports, if any, for the three most

recent years.

(5) A copy of any provisions of the partnership

agreement in record form and any amendment made in record

form to any partnership agreement.

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(6) A copy of any financial statement of the partnership

for the three most recent years.

(7) A copy of any record made by the partnership during

the past three years of any consent given by or vote taken of

any partner under this title or the partnership agreement.

(8) Unless contained in a provision of the partnership

agreement in record form, a record stating:

(i) a description and statement of the agreed value

of contributions other than money made and agreed to be

made by each partner;

(ii) the times at which, or events on the happening

of which, any additional contributions agreed to be made

by each partner are to be made;

(iii) for any person that is both a general partner

and a limited partner, a specification of what

transferable interest the person owns in each capacity;

and

(iv) any events upon the happening of which the

partnership is to be dissolved and its activities and

affairs wound up.

(b) Cross reference.--See section 8615 (relating to contents

of partnership agreement).

§ 8619. Dual capacity.

A person may be both a general partner and a limited

partner. A person that is both a general and limited partner has

the rights, powers, duties and obligations provided by this

title and the partnership agreement in each of those

capacities. When the person acts as a general partner, the

person is subject to the obligations, duties and restrictions

under this title and the partnership agreement for general

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partners. When the person acts as a limited partner, the person

is subject to the obligations, duties and restrictions under

this title and the partnership agreement for limited partners.

§ 8620. Characteristics of limited partnership.

(a) Separate entity.--A limited partnership is an entity

distinct from its partners. A limited partnership is the same

entity regardless of whether:

(1) its certificate of limited partnership states that

the limited partnership is a limited liability limited

partnership; or

(2) it has a statement of registration in effect under

section 8201 (relating to scope).

(b) Purpose.--A limited partnership may have any lawful

purpose, OTHER THAN ACTING AS A BANKING INSTITUTION, CREDIT

UNION OR INSURER, regardless of whether the purpose is for

profit. See section 8102 (relating to interchangeability of

partnership, limited liability company and corporate forms of

organization).

(c) Duration.--A limited partnership has perpetual duration.

(d) Powers.--A limited partnership has the capacity to sue

and be sued in its own name and the power to do all things

necessary or convenient to carry on its activities and affairs.

(e) Restrictions on nonprofit limited partnerships.--If a

limited partnership has a purpose that is not for profit:

(1) Its purpose must be stated in the certificate of

limited partnership.

(2) The partnership shall not distribute any part of its

income or profits to its partners, but it may pay

compensation in a reasonable amount to those persons for

services rendered.

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(3) The partnership may confer benefits on partners or

nonpartners in conformity with its purposes, may repay

capital contributions and may redeem evidences of

indebtedness, except when the partnership is currently

insolvent or would thereby be made insolvent or rendered

unable to carry on its purposes, or when the fair value of

the assets of the partnership remaining after the conferring

of benefits, payment or redemption would be insufficient to

meet its liabilities. The partnership may make distributions

of money or property to partners upon dissolution or final

liquidation as permitted by this chapter.

(4) If the partnership is organized for a charitable

purpose, it may take, receive and hold real and personal

property as may be given, devised to, or otherwise vested in

the partnership, in trust, for the purpose or purposes set

forth in its certificate of limited partnership. The general

partners shall, as trustees of the property, be held to the

same degree of responsibility and accountability as other

trustees, unless:

(i) a lesser degree or a particular degree of

responsibility and accountability is prescribed in the

trust instrument; or

(ii) the general partners are under the control of

the limited partners or third persons who retain the

right to direct, and do direct, the actions of the

general partners as to the use of the trust property from

time to time.

(5) Property of the partnership committed to charitable

purposes shall not, by any proceeding under Chapter 3

(relating to entity transactions) or otherwise, be diverted

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from the objects to which it was donated, granted or devised,

unless and until the partnership obtains from the court an

order under 20 Pa.C.S. Ch. 77 (relating to trusts) specifying

the disposition of the property.

(f) Cross references.--See sections 8611(d) (relating to

short title and application of chapter) and 8615 (relating to

contents of partnership agreement).

SUBCHAPTER B

FORMATION AND FILINGS

Sec.

8621. Formation of limited partnership and certificate of

limited partnership.

8622. Amendment or restatement of certificate of limited

partnership.

8623. Signing of filed documents.

8624. Liability of general partner for false or missing

information in filed document.

8625. Registered office.

§ 8621. Formation of limited partnership and certificate of

limited partnership.

(a) Formation.--To form a limited partnership, a person must

deliver a certificate of limited partnership to the department

for filing.

(b) Required contents of certificate.--A certificate of

limited partnership must state:

(1) the name of the limited partnership, which must

comply with Subchapter A of Chapter 2 (relating to names );

(2) subject to section 109 (relating to name of

commercial registered office provider in lieu of registered

address), the address, including street and number, if any,

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of the partnership's registered office; and

(3) the name and address of each general partner.

(c) Optional contents of certificate.--A certificate of

limited partnership may contain statements as to matters other

than those required under subsection (b), but may not vary or

otherwise affect the provisions specified in section 8615(c) and

(d) (relating to contents of partnership agreement) in a manner

inconsistent with that section.

(d) Time of formation.--A limited partnership is formed

when:

(1) the certificate of limited partnership becomes

effective ;

(2) at least two persons have become partners;

(3) at least one person has become a general partner;

and

(4) at least one person has become a limited partner.

(e) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8620 (relating to characteristics of limited

partnership).

Section 8623 (relating to signing of filed documents).

§ 8622. Amendment or restatement of certificate of limited

partnership.

(a) General rule.--A certificate of limited partnership may

be amended or restated at any time.

(b) Required contents of certificate of amendment.--To amend

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its certificate of limited partnership, a limited partnership

must deliver to the department for filing a certificate of

amendment that states:

(1) the name of the partnership;

(2) the date of filing of its initial certificate;

(3) subject to section 109 (relating to name of

commercial registered office provider in lieu of registered

address), the address, including street and number, if any,

of its registered office; and

(4) the amendment.

(c) Restatement.--To restate its certificate of limited

partnership, a limited partnership must deliver to the

department for filing a certificate of amendment that:

(1) is designated as a restatement; and

(2) includes a statement that the restated certificate

supersedes the original certificate and all amendments.

(d) Required amendments.--A limited partnership shall

promptly deliver to the department for filing an amendment to

its certificate of limited partnership to reflect:

(1) the admission of a new general partner;

(2) the dissociation of a person as a general partner;

or

(3) the appointment of a person to wind up the

partnership's activities and affairs under section 8682(c) or

(d) (relating to winding up and filing of optional

certificates).

(e) Obligation to correct.--If a general partner knows that

any information in a filed certificate of limited partnership is

inaccurate, the general partner shall promptly:

(1) cause the certificate to be amended; or

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(2) if appropriate, deliver to the department for

filing:

(i) a certificate of change of registered office

under section 8625 (relating to registered office);

(ii) a statement of correction under section 138

(relating to statement of correction); or

(iii) a statement of abandonment under section 141

(relating to abandonment of filing before effectiveness).

(F) AMENDMENT OF VOTING PROVISIONS.--EXCEPT AS PROVIDED IN

THE CERTIFICATE OF LIMITED PARTNERSHIP, WHENEVER THE CERTIFICATE

REQUIRES FOR THE TAKING OF ANY ACTION BY THE PARTNERS OR A CLASS

OF PARTNERS A SPECIFIC NUMBER OR PERCENTAGE OF VOTES OR

CONSENTS, THE PROVISION OF THE CERTIFICATE SETTING FORTH THAT

REQUIREMENT SHALL NOT BE AMENDED OR REPEALED BY ANY LESSER

NUMBER OR PERCENTAGE OF VOTES OR CONSENTS OF THE PARTNERS OR OF

THE CLASS OF PARTNERS.

(f) (G) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8623 (relating to signing of filed documents).

§ 8623. Signing of filed documents.

(a) Required signatures.-- A EXCEPT AS PROVIDED IN THIS

TITLE, A document delivered to the department for filing under

this title relating to a limited partnership must be signed as

follows:

(1) An initial certificate of limited partnership must

be signed by all general partners listed in the certificate.

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(2) An amendment to the certificate of limited

partnership deleting a statement that the limited partnership

is a limited liability limited partnership must be signed by

all general partners listed in the certificate.

(3) An amendment to the certificate of limited

partnership designating as general partner a person admitted

under section 8681(a)(3)(ii) (relating to events causing

dissolution) following the dissociation of a limited

partnership's last general partner must be signed by that

person.

(4) An amendment to the certificate of limited

partnership required by section 8682(c) (relating to winding

up and filing of optional certificates) following the

appointment of a person to wind up the dissolved limited

partnership's activities and affairs must be signed by that

person.

(5) Any other amendment to the certificate of limited

partnership must be signed by:

(i) at least one general partner listed in the

certificate;

(ii) each person designated in the amendment as a

new general partner; and

(iii) each person that the amendment indicates has

dissociated as a general partner, unless:

(A) the person is deceased or a guardian has

been appointed for the person and the amendment so

states; or

(B) the person has previously delivered to the

department for filing a certificate of dissociation.

(6) A restated certificate of limited partnership must

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be signed by at least one general partner listed in the

certificate, and, to the extent the restated certificate

effects a change under any other paragraph of this

subsection, the certificate must be signed in a manner that

satisfies that paragraph.

(7) A certificate of termination must be signed by all

general partners listed in the certificate of limited

partnership or, if the certificate of a dissolved limited

partnership lists no general partners, by the person

appointed under section 8682(c) or (d) to wind up the

dissolved limited partnership's activities and affairs.

(8) Any other document delivered by a limited

partnership to the department for filing must be signed by at

least one general partner listed in the certificate of

limited partnership.

(9) A statement by a person under section 8665(a)(3)

(relating to effects of dissociation as general partner)

stating that the person has dissociated as a general partner

must be signed by that person.

(10) A certificate of negation by a person under section

8636 (relating to person erroneously believing self to be

limited partner) must be signed by that person.

(11) Any other document delivered on behalf of a person

to the department for filing must be signed by that person.

(b) Cross reference.--See section 142 (relating to effect of

signing filings).

§ 8624. Liability of general partner for false or missing

information in filed document.

(a) General rule.--If a document delivered to the department

for filing under this title and filed by the department contains

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a materially false statement or fails to state a material fact

required to be stated, a person that suffers loss by reasonable

reliance on the statement or failure to state a material fact

may recover damages for the loss from a general partner if:

(1) the document was delivered for filing on behalf of

the limited partnership; and

(2) the general partner knew or had notice there was

false or missing information in the document for a reasonably

sufficient time before the document was relied upon so that,

before the reliance, the general partner reasonably could

have:

(i) effected an amendment under section 8622

(relating to amendment or restatement of certificate of

limited partnership);

(ii) filed a petition under section 144 (relating to

signing and filing pursuant to judicial order); or

(iii) delivered to the department for filing:

(A) a certificate of change of registered office

under section 8625 (relating to registered office);

(B) a statement of correction under section 138

(relating to statement of correction); or

(C) a statement of abandonment under section 141

(relating to abandonment of filing before

effectiveness).

(b) Cross references.--See sections 142 (relating to effect

of signing filings) and 143 (relating to liability for

inaccurate information in filing).

§ 8625. Registered office.

(a) General rule.--Every limited partnership shall have and

continuously maintain in this Commonwealth a registered office

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which may, but need not, be the same as its place of business.

(b) Change of registered office.--After formation, a change

in the location of the registered office may be effected at any

time by the limited partnership. Before the change becomes

effective, the limited partnership shall amend its certificate

of limited partnership under the provisions of this chapter to

reflect the change in location, or shall deliver to the

department for filing a certificate of change of registered

office setting forth:

(1) The name of the limited partnership.

(2) The address, including street and number, if any, of

its then registered office.

(3) The address, including street and number, if any, to

which the registered office is to be changed.

(c) Alternative procedure.--A limited partnership may

satisfy the requirements of this chapter concerning the

maintenance of a registered office in this Commonwealth by

setting forth in any document filed by the department under any

provision of this title that permits or requires the statement

of the address of its then registered office, in lieu of that

address, the statement authorized by section 109(a) (relating to

name of commercial registered office provider in lieu of

registered address).

(d) Cross references.--See:

Section 108 (relating to change in location or status of

registered office provided by agent).

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

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Department of State).

Section 8615(c)(6) (relating to contents of partnership

agreement).

Section 8623 (relating to signing of filed documents).

SUBCHAPTER C

LIMITED PARTNERS

Sec.

8631. Becoming a limited partner.

8632. No agency power of limited partner as limited partner.

8633. No liability as limited partner for limited partnership

obligations.

8634. Limited partner rights to information.

8635. Limited duties of limited partners.

8636. Person erroneously believing self to be limited partner.

§ 8631. Becoming a limited partner.

(a) Upon formation.--Upon formation of a limited

partnership, a person becomes a limited partner as agreed among

the persons that are to be the initial partners.

(b) After formation.--After formation, a person becomes a

limited partner:

(1) as provided in the partnership agreement;

(2) as the result of a transaction effective under

Chapter 3 (relating to entity transactions);

(3) with the affirmative vote or consent of all the

partners; or

(4) as provided in section 8681(a)(4) or (5) (relating

to events causing dissolution).

(c) Noneconomic limited partners.--A person may become a

limited partner without:

(1) acquiring a transferable interest; or

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(2) making or being obligated to make a contribution to

the limited partnership.

(d) Nature of interest.--The interest of a limited partner

in a limited partnership is personal property.

§ 8632. No agency power of limited partner as limited partner.

(a) General rule.--A limited partner is not an agent of a

limited partnership solely by reason of being a limited partner.

(b) Creation of partnership liability.--A person's status as

a limited partner does not prevent or restrict law other than

this chapter from imposing liability on a limited partnership

because of the person's conduct.

§ 8633. No liability as limited partner for limited partnership

obligations.

A debt, obligation or other liability of a limited

partnership is not the debt, obligation or other liability of a

limited partner. A limited partner is not personally liable,

directly or indirectly, by way of contribution or otherwise, for

a debt, obligation or other liability of the partnership solely

by reason of being or acting as a limited partner, even if the

limited partner participates in the management and control of

the partnership. This subsection applies regardless of the

dissolution, winding up or termination of the partnership.

§ 8634. Limited partner rights to information.

(a) Right to required information.-- Within 10 days after

receipt by a limited partnership of a demand made in record

form, a limited partner may inspect and copy required

information during regular business hours in the partnership's

principal office. The limited partner need not have any

particular purpose for seeking the information.

(b) Right to other information.--During regular business

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hours and at a reasonable location specified by the limited

partnership, a limited partner may inspect and copy information,

other than the required information, regarding the activities,

affairs, financial condition and other circumstances of the

partnership if:

(1) the limited partner seeks the information for a

purpose reasonably related to the partner's interest as a

limited partner;

(2) the limited partner makes a demand in record form

received by the partnership, describing with reasonable

particularity the information sought and the purpose for

seeking the information; and

(3) the information sought is directly connected to the

limited partner's purpose.

(c) Rights of person dissociated as limited partner.--

Subject to subsection (h), on demand made in record form

received by a limited partnership, a person dissociated as a

limited partner may have access to information to which the

person was entitled while a limited partner if:

(1) the information pertains to the period during which

the person was a limited partner;

(2) in seeking the information the person complies with

section 8635(a) (relating to limited duties of limited

partners) as if still a limited partner; and

(3) the person satisfies the requirements imposed on a

limited partner by subsection (b).

(d) Required response to demand.--Within 10 days after

receiving a demand under subsection (b) or (c), the limited

partnership shall inform in record form the person that made the

demand of:

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(1) what information the partnership will provide in

response to the demand and when and where the partnership

will provide the information; and

(2) the partnership's reasons for declining, if the

partnership declines to provide any demanded information.

(e) Copying costs.--A limited partnership may charge a

person that makes a demand under this section the reasonable

costs of copying, limited to the costs of labor and materials.

(f) Rights of agent or guardian.--A limited partner or

person dissociated as a limited partner may exercise the rights

under this section through an agent or, in the case of an

individual under legal disability, a guardian. Any restriction

or condition imposed by the partnership agreement or under

subsection (h) applies both to the agent or guardian and to the

limited partner or person dissociated as a limited partner.

(g) No rights of transferee.--Subject to section 8674

(relating to power of personal representative of deceased

partner), the rights under this section do not extend to a

person as transferee.

(h) Limitations on access.--In addition to any restriction

or condition stated in its partnership agreement, a limited

partnership, as a matter within the ordinary course of its

activities and affairs, may impose reasonable restrictions and

conditions on access to and use of information to be furnished

under this section, including designating information

confidential and imposing nondisclosure and safeguarding

obligations on the recipient. In a dispute concerning the

reasonableness of a restriction under this subsection, the

partnership has the burden of proving reasonableness.

(i) Cross reference.--See section 8615 (relating to contents

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of partnership agreement).

§ 8635. Limited duties of limited partners.

(a) Good faith and fair dealing.--A limited partner shall

discharge any duties to the limited partnership and the other

partners under the partnership agreement and exercise any rights

under this title or the partnership agreement consistently with

the contractual obligation of good faith and fair dealing.

(b) No other duties.--Except as provided under subsection

(a), a limited partner does not have any duty to the limited

partnership or to any other partner solely by reason of acting

as a limited partner.

(c) Transactions with limited partnership.--If a limited

partner enters into a transaction with a limited partnership,

the limited partner's rights and obligations arising from the

transaction are the same as those of a person that is not a

partner.

(d) Cross reference.--See section 8615(c)(11) (relating to

contents of partnership agreement).

§ 8636. Person erroneously believing self to be limited

partner.

(a) Right to correct.--Except as provided in subsection (b),

a person that makes an investment in a business enterprise and

erroneously but in good faith believes that the person has

become a limited partner in the enterprise is not liable for the

enterprise's obligations by reason of making the investment,

receiving distributions from the enterprise or exercising any

rights of or appropriate to a limited partner, if, on

ascertaining the mistake, the person:

(1) causes an appropriate certificate of limited

partnership, amendment or statement of correction to be

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signed and delivered to the department for filing;

(2) if a certificate of limited partnership is on file

in the department, withdraws from future participation as an

owner in the enterprise by delivering to the department for

filing a certificate of negation under this section stating:

(i) the name of the limited partnership;

(ii) subject to section 109 (relating to name of

commercial registered office provider in lieu of

registered address), the address, including street and

number, if any, of the partnership's registered office;

(iii) the name of the person delivering the

certificate to the department for filing; and

(iv) that the person is not a general partner; or

(3) files a certificate of denial under section 8434

(relating to certificate of denial) as if the enterprise were

a general partnership.

(b) Liability before correction.--A person that makes an

investment described in subsection (a) is liable to the same

extent as a general partner to any third party that enters into

a transaction with the enterprise, believing in good faith that

the person is a general partner, before the department files a

certificate of negation, certificate of limited partnership,

amendment or statement of correction to show that the person is

not a general partner.

(c) Right to withdraw.--If a person makes a diligent effort

in good faith to comply with subsection (a)(1) and is unable to

cause the appropriate certificate of limited partnership,

amendment or statement of correction to be signed and delivered

to the department for filing, the person has the right to

withdraw from the enterprise under subsection (a)(2) even if the

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withdrawal would otherwise breach an agreement with others that

are or have agreed to become co-owners of the enterprise.

(d) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8623 (relating to signing of filed documents).

SUBCHAPTER D

GENERAL PARTNERS

Sec.

8641. Becoming a general partner.

8642. General partner agent of limited partnership.

8643. Limited partnership liable for general partner's

actionable conduct.

8644. General partner's liability.

8645. Actions by and against partnership and partners.

8646. Management rights.

8647. General partner rights to information.

8648. Reimbursement, indemnification, advancement and

insurance.

8649. Standards of conduct for general partners.

§ 8641. Becoming a general partner.

(a) Admission on formation.--On formation of a limited

partnership, a person becomes a general partner as agreed among

the persons that are to be the initial partners.

(b) Admission after formation.--After formation of a limited

partnership, a person becomes a general partner:

(1) as provided in the partnership agreement;

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(2) as the result of a transaction effective under

Chapter 3 (relating to entity transactions);

(3) with the affirmative vote or consent of all the

partners; or

(4) under section 8681(a)(3)(ii) or (5) (relating to

events causing dissolution) following the dissociation of a

limited partnership's last general partner.

(c) Noneconomic general partners.--A person may become a

general partner without:

(1) acquiring a transferable interest; or

(2) making or being obligated to make a contribution to

the partnership.

(d) Nature of interest.--The interest of a general partner

in a limited partnership is personal property.

§ 8642. General partner agent of limited partnership.

(a) General rule.--Each general partner is an agent of the

limited partnership for the purposes of its activities and

affairs. An act of a general partner, including the signing of a

document in record form in the partnership's name, for

apparently carrying on in the ordinary course the partnership's

activities and affairs, or activities and affairs of the kind

carried on by the partnership, binds the partnership, unless the

general partner did not have authority to act for the

partnership in the particular matter and the person with which

the general partner was dealing knew or had notice that the

general partner lacked authority.

(b) Act outside of ordinary course.--An act of a general

partner which is not apparently for carrying on in the ordinary

course the limited partnership's activities and affairs, or

activities and affairs of the kind carried on by the

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partnership, binds the partnership only if the partner had

actual authority to take the action.

§ 8643. Limited partnership liable for general partner's

actionable conduct.

(a) General rule.--A limited partnership is liable for loss

or injury caused to a person or for a penalty incurred as a

result of a wrongful act, or other actionable conduct, of a

general partner acting in the ordinary course of activities and

affairs of the partnership or with the actual or apparent

authority of the partnership.

(b) Misapplication of property.--If, in the course of a

limited partnership's activities and affairs or while acting

with actual or apparent authority of the partnership, a general

partner receives or causes the partnership to receive money or

property of a person not a partner, and the money or property is

misapplied by a general partner, the partnership is liable for

the loss.

§ 8644. General partner's liability.

(a) General rule.--Except as provided under subsection (b)

or section 8204 (relating to limitation on liability of

partners), all general partners are liable jointly and severally

for all debts, obligations and other liabilities of the limited

partnership unless otherwise agreed by the claimant or provided

by law.

(b) Preexisting obligations.--A person that becomes a

general partner is not personally liable for a debt, obligation

or other liability of the limited partnership incurred before

the person became a general partner.

§ 8645. Actions by and against partnership and partners.

(a) General partner as party.--To the extent not

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inconsistent with section 8644 (relating to general partner's

liability), a general partner may be joined in an action against

the limited partnership or named in a separate action.

(b) Judgment against partnership only.--A judgment against a

partnership:

(1) is not by itself a judgment against a partner; and

(2) except as set forth in subsection (c), may not be

satisfied from a partner's assets.

(c) Judgment against partnership and partner.--If there is a

judgment against a partnership and a partner on the same claim,

the judgment creditor may levy execution against the assets of

the partner if both of the following paragraphs apply:

(1) The partner is personally liable for the claim under

section 8644.

(2) One of the following subparagraphs applies:

(i) A writ of execution on the judgment against the

partnership has been returned unsatisfied in whole or in

part.

(ii) The partnership is a debtor in bankruptcy.

(iii) The partner has agreed that the creditor need

not exhaust partnership assets.

(iv) A court grants permission to levy execution

based on a finding that:

(A) partnership assets subject to execution are

clearly insufficient to satisfy the judgment;

(B) exhaustion of partnership assets is

excessively burdensome; or

(C) the grant of permission is an appropriate

exercise of the court's equitable powers.

(v) Liability is imposed on the partner by law or

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contract independent of the existence of the partnership.

§ 8646. Management rights.

(a) General rule.--Each general partner has equal rights in

the management and conduct of the limited partnership's

activities and affairs. Except as provided in this title, any

matter relating to the activities and affairs of the partnership

is decided exclusively by the general partner or, if there is

more than one general partner, by a majority of the general

partners.

(b) Actions requiring unanimous approval.--The affirmative

vote or consent of all the partners is required to:

(1) amend the partnership agreement; AND

(2) amend the certificate of limited partnership to

delete a statement that the limited partnership is a limited

liability limited partnership. ; and

(3) sell, lease, exchange, or otherwise dispose of all,

or substantially all, of the limited partnership's property,

with or without the goodwill, other than in the usual and

regular course of the partnership's activities and affairs.

(c) Reimbursement of advance.--A limited partnership shall

reimburse a general partner for an advance to the partnership

beyond the amount of capital the general partner agreed to

contribute.

(d) Status of advance.--A payment or advance made by a

general partner which gives rise to an obligation of the limited

partnership under subsection (c) or section 8648(a) (relating to

reimbursement, indemnification, advancement and insurance)

constitutes a loan to the partnership which accrues interest

from the date of the payment or advance.

(e) No right to remuneration.--A general partner is not

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entitled to remuneration for services performed for the limited

partnership.

(F) SALE OF ASSETS.--A SALE, LEASE, EXCHANGE OR OTHER

DISPOSITION OF ALL, OR SUBSTANTIALLY ALL, THE PROPERTY AND

ASSETS OF A LIMITED PARTNERSHIP THAT IS NOT MADE IN THE USUAL

AND REGULAR COURSE OF THE BUSINESS OF THE PARTNERSHIP MUST BE

APPROVED BY:

(1) ALL THE GENERAL PARTNERS; AND

(2) LIMITED PARTNERS OWNING THE RIGHTS TO RECEIVE A

MAJORITY OF THE DISTRIBUTIONS AS LIMITED PARTNERS.

(f) (G) Cross reference.--See section 324 (relating to

approval by limited partnership).

§ 8647. General partner rights to information.

(a) Right to required information.--A general partner may

inspect and copy required information during regular business

hours in the limited partnership's principal office , without

having any particular purpose for seeking the information .

(b) Right to other information.--On reasonable notice, a

general partner may inspect and copy during regular business

hours, at a reasonable location specified by the limited

partnership, any record OTHER RECORDS maintained by the

partnership IN ADDITION TO THE REQUIRED INFORMATION regarding

the partnership's activities, affairs, financial condition and

other circumstances , to the extent the information is material

to the general partner's rights and duties under the partnership

agreement or this title .

(c) Obligation of limited partnership.--A limited

partnership shall furnish to each general partner :

(1) , without demand, any information concerning the

partnership's activities, affairs, financial condition and

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other circumstances which the partnership knows and is

material to the proper exercise of the general partner's

rights and duties under the partnership agreement or this

title, except to the extent the partnership can establish

that it reasonably believes the general partner already knows

the information . ; and

(2) on demand, any other information concerning the

partnership's activities, affairs, financial condition and

other circumstances, except to the extent the demand or the

information demanded is unreasonable or otherwise improper

under the circumstances.

(d) Obligation of general partner.--The duty to furnish

information under subsection (c) also applies to each general

partner to the extent the general partner knows any of the

information described in subsection (b).

(e) Rights of person dissociated as general partner.--

Subject to subsection (j), within 10 days after receipt by a

limited partnership of a demand made in record form, a person

dissociated as a general partner may have access to the

information and records described under subsections (a) and (b)

at the locations specified under subsections (a) and (b) if:

(1) the information or record pertains to the period

during which the person was a general partner;

(2) in seeking the information or record the person

complies with section 8649(d) (relating to standards of

conduct for general partners) as if still a general partner;

and

(3) all of the following apply:

(i) the person seeks the information for a purpose

reasonably related to the partner's interest as a former

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general partner;

(ii) the person makes a demand in record form

received by the partnership, describing with reasonable

particularity the information sought and the purpose for

seeking the information; and

(iii) the information sought is directly connected

to the person's purpose.

(f) Required response to demand.--Within 10 days after

receiving a demand under subsection (e), the limited partnership

shall, in record form, inform the person that made the demand

of:

(1) what information the partnership will provide in

response to the demand and when and where the partnership

will provide the information; and

(2) the partnership's reasons for declining, if the

partnership declines to provide any demanded information.

(g) Copying costs.--A limited partnership may charge a

person that makes a demand under this section the reasonable

costs of copying.

(h) Rights of agent or guardian.--A general partner or

person dissociated as a general partner may exercise the rights

under this section through an agent or, in the case of an

individual under legal disability, a guardian. Any restriction

or condition imposed by the partnership agreement or under

subsection (j) applies both to the agent or guardian and to the

general partner or person dissociated as a general partner.

(i) No rights of transferee.--The rights under this section

do not extend to a person as transferee, except that if:

(1) a general partner dies, section 8674 (relating to

power of personal representative of deceased partner)

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applies; and

(2) an individual dissociates as a general partner under

section 8663(7)(ii) 8663(A)(7)(II) or (iii) (relating to

dissociation as general partner), the personal representative

of the individual may exercise the rights under subsection

(d) of a person dissociated as a general partner.

(j) Limitations on access.--In addition to any restriction

or condition stated in its partnership agreement, a limited

partnership, as a matter within the ordinary course of its

activities and affairs, may impose reasonable restrictions and

conditions on access to and use of information to be furnished

under this section, including designating information

confidential and imposing nondisclosure and safeguarding

obligations on the recipient. In a dispute concerning the

reasonableness of a restriction under this subsection, the

partnership has the burden of proving reasonableness.

(k) Cross reference.--See section 8615 (relating to contents

of partnership agreement).

§ 8648. Reimbursement, indemnification, advancement and

insurance.

(a) Reimbursement.--A limited partnership shall reimburse a

general partner for any payment made by the general partner in

the course of the general partner's activities on behalf of the

partnership, if the general partner complied with sections 8646

(relating to management rights), 8649 (relating to standards of

conduct for general partners) and 8654 (relating to limitations

on distributions) in making the payment.

(b) Indemnification.--A limited partnership shall indemnify

and hold harmless a person with respect to any claim or demand

against the person and any debt, obligation or other liability

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incurred by the person by reason of the person's former or

present capacity as a general partner, if the claim, demand,

debt, obligation or other liability does not arise from the

person's breach of section 8646, 8649 or 8654.

(c) Advancement.--In the ordinary course of its activities

and affairs, a limited partnership may advance reasonable

expenses, including attorney fees and costs, incurred by a

person in connection with a claim or demand against the person

by reason of the person's former or present capacity as a

general partner, if the person promises to repay the partnership

if the person ultimately is determined not to be entitled to be

indemnified.

(d) Insurance.--A limited partnership may purchase and

maintain insurance on behalf of a general partner against

liability asserted against or incurred by the general partner in

that capacity or arising from that status even if, under section

8615(c)(11) (relating to contents of partnership agreement)

SUBSECTION (G) , the partnership agreement could not eliminate or

limit the person's liability to the partnership for the conduct

giving rise to the liability.

(e) Non-exclusivity.--The rights provided under subsections

(a), (b), (c) and (d) shall not be deemed exclusive of any other

rights to which a person seeking reimbursement, indemnification,

advancement of expenses or insurance may be entitled under the

partnership agreement, vote of partners, contract or otherwise,

both as to action in his official capacity and as to action in

another capacity while holding that position. Section 8649(f)

shall be applicable to a vote, contract or other action under

this subsection. A limited partnership may create a fund of any

nature, which may, but need not be, under the control of a

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trustee, or otherwise secure or insure in any manner its

indemnification obligations, whether arising under this section

or otherwise.

(f) Grounds.--Indemnification under subsection (e) may be

granted for any action taken and may be made whether or not the

limited partnership would have the power to indemnify the person

under any other provision of law except as provided in THIS

section 8615(c)(11) and whether or not the indemnified liability

arises or arose from any threatened, pending or completed action

by or in the right of the partnership. Indemnification under

subsection (e) is declared to be consistent with the public

policy of the Commonwealth.

(G) LIMITATION.--INDEMNIFICATION UNDER THIS SECTION SHALL

NOT BE MADE IN ANY CASE WHERE THE ACT GIVING RISE TO THE CLAIM

FOR INDEMNIFICATION IS DETERMINED BY A COURT TO CONSTITUTE

RECKLESSNESS, WILLFUL MISCONDUCT OR A KNOWING VIOLATION OF LAW.

§ 8649. Standards of conduct for general partners.

(a) General rule.--A general partner owes to the limited

partnership and, subject to section 8691 (relating to direct

action by partner), the other partners the duties of loyalty and

care stated in subsections (b) and (c).

(b) Duty of loyalty.--The fiduciary duty of loyalty of a

general partner includes the duties:

(1) to account to the limited partnership and hold as

trustee for it any property, profit or benefit derived by the

general partner:

(i) in the conduct or winding up of the

partnership's activities and affairs;

(ii) from a use by the general partner of the

partnership's property; or

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(iii) from the appropriation of a partnership

opportunity;

(2) to refrain from dealing with the partnership in the

conduct or winding up of the partnership's activities and

affairs as or on behalf of a person having an interest

adverse to the partnership; and

(3) to refrain from competing with the partnership in

the conduct or winding up of the partnership's activities and

affairs.

(c) Duty of care.--The duty of care of a general partner in

the conduct or winding up of the limited partnership's

activities and affairs is to refrain from engaging in grossly

negligent or reckless conduct, willful or intentional misconduct

or knowing violation of law.

(d) Good faith and fair dealing.--A general partner shall

discharge the duties and obligations under this title or under

the partnership agreement and exercise any rights consistent

with the contractual obligation of good faith and fair dealing.

(e) Self-serving conduct.--A general partner does not

violate a duty or obligation under this title or under the

partnership agreement solely because the general partner's

conduct furthers the general partner's own interest.

(f) Authorization or ratification.--All the partners of a

limited partnership may authorize or ratify, after full

disclosure of all material facts, a specific act or transaction

that otherwise would violate the duty of loyalty of a general

partner.

(g) Fairness as a defense.--It is a defense to a claim under

subsection (b)(2) and any comparable claim in equity or at

common law that the transaction was fair to the limited

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partnership at the time it is authorized or ratified under

subsection (f).

(h) Rights and obligations in approved transactions.--If a

general partner enters into a transaction with the limited

partnership which otherwise would be prohibited by subsection

(b)(2) and the transaction is authorized or ratified as provided

in subsection (f) or the partnership agreement, the general

partner's rights and obligations arising from the transaction

are the same as those of a person that is not a general partner.

(I) EXONERATION.--THE PARTNERSHIP AGREEMENT MAY PROVIDE THAT

A GENERAL PARTNER SHALL NOT BE PERSONALLY LIABLE FOR MONETARY

DAMAGES TO THE PARTNERSHIP OR THE OTHER PARTNER FOR A BREACH OF

SUBSECTION (C), EXCEPT THAT A GENERAL PARTNER MAY NOT BE

EXONERATED FOR AN ACT THAT CONSTITUTES RECKLESSNESS, WILLFUL

MISCONDUCT OR A KNOWING VIOLATION OF LAW.

(i) (J) Cross reference.--See section 8615 (relating to

contents of partnership agreement).

SUBCHAPTER E

CONTRIBUTIONS AND DISTRIBUTIONS

Sec.

8651. Form of contribution.

8652. Liability for contribution.

8653. Sharing of and right to distributions before dissolution.

8654. Limitations on distributions.

8655. Liability for improper distributions.

§ 8651. Form of contribution.

A contribution may consist of:

(1) property transferred to, services performed for or

another benefit provided to the limited partnership;

(2) an agreement to transfer property to, perform

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services for or provide another benefit to the partnership;

or

(3) any combination of items listed in paragraphs (1)

and (2).

§ 8652. Liability for contribution.

(a) Obligation not excused.--A person's obligation to make a

contribution to a limited partnership is not excused by the

person's death, disability, termination or other inability to

perform personally.

(b) Substitute payment.--If a person does not fulfill an

obligation to make a contribution other than money, the person

is obligated at the option of the limited partnership to

contribute money equal to the value, as stated in the required

information, of the part of the contribution which has not been

made.

(c) Compromise of obligation.--The obligation of a person to

make a contribution may be compromised only by the affirmative

vote or consent of all the partners. If a creditor of a limited

partnership extends credit or otherwise acts in reliance on an

obligation described in subsection (a) without knowledge or

notice of a compromise under this subsection, the creditor may

enforce the obligation.

§ 8653. Sharing of and right to distributions before

dissolution.

(a) General rule.--Any distribution made by a limited

partnership before its dissolution and winding up must be shared

among the partners and persons dissociated as partners on the

basis of the value, as stated in the required information when

the limited partnership decides to make the distribution, of the

contributions the limited partnership has received from each

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partner, except to the extent necessary to comply with a

transfer effective under section 8672 AS PROVIDED IN SECTION

8672(B) (relating to transfer of transferable interest) or TO

THE EXTENT NECESSARY TO COMPLY WITH A charging order in effect

under section 8673 (relating to charging order).

(b) No entitlement to distribution.--A person has a right to

a distribution before the dissolution and winding up of a

limited partnership only if the partnership decides to make an

interim distribution. A person's dissociation does not entitle

the person to a distribution.

(c) Distribution in kind.--A person does not have a right to

demand or receive a distribution from a limited partnership in

any form other than money. Except as provided under section

8690(f) (relating to disposition of assets in winding up and

required contributions), a partnership may distribute an asset

in kind only if each part of the asset is fungible with each

other part and each person receives a percentage of the asset

equal in value to the person's share of distributions.

(d) Status as creditor.--If a partner or transferee becomes

entitled to receive a distribution, the partner or transferee

has the status of, and is entitled to all remedies available to,

a creditor of the limited partnership with respect to the

distribution, except that the partnership's obligation to make a

distribution is subject to offset for any amount owed to the

partnership by the partner or a person dissociated as a partner

on whose account the distribution is made.

§ 8654. Limitations on distributions.

(a) General rule.--A limited partnership may not make a

distribution, including a distribution under section 8690

(relating to disposition of assets in winding up and required

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contributions), if after the distribution:

(1) the partnership would not be able to pay its debts

as they become due in the ordinary course of the

partnership's activities and affairs; or

(2) the partnership's total assets would be less than

the sum of its total liabilities plus the amount that would

be needed, if the partnership were to be dissolved and wound

up at the time of the distribution, to satisfy the

preferential rights upon dissolution and winding up of

partners and transferees whose preferential rights are

superior to the rights of persons receiving the distribution.

(b) Valuation.--A limited partnership may base a

determination that a distribution is not prohibited under

subsection (a)(2) on:

(1) the book values of the assets and liabilities of the

partnership, as reflected on its books and records;

(2) a valuation that takes into consideration unrealized

appreciation and depreciation or other changes in value of

the assets and liabilities of the partnership;

(3) the current value of the assets and liabilities of

the partnership, either valued separately or valued in

segments or as an entirety as a going concern; or

(4) any other method that is reasonable in the

circumstances.

(c) Excluded liabilities.--In determining whether a

distribution is prohibited by subsection (a)(2), the limited

partnership need not consider obligations and liabilities unless

they are required to be reflected on a balance sheet, not

including the notes to the balance sheet, prepared on the basis

of generally accepted accounting principles or other such

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accounting practices and principles as are used generally by the

partnership in the maintenance of its books and records and as

are reasonable in the circumstances.

(d) Measuring date of distribution.--Except as provided in

subsection (e), the effect of a distribution under subsection

(a) is measured:

(1) as of the date specified by the limited partnership

when it authorizes the distribution if the distribution

occurs within 125 days of the earlier of the date so

specified or the date of authorization; or

(2) as of the date of distribution in all other cases.

(e) Date of redemption.--In the case of a distribution

described in paragraph (1) of the definition of "distribution"

in section 8612 (relating to definitions), the distribution is

deemed to occur as of the earlier of the date money or other

property is transferred or debt is incurred by the limited

partnership or 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.

(f) Status of distribution debt.--The indebtedness of a

limited partnership to a partner or transferee incurred by

reason of a distribution made in accordance with this section

shall be at least on a parity with the partnership's

indebtedness to its general, unsecured creditors, except to the

extent subordinated by agreement.

(g) Certain subordinated debt.--The indebtedness of a

limited partnership, including indebtedness issued as a

distribution, is not a liability for purposes of subsection (a)

if the terms of the indebtedness provide that payment of

principal and interest is made only if and to the extent that

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payment of a distribution could then be made under this

section. If the indebtedness is issued as a distribution, each

payment of principal or interest is treated as a distribution,

the effect of which is measured on the date the payment is made.

(h) Distributions in winding up.--In measuring the effect of

a distribution under section 8690, the liabilities of a

dissolved limited partnership do not include any claim that has

been barred under section 8686 (relating to known claims against

dissolved limited partnership) or 8687 (relating to other claims

against dissolved limited partnership), or for which security

has been provided under section 8688 (relating to court

proceedings).

(i) Cross references.--See sections 8615(d)(1)(ii) (relating

to contents of partnership agreement) and 8649 (relating to

standards of conduct for general partners).

§ 8655. Liability for improper distributions.

(a) General rule.--If a general partner consents to a

distribution made in violation of section 8654 (relating to

limitations on distributions) and in consenting to the

distribution fails to comply with section 8649 (relating to

standards of conduct for general partners), the general partner

is personally liable to the limited partnership for the amount

of the distribution which exceeds the amount that could have

been distributed without the violation of section 8654.

(b) Recipients.--A person that receives a distribution

knowing that the distribution violated section 8654 is

personally liable to the limited partnership but only to the

extent that the distribution received by the person exceeded the

amount that could have been properly paid under section 8654.

(c) Contribution.--A general partner against which an action

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is commenced because the general partner is liable under

subsection (a) may:

(1) join any other person that is liable under

subsection (a) or otherwise seek to enforce a right of

contribution from the person; and

(2) join any person that received a distribution in

violation of subsection (b) or otherwise seek to enforce a

right of contribution from the person in the amount the

person received in violation of subsection (b).

(d) Statute of repose.--An action under this section is

barred unless commenced within two years after the distribution.

SUBCHAPTER F

DISSOCIATION

Sec.

8661. Dissociation as limited partner.

8662. Effects of dissociation as limited partner.

8663. Dissociation as general partner.

8664. Power to dissociate as general partner and wrongful

dissociation.

8665. Effects of dissociation as general partner.

8666. Power to bind and liability of person dissociated as

general partner.

8667. Liability of person dissociated as general partner to

other persons.

§ 8661. Dissociation as limited partner.

(a) No right to dissociate.--A person does not have a right

to dissociate as a limited partner before the completion of the

winding up of the limited partnership.

(b) Events causing dissociation.--A person is dissociated as

a limited partner when any of the following apply:

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(1) The limited partnership knows or has notice of the

person's express will to withdraw as a limited partner

rightfully or wrongfully, except that, if the person has

specified a withdrawal date later than the date the

partnership knew or had notice, on that later date.

(2) An event stated in the partnership agreement as

causing the person's dissociation as a limited partner

occurs.

(3) The person is expelled as a limited partner pursuant

to the partnership agreement.

(4) The person is expelled as a limited partner by the

affirmative vote or consent of all the other partners if:

(i) it is unlawful to carry on the partnership's

activities and affairs with the person as a limited

partner;

(ii) there has been a transfer of all the person's

transferable interest in the partnership, other than:

(A) a transfer for security purposes; or

(B) a charging order in effect under section

8673 (relating to charging order) which has not been

foreclosed;

(iii) the person is an entity and:

(A) the partnership notifies the person that it

will be expelled as a limited partner because:

(I) the person has filed a certificate of

dissolution or the equivalent;

(II) the person has been administratively

dissolved;

(III) the person's charter or the equivalent

has been revoked; or

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(IV) the person's right to conduct business

has been suspended by the person's jurisdiction

of formation; and

(B) within 90 days after the notification:

(I) the certificate of dissolution or the

equivalent has not been withdrawn, rescinded or

revoked;

(II) the person has not been reinstated;

(III) the person's charter or the equivalent

has not been reinstated; or

(IV) the person's right to conduct business

has not been reinstated; or

(iv) the person is an unincorporated entity that has

been dissolved and whose activities and affairs are being

wound up.

(5) On application by the partnership or a partner in a

direct action under section 8691 (relating to direct action

by partner), the person is expelled as a limited partner by

judicial order because the person:

(i) has engaged or is engaging in wrongful conduct

that has affected adversely and materially, or will

affect adversely and materially, the partnership's

activities and affairs;

(ii) has committed willfully or persistently, or is

committing willfully or persistently, a material breach

of the partnership agreement or the contractual

obligation of good faith and fair dealing under section

8635(a) (relating to limited duties of limited partners);

or

(iii) has engaged or is engaging in conduct relating

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to the partnership's activities and affairs which makes

it not reasonably practicable to carry on the activities

and affairs with the person as a limited partner.

(6) In the case of an individual, the individual dies.

(7) In the case of a person that is a testamentary or

inter vivos trust or is acting as a limited partner by virtue

of being a trustee of such a trust, the trust's entire

transferable interest in the limited partnership is

distributed.

(8) In the case of a person that is an estate or is

acting as a limited partner by virtue of being a personal

representative of an estate, the estate's entire transferable

interest in the limited partnership is distributed.

(9) In the case of a person that is not an individual,

the existence of the person terminates.

(10) The partnership participates in a merger under

Chapter 3 (relating to entity transactions) and:

(i) the partnership is not the surviving entity; or

(ii) otherwise as a result of the merger, the person

ceases to be a limited partner.

(11) The partnership participates in an interest

exchange under Chapter 3 and, as a result of the interest

exchange, the person ceases to be a limited partner.

(12) The partnership participates in a conversion under

Chapter 3.

(13) The partnership participates in a division under

Chapter 3 and:

(i) the partnership is not a resulting association;

or

(ii) as a result of the division, the person ceases

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to be a partner.

(14) The partnership participates in a domestication

under Chapter 3 and, as a result of the domestication, the

person ceases to be a limited partner.

(15) The partnership dissolves and completes winding up.

(c) Cross reference.--See section 8611(d) (relating to short

title and application of chapter).

§ 8662. Effects of dissociation as limited partner.

(a) General rule.--If a person is dissociated as a limited

partner:

(1) subject to section 8674 (relating to power of

personal representative of deceased partner), the person does

not have further rights as a limited partner;

(2) the person's contractual obligation of good faith

and fair dealing as a limited partner under section 8635(a)

(relating to limited duties of limited partners) ends with

regard to matters arising and events occurring after the

person's dissociation except as provided in section 8634(c)

(relating to limited partner rights to information); and

(3) subject to section 8674 and Chapter 3 (relating to

entity transactions), any transferable interest owned by the

person in the person's capacity as a limited partner

immediately before dissociation is owned by the person solely

as a transferee.

(b) Existing obligations not discharged.--A person's

dissociation as a limited partner does not of itself discharge

the person from any debt, obligation or other liability to the

limited partnership or the other partners which the person

incurred while a limited partner.

(c) Cross reference.--See section 8611(d) (relating to short

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title and application of chapter).

§ 8663. Dissociation as general partner.

(a) General rule.--A person is dissociated as a general

partner when any of the following occurs:

(1) The limited partnership knows or has notice of the

person's express will to withdraw as a general partner

rightfully or wrongfully, except that, if the person has

specified a withdrawal date later than the date the

partnership knew or had notice, on that later date.

(2) An event stated in the partnership agreement as

causing the person's dissociation as a general partner

occurs.

(3) The person is expelled as a general partner pursuant

to the partnership agreement.

(4) The person is expelled as a general partner by the

affirmative vote or consent of all the other partners if:

(i) it is unlawful to carry on the partnership's

activities and affairs with the person as a general

partner;

(ii) there has been a transfer of all the person's

transferable interest in the partnership, other than:

(A) a transfer for security purposes; or

(B) a charging order in effect under section

8673 (relating to charging order) which has not been

foreclosed;

(iii) the person is an entity and:

(A) the partnership notifies the person that it

will be expelled as a general partner because:

(I) the person has filed a certificate of

dissolution or the equivalent;

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(II) the person has been administratively

dissolved;

(III) the person's charter or the equivalent

has been revoked; or

(IV) the person's right to conduct business

has been suspended by the person's jurisdiction

of formation; and

(B) within 90 days after the notification:

(I) the certificate of dissolution or the

equivalent has not been withdrawn, rescinded or

revoked;

(II) the person has not been reinstated;

(III) the person's charter or the equivalent

has not been reinstated; or

(IV) the person's right to conduct business

has not been reinstated; or

(iv) the person is an unincorporated entity that has

been dissolved and whose activities and affairs are being

wound up.

(5) On application by the partnership or a partner in a

direct action under section 8691 (relating to direct action

by partner), the person is expelled as a general partner by

judicial order because the person:

(i) has engaged or is engaging in wrongful conduct

that has affected adversely and materially, or will

affect adversely and materially, the partnership's

activities and affairs;

(ii) has committed willfully or persistently, or is

committing willfully or persistently, a material breach

of the partnership agreement or a duty or obligation

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under section 8649 (relating to standards of conduct for

general partners); or

(iii) has engaged or is engaging in conduct relating

to the partnership's activities and affairs which makes

it not reasonably practicable to carry on the activities

and affairs of the partnership with the person as a

general partner.

(6) The person:

(i) becomes a debtor in bankruptcy;

(ii) executes an assignment for the benefit of

creditors; or

(iii) seeks, consents to or acquiesces in the

appointment of a trustee, receiver or liquidator of the

person or of all or substantially all the person's

property.

(7) In the case of an individual:

(i) the individual dies;

(ii) a guardian for the individual is appointed; or

(iii) a court orders that the individual has

otherwise become incapable of performing the individual's

duties as a general partner under this title or the

partnership agreement.

(8) In the case of a person that is a testamentary or

inter vivos trust or is acting as a general partner by virtue

of being a trustee of the trust, the trust's entire

transferable interest in the limited partnership is

distributed.

(9) In the case of a person that is an estate or is

acting as a general partner by virtue of being a personal

representative of an estate, the estate's entire transferable

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interest in the limited partnership is distributed.

(10) In the case of a person that is not an individual,

the existence of the person terminates.

(11) The partnership participates in a merger under

Chapter 3 (relating to entity transactions) and:

(i) the partnership is not the surviving entity; or

(ii) otherwise as a result of the merger, the person

ceases to be a general partner.

(12) The partnership participates in an interest

exchange under Chapter 3 and, as a result of the interest

exchange, the person ceases to be a general partner.

(13) The partnership participates in a conversion under

Chapter 3.

(14) The partnership participates in a division under

Chapter 3 and:

(i) the partnership is not a resulting association;

or

(ii) as a result of the division, the person ceases

to be a partner.

(15) The partnership participates in a domestication

under Chapter 3 and, as a result of the domestication, the

person ceases to be a general partner.

(16) The partnership dissolves and completes winding up.

(b) Cross reference.--See section 8611(d) (relating to short

title and application of chapter).

§ 8664. Power to dissociate as general partner and wrongful

dissociation.

(a) Power to dissociate.--A person has the power to

dissociate as a general partner at any time, rightfully or

wrongfully, by withdrawing as a general partner by express will

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under section 8663(1) (relating to dissociation as general

partner).

(b) Wrongful dissociation.--A person's dissociation as a

general partner is wrongful only if the dissociation:

(1) is in breach of an express provision of the

partnership agreement; or

(2) occurs before the completion of the winding up of

the limited partnership, and:

(i) the person withdraws as a general partner by

express will;

(ii) the person is expelled as a general partner by

judicial order under section 8663(5);

(iii) the person is dissociated as a general partner

under section 8663(6); or

(iv) the person is expelled or otherwise dissociated

as a general partner because its existence terminated,

except that this subparagraph does not apply to a person

that is:

(A) a trust that is not a business or statutory

trust;

(B) an estate; or

(C) an individual.

(c) Damages for wrongful dissociation.--A person that

wrongfully dissociates as a general partner is liable to the

limited partnership and, subject to section 8691 (relating to

direct action by partner), to the other partners for damages

caused by the dissociation. The liability is in addition to any

debt, obligation or other liability of the general partner to

the partnership or the other partners.

(d) Cross reference.--See section 8615 (relating to contents

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of partnership agreement).

§ 8665. Effects of dissociation as general partner.

(a) General rule.--If a person is dissociated as a general

partner:

(1) The person's right to participate as a general

partner in the management and conduct of the limited

partnership's activities and affairs terminates.

(2) The person's duties and obligations as a general

partner under section 8649 (relating to standards of conduct

for general partners) end with regard to matters arising and

events occurring after the person's dissociation except as

provided in section 8647(e)(2) (relating to general partner

rights to information).

(3) The person may deliver to the department for filing

a certificate of dissociation stating:

(i) the name of the partnership;

(ii) subject to section 109 (relating to name of

commercial registered office provider in lieu of

registered address), the address, including street and

number, if any, of the registered office of the

partnership; and

(iii) the name of the person and that the person has

dissociated as a general partner.

(4) At the request of the limited partnership, the

person shall sign an amendment to the certificate of limited

partnership which states that the person has dissociated as a

general partner.

(5) Subject to section 8674 (relating to power of

personal representative of deceased partner) and Chapter 3

(relating to entity transactions), any transferable interest

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owned by the person in the person's capacity as a general

partner immediately before dissociation is owned by the

person solely as a transferee.

(b) Existing obligations not discharged.--A person's

dissociation as a general partner does not of itself discharge

the person from any debt, obligation or other liability to the

limited partnership or the other partners which the person

incurred while a general partner.

(c) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8623 (relating to signing of filed documents).

§ 8666. Power to bind and liability of person dissociated as

general partner.

(a) Power to bind.--After a person is dissociated as a

general partner and before the limited partnership is merged or

divided out of existence, converted or domesticated under

Chapter 3 (relating to entity transactions) or dissolved, the

partnership is bound by an act of the person only if:

(1) the act would have bound the partnership under

section 8642 (relating to general partner agent of limited

partnership) before the dissociation; and

(2) at the time the other party enters into the

transaction:

(i) less than two years have passed since the

dissociation; and

(ii) the other party does not know or have notice of

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the dissociation and reasonably believes that the person

is a general partner.

(b) Liability.--If a limited partnership is bound under

subsection (a), the person dissociated as a general partner

which caused the partnership to be bound is liable:

(1) to the partnership for any damage caused to the

partnership arising from the obligation incurred under

subsection (a); and

(2) if a general partner or another person dissociated

as a general partner is liable for the obligation, to the

general partner or other person for any damage caused to the

general partner or other person arising from the liability.

§ 8667. Liability of person dissociated as general partner to

other persons.

(a) General rule.--A person's dissociation as a general

partner does not of itself discharge the person's liability as a

general partner for a debt, obligation or other liability of the

limited partnership incurred before dissociation. Except as

provided in subsections (b) and (c), the person is not liable

for a partnership obligation incurred after dissociation.

(b) Obligations incurred after dissolution.--A person whose

dissociation as a general partner results in a dissolution and

winding up of the limited partnership's activities and affairs

is liable on an obligation incurred by the partnership under

section 8685 (relating to general partner liability after

dissolution) to the same extent as a general partner under

section 8644 (relating to general partner's liability).

(c) When partnership not dissolved.--A person that is

dissociated as a general partner without the dissociation

resulting in a dissolution and winding up of the limited

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partnership's activities and affairs is liable on a transaction

entered into by the partnership after the dissociation only if a

general partner would be liable on the transaction, but at the

time the other party enters into the transaction:

(1) less than two years have passed since the

dissociation; and

(2) the other party does not have knowledge or notice of

the dissociation and reasonably believes that the person is a

general partner.

(d) Constructive release by creditor.--A person dissociated

as a general partner is released from liability for a debt,

obligation or other liability of the limited partnership if the

partnership's creditor, with knowledge or notice of the person's

dissociation as a general partner and without the person's

consent, agrees to a material alteration in the nature or time

of payment of the debt, obligation or other liability. The

release from liability under this subsection applies whether the

liability arises directly or indirectly, by way of contribution

or otherwise, but only if the liability arises solely by reason

of having been a general partner.

SUBCHAPTER G

TRANSFERABLE INTERESTS AND RIGHTS

OF TRANSFEREES AND CREDITORS

Sec.

8671. Nature of transferable interest.

8672. Transfer of transferable interest.

8673. Charging order.

8674. Power of personal representative of deceased partner.

§ 8671. Nature of transferable interest.

(a) Personal property.--A transferable interest is personal

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property.

(b) Only right that may be transferred.--A person may not

transfer to a person not a partner any rights in a limited

partnership other than a transferable interest.

§ 8672. Transfer of transferable interest.

(a) General rule.--A transfer, in whole or in part, of a

transferable interest:

(1) is permissible;

(2) does not by itself cause the dissociation of the

transferor as a partner or a dissolution and winding up of

the limited partnership's activities and affairs; and

(3) subject to section 8674 (relating to power of

personal representative of deceased partner), does not

entitle the transferee to:

(i) participate in the management or conduct of the

partnership's activities and affairs; or

(ii) except as provided under subsection (c), have

access to required information, records or other

information concerning the partnership's activities and

affairs.

(b) Right to distributions.--A transferee has the right to

receive, in accordance with the transfer, distributions to which

the transferor would otherwise be entitled.

(c) Right to account on dissolution.--In a dissolution and

winding up of a limited partnership, a transferee is entitled to

an account of the partnership's transactions only from the date

of dissolution.

(d) Certificate of interest.--A transferable interest may be

evidenced by a certificate of the interest issued by a limited

partnership in record form, and, subject to this section, the

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interest represented by the certificate may be transferred by a

transfer of the certificate.

(e) Recognition of transferee's rights.--A limited

partnership need not give effect to a transferee's rights under

this section until the partnership knows or has notice of the

transfer.

(f) Transfer restrictions.--A transfer of a transferable

interest in violation of a restriction on transfer contained in

the partnership agreement is ineffective if the intended

transferee has knowledge or notice of the restriction at the

time of transfer.

(g) Rights retained by transferor.--Except as provided under

sections 8661(b)(4)(ii) (relating to dissociation as limited

partner) and 8663(a)(4)(ii) (relating to dissociation as general

partner), if a general or limited partner transfers a

transferable interest, the transferor retains the rights of a

general or limited partner other than the transferable interest

transferred and retains all the duties and obligations of a

general or limited partner.

§ 8673. Charging order.

(a) General rule.--On application by a judgment creditor of

a partner or transferee, a court may enter a charging order

against the transferable interest of the judgment debtor for the

unsatisfied amount of the judgment. A charging order constitutes

a lien on a judgment debtor's transferable interest and requires

the limited partnership to pay over to the person to which the

charging order was issued any distribution that otherwise would

be paid to the judgment debtor.

(b) Available relief.--To the extent necessary to effectuate

the collection of distributions pursuant to a charging order in

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effect under subsection (a), the court may:

(1) appoint a receiver of the distributions subject to

the charging order, with the power to make all inquiries the

judgment debtor might have made; and

(2) make all other orders necessary to give effect to

the charging order.

(c) Foreclosure.--Upon a showing that distributions under a

charging order will not pay the judgment debt within a

reasonable time, the court may foreclose the lien and order the

sale of the transferable interest. The purchaser at the

foreclosure sale obtains only the transferable interest, does

not thereby become a partner and is subject to section 8672

(relating to transfer of transferable interest).

(d) Satisfaction of judgment.--At any time before

foreclosure under subsection (c), the partner or transferee

whose transferable interest is subject to a charging order under

subsection (a) may extinguish the charging order by satisfying

the judgment and filing a certified copy of the satisfaction

with the court that issued the charging order.

(e) Purchase of rights.--At any time before foreclosure

under subsection (c), a limited partnership or one or more

partners whose transferable interests are not subject to the

charging order may pay to the judgment creditor the full amount

due under the judgment and thereby succeed to the rights of the

judgment creditor, including the charging order.

(f) Exemption laws preserved.--This chapter shall not

deprive any partner or transferee of the benefit of any

exemption law applicable to the transferable interest of the

partner or transferee.

(g) Exclusive remedy.--This section provides the exclusive

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remedy by which a person seeking, in the capacity of a judgment

creditor, to enforce a judgment against a partner or transferee

may satisfy the judgment from the judgment debtor's transferable

interest.

§ 8674. Power of personal representative of deceased partner.

If a partner dies, the personal representative of the

deceased partner may exercise:

(1) the rights of a transferee provided in section

8672(c) (relating to transfer of transferable interest); and

(2) for the purposes of settling the estate, the rights

of a current limited partner under section 8634 (relating to

limited partner rights to information).

SUBCHAPTER H

DISSOLUTION AND WINDING UP

Sec.

8681. Events causing dissolution.

8681.1. Voluntary termination by partners.

8682. Winding up and filing of optional certificates.

8683. Rescinding dissolution (RESERVED) .

8684. Power to bind partnership after dissolution.

8685. General partner liability after dissolution.

8686. Known claims against dissolved limited partnership.

8687. Other claims against dissolved limited partnership.

8688. Court proceedings.

8689. General partner liability when claim against limited

partnership barred.

8690. Disposition of assets in winding up and required

contributions.

§ 8681. Events causing dissolution.

(a) General rule.--A limited partnership is dissolved, and

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its activities and affairs must be wound up, upon the occurrence

of any of the following:

(1) an event or circumstance that the partnership

agreement states causes dissolution;

(2) the affirmative vote or consent of all general

partners and of limited partners owning a majority of the

rights to receive OF:

(I) ALL GENERAL PARTNERS; AND

(II) LIMITED PARTNERS OWNING THE RIGHTS TO RECEIVE A

MAJORITY OF THE distributions as limited partners at the

time the vote or consent is to be effective;

(3) after the dissociation of a person as a general

partner:

(i) if the partnership has at least one remaining

general partner, the affirmative vote or consent to

dissolve the partnership within 90 days after the

dissociation by partners owning a majority of the rights

to receive distributions as partners at the time the vote

or consent is to be effective; or

(ii) if the partnership does not have a remaining

general partner, the passage of 180 days after the

dissociation, unless before the end of the period:

(A) consent to continue the activities and

affairs of the partnership and admit at least one

general partner is given by limited partners owning a

majority of the rights to receive distributions as

limited partners at the time the consent is to be

effective; and

(B) at least one person is admitted as a general

partner in accordance with the consent;

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(4) the passage of 90 180 consecutive days after the

dissociation of the partnership's last limited partner,

unless before the end of the period the partnership admits at

least one limited partner;

(5) the passage of 90 180 consecutive days during which

the partnership has only one partner, unless before the end

of the period:

(i) the partnership admits at least one person as a

partner;

(ii) if the previously sole remaining partner is

only a general partner, the partnership admits a person

as a limited partner; and

(iii) if the previously sole remaining partner is

only a limited partner, the partnership admits a person

as a general partner; or

(6) on application by a partner, the entry by the court

of an order dissolving the partnership on the grounds that:

(i) the conduct of all or substantially all the

partnership's activities and affairs is unlawful;

(ii) it is not reasonably practicable to carry on

the partnership's activities and affairs in conformity

with the certificate of limited partnership and

partnership agreement; or

(iii) the general partners have acted, are acting or

will act in a manner that is illegal or fraudulent.

(b) Multiple deadlines.--If an event occurs that imposes a

deadline on a limited partnership under subsection (a) and

before the partnership has met the requirements of the deadline,

another event occurs that imposes a different deadline on the

partnership under subsection (a):

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(1) the occurrence of the second event does not affect

the deadline caused by the first event; and

(2) the partnership's meeting of the requirements of the

first deadline does not extend the second deadline.

(c) Cross references.--See sections 8611(d) (relating to

short title and application of chapter) and 8615(c)(15)

(relating to contents of partnership agreement).

§ 8681.1. Voluntary termination by partners.

(a) General rule.--The general partners of a limited

partnership that has not commenced business may effect the

termination of the partnership by delivering to the department

for filing a certificate of termination signed by a majority of

the general partners and stating:

(1) the name of the partnership;

(2) subject to section 109 (relating to name of

commercial registered office provider in lieu of registered

address), the address, including street and number, if any,

of the registered office of the partnership;

(3) that the partnership has not commenced business;

(4) that the amounts, if any, actually paid in as

contributions, less any part disbursed for necessary

expenses, have been returned to those entitled to the return

of the amounts;

(5) that all liabilities of the partnership have been

discharged or that adequate provision has been made for those

liabilities; and

(6) that a majority of the general partners elect that

the partnership be terminated.

(b) Effect.--Upon the filing of the certificate of

termination, the existence of the limited partnership shall

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cease.

(c) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8623 (relating to signing of filed documents).

§ 8682. Winding up and filing of optional certificates.

(a) General rule.--A dissolved limited partnership shall

wind up its activities and affairs and , except as provided

under section 8683 (relating to rescinding dissolution), the

partnership continues after dissolution only for the purpose of

winding up.

(b) Conduct of winding up.--In winding up its activities and

affairs, the limited partnership:

(1) shall discharge the partnership's debts, obligations

and other liabilities, settle and close the partnership's

activities and affairs, and marshal and distribute the assets

of the partnership; and

(2) may:

(i) amend its certificate of limited partnership to

state that the partnership is dissolved;

(ii) preserve the partnership activities, affairs

and property as a going concern for a reasonable time;

(iii) prosecute, defend and settle actions and

proceedings, whether civil, criminal or administrative;

(iv) transfer the partnership's property;

(v) participate in, agree to participate in and

settle disputes by mediation, arbitration or alternative

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dispute resolution proceedings;

(vi) deliver to the department for filing the

certificates, if any, required by section 139 (relating

to tax clearance of certain fundamental transactions) and

a certificate of termination stating:

(A) the name of the partnership;

(B) subject to section 109 (relating to name of

commercial registered office provider in lieu of

registered address), the address, including street

and number, if any, of its registered office; and

(C) that the partnership is terminated; and

(vii) perform other acts necessary or appropriate to

the winding up.

(c) Conduct of winding up when no general partner.--If a

dissolved limited partnership does not have a general partner, a

person to wind up the dissolved partnership's activities and

affairs may be appointed by the affirmative vote or consent of

limited partners owning a majority of the rights to receive A

MAJORITY OF THE distributions as limited partners at the time

the vote or consent is to be effective. A person appointed under

this subsection:

(1) has the powers of a general partner under section

8684 (relating to power to bind partnership after

dissolution) but is not liable for the debts, obligations and

other liabilities of the partnership solely by reason of

having or exercising those powers or otherwise acting to wind

up the dissolved partnership's activities and affairs; and

(2) shall deliver promptly to the department for filing

an amendment to the partnership's certificate of limited

partnership stating:

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(i) that the partnership does not have a general

partner;

(ii) the name and address of the person; and

(iii) that the person has been appointed under this

subsection to wind up the partnership.

(d) Judicial supervision.--On the application of a partner

or person entitled under subsection (c) to participate in

winding up, the court may order judicial supervision of the

winding up of a dissolved limited partnership, including the

appointment of a person to wind up the partnership's activities

and affairs, if:

(1) the partnership does not have a general partner and

within a reasonable time following the dissolution no person

has been appointed under subsection (c); or

(2) the applicant establishes other good cause.

(e) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8615(c)(16) (relating to contents of partnership

agreement).

Section 8623 (relating to signing of filed documents).

§ 8683. Rescinding dissolution.

(a) General rule.--A limited partnership may rescind its

dissolution, unless a certificate of termination applicable to

the partnership is effective or the court has entered an order

under section 8681(a)(6) (relating to events causing

dissolution) dissolving the partnership.

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(b) Procedure.--Rescinding dissolution under this section

requires:

(1) the affirmative vote or consent of each partner; and

(2) if the limited partnership has delivered to the

department for filing an amendment to the certificate of

limited partnership stating that the partnership is dissolved

and:

(i) the amendment has not become effective, delivery

to the department for filing of a statement of

abandonment under section 141 (relating to abandonment of

filing before effectiveness) applicable to the amendment;

or

(ii) the amendment has become effective, the

delivery to the department for filing of an amendment to

the certificate of limited partnership stating that

dissolution has been rescinded under this section.

(c) Effects of rescission.--If a limited partnership

rescinds its dissolution:

(1) the partnership resumes carrying on its activities

and affairs as if dissolution had never occurred;

(2) subject to paragraph (3), any liability incurred by

the partnership after the dissolution and before the

rescission is effective is determined as if dissolution had

never occurred; and

(3) the rights of a third party arising out of conduct

in reliance on the dissolution before the third party knew or

had notice of the rescission may not be adversely affected.

(d) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

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documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8623 (relating to signing of filed documents).

(RESERVED).

§ 8684. Power to bind partnership after dissolution.

(a) Power of general partner.--A limited partnership is

bound by a general partner's act after dissolution which:

(1) is appropriate for winding up the partnership's

activities and affairs; or

(2) would have bound the partnership under section 8642

(relating to general partner agent of limited partnership)

before dissolution if, at the time the other party enters

into the transaction, the other party does not know or have

notice of the dissolution.

(b) Power of person dissociated as general partner.--A

person dissociated as a general partner binds a limited

partnership through an act occurring after dissolution if:

(1) at the time the other party enters into the

transaction:

(i) less than two years have passed since the

dissociation; and

(ii) the other party does not know or have notice of

the dissociation and reasonably believes that the person

is a general partner; and

(2) the act:

(i) is appropriate for winding up the partnership's

activities and affairs; or

(ii) would have bound the partnership under section

8642 before dissolution and at the time the other party

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enters into the transaction, the other party does not

know or have notice of the dissolution.

§ 8685. General partner liability after dissolution.

(a) Liability of general partner.--If a general partner

having knowledge of the dissolution causes a limited partnership

to incur an obligation under section 8684(a) (relating to power

to bind partnership after dissolution) by an act that is not

appropriate for winding up the partnership's activities and

affairs, the general partner is liable:

(1) to the partnership for any damage caused to the

partnership arising from the obligation; and

(2) if another general partner or a person dissociated

as a general partner is liable for the obligation, to that

other general partner or person for any damage caused to that

other general partner or person arising from the liability.

(b) Liability of person dissociated as general partner.--If

a person dissociated as a general partner causes a limited

partnership to incur an obligation under section 8684(b), the

person is liable:

(1) to the partnership for any damage caused to the

partnership arising from the obligation; and

(2) if a general partner or another person dissociated

as a general partner is liable for the obligation, to the

general partner or other person for any damage caused to the

general partner or other person arising from the obligation.

§ 8686. Known claims against dissolved limited partnership.

(a) General rule.--Except as provided under subsection (d),

a dissolved limited partnership may give notice of a known claim

under subsection (b), which has the effect provided in

subsection (c).

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(b) Required notice.--A dissolved limited partnership may

notify in record form its known claimants of the dissolution.

The notice must:

(1) specify the information required to be included in a

claim;

(2) state that a claim must be in writing and provide a

mailing address to which the claim is to be sent;

(3) state the deadline for receipt of a claim, which may

not be less than 120 days after the date the notice is

received by the claimant;

(4) state that the claim will be barred if not received

by the deadline; and

(5) unless the partnership has been throughout its

existence a limited liability limited partnership, state that

the barring of a claim against the partnership will also bar

any corresponding claim against any general partner or person

dissociated as a general partner which is based on section

8644 (relating to general partner's liability).

(c) Claims barred.--A claim against a dissolved limited

partnership is barred if the requirements of subsection (b) are

met and:

(1) the claim is not received by the specified deadline;

or

(2) if the claim is timely received but rejected by the

partnership:

(i) the partnership causes the claimant to receive a

notice in record form stating that the claim is rejected

and will be barred unless the claimant commences an

action against the partnership to enforce the claim

within 90 days after the claimant receives the notice;

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and

(ii) the claimant fails to commence the required

action no later than 90 days after the claimant receives

the notice.

(d) Later arising claims.--This section shall not apply to a

claim based on an event occurring after the date of dissolution

or a liability that on that date is contingent.

§ 8687. Other claims against dissolved limited partnership.

(a) Permissive notice.--A dissolved limited partnership may

publish notice of its dissolution and request persons having

claims against the partnership to present them in accordance

with the notice.

(b) Notice procedure.--A notice under subsection (a) must:

(1) be officially published one time;

(2) describe the information required to be contained in

a claim, state that the claim must be in writing and provide

a mailing address to which the claim is to be sent;

(3) state that a claim against the partnership is barred

unless an action to enforce the claim is commenced within two

years after publication of the notice; and

(4) unless the partnership has been throughout its

existence a limited liability limited partnership, state that

the barring of a claim against the partnership will also bar

any corresponding claim against any general partner or person

dissociated as a general partner which is based on section

8644 (relating to general partner's liability).

(c) Claims barred.--If a dissolved limited partnership

publishes a notice in accordance with subsection (b), the claim

of each of the following claimants is barred unless the claimant

commences an action to enforce the claim against the partnership

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within two years after the publication date of the notice:

(1) a claimant that did not receive notice in record

form under section 8686 (relating to known claims against

dissolved limited partnership);

(2) a claimant whose claim was timely sent to the

partnership but not acted on; and

(3) a claimant whose claim is contingent at, or based on

an event occurring after, the date of dissolution.

(d) Claims not barred.--A claim not barred under this

section or section 8686 may be enforced:

(1) against the dissolved limited partnership, to the

extent of its undistributed assets;

(2) except as provided under section 8688 (relating to

court proceedings), if assets of the partnership have been

distributed after dissolution, against a partner or

transferee to the extent of that person's proportionate share

of the claim or of the partnership's assets distributed to

the partner or transferee after dissolution, whichever is

less, except that a person's total liability for all claims

under this paragraph may not exceed the total amount of

assets distributed to the person after dissolution; and

(3) against any person liable on the claim under

sections 8644 and 8667 (relating to liability of person

dissociated as general partner to other persons).

§ 8688. Court proceedings.

(a) Determination of security.--A dissolved limited

partnership that has officially published a notice under section

8687 (relating to other claims against dissolved limited

partnership) may file an application with the court of common

pleas embracing the county where the partnership's principal

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office is located or, if the principal office is not located in

this Commonwealth, where its registered office is or was last

located, for a determination of the amount and form of security

to be provided for payment of claims that are reasonably

expected to arise after the date of dissolution based on facts

known to the partnership and:

(1) at the time of the application:

(i) are contingent; or

(ii) have not been made known to the partnership; or

(2) are based on an event occurring after the date of

dissolution.

(b) When security not required.--Security is not required

for any claim that is or is reasonably anticipated to be barred

under section 8687.

(c) Notice.--Within 10 days after the filing of an

application under subsection (a), the dissolved limited

partnership shall give notice of the proceeding to each claimant

holding a contingent claim known to the partnership.

(d) Guardian ad litem.--In a proceeding brought under this

section, the court may appoint a guardian ad litem to represent

all claimants whose identities are unknown. The reasonable fees

and expenses of the guardian, including all reasonable expert

witness fees, must be paid by the dissolved limited partnership.

(e) Effect on contingent claims.--A dissolved limited

partnership that provides security in the amount and form

ordered by the court under subsection (a) satisfies the

partnership's obligations with respect to claims that are

contingent, have not been made known to the partnership or are

based on an event occurring after the date of dissolution. The

claims may not be enforced against a partner or transferee on

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account of assets received in liquidation.

§ 8689. General partner liability when claim against limited

partnership barred.

If a claim against a dissolved limited partnership is barred

under section 8686 (relating to known claims against dissolved

limited partnership), 8687 (relating to other claims against

dissolved limited partnership) or 8688 (relating to court

proceedings), any corresponding claim under section 8644

(relating to general partner's liability) or 8667 (relating to

liability of person dissociated as general partner to other

persons) is also barred.

§ 8690. Disposition of assets in winding up and required

contributions.

(a) Creditors.--In winding up its activities and affairs, a

limited partnership shall apply its assets, including the

contributions required by this section, to discharge the

partnership's obligations to creditors, including partners that

are creditors.

(b) Surplus.--After a limited partnership complies with

subsection (a), any surplus shall be distributed in the

following order, subject to any charging order in effect under

section 8673 (relating to charging order):

(1) to each owner of a transferable interest that

reflects contributions made and not previously returned, an

amount equal to the value of the unreturned contributions;

and

(2) among owners of transferable interests in proportion

to their respective rights to share in distributions

immediately before the dissolution of the partnership.

(c) Insufficient assets.--If a limited partnership's assets

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are insufficient to satisfy all of its obligations under

subsection (a), with respect to each unsatisfied obligation

incurred when the partnership was not a limited liability

limited partnership, the following rules apply:

(1) Each person that was a general partner when the

obligation was incurred and that has not been released from

the obligation under section 8667 (relating to liability of

person dissociated as general partner to other persons) shall

contribute to the partnership for the purpose of enabling the

partnership to satisfy the obligation. The contribution due

from each of those persons is in proportion to the right to

receive distributions in the capacity of a general partner in

effect for each of those persons when the obligation was

incurred.

(2) If a person does not contribute the full amount

required under paragraph (1) with respect to an unsatisfied

obligation of the partnership, the other persons required to

contribute by paragraph (1) on account of the obligation

shall contribute the additional amount necessary to discharge

the obligation. The additional contribution due from each of

those other persons is in proportion to the right to receive

distributions in the capacity of a general partner in effect

for each of those other persons when the obligation was

incurred.

(3) If a person does not make the additional

contribution required by paragraph (2), further additional

contributions are determined and due in the same manner as

provided in that paragraph.

(d) Recovery of additional contributions.--A person that

makes an additional contribution under subsection (c)(2) or (3)

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may recover from any person whose failure to contribute under

subsection (c)(1) or (2) necessitated the additional

contribution. A person may not recover under this subsection

more than the amount additionally contributed. A person's

liability under this subsection may not exceed the amount the

person failed to contribute.

(e) Distribution when surplus insufficient.--If a limited

partnership does not have sufficient surplus to comply with

subsection (b)(1), any surplus must be distributed among the

owners of transferable interests in proportion to the value of

the respective unreturned contributions.

(f) Form of payment.--All distributions made under

subsections (b) and (c) must be paid in money.

SUBCHAPTER I

ACTIONS BY PARTNERS

Sec.

8691. Direct action by partner.

8692. Derivative action.

8693. Proper plaintiff.

8694. Pleading.

8695. SECURITY FOR COSTS.

8694. Special litigation committee.

8696 8695 . Proceeds and expenses.

§ 8691. Direct action by partner.

(a) General rule.--Subject to subsection (b), a partner may

maintain a direct action against another partner or the limited

partnership, with or without an accounting as to the

partnership's activities and affairs, to enforce the partner's

rights and protect the partner's interests, including rights and

interests under the partnership agreement or this title or

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arising independently of the partnership relationship.

(b) Required injury.--A partner maintaining a direct action

under this section must plead and prove an actual or threatened

injury that is not solely the result of an injury suffered or

threatened to be suffered by the limited partnership.

(c) Claims not revived.--A right to an accounting on a

dissolution and winding up does not revive a claim barred by

law.

(d) Cross reference.--See section 8615(c)(17) (relating to

contents of partnership agreement).

§ 8692. Derivative action.

(a) General rule.--Subject to subsection (b), a partner may

maintain a derivative action to enforce a right of a limited

partnership only if:

(1) the partner first makes a demand on the general

partners , requesting that they cause the partnership to bring

an action to enforce the right, unless demand is excused

under subsection (b); and

(2) both:

(i) a special litigation committee is not appointed

under section 8695 (relating to special litigation

committee); and

(ii) the general partners do not bring the action

within a reasonable time. AND:

(I) IF A SPECIAL LITIGATION COMMITTEE IS NOT

APPOINTED UNDER SECTION 8694 (RELATING TO SPECIAL

LITIGATION COMMITTEE), THE PARTNERSHIP DOES NOT BRING THE

ACTION WITHIN A REASONABLE TIME; OR

(II) IF A SPECIAL LITIGATION COMMITTEE IS APPOINTED

UNDER SECTION 8694, A DETERMINATION IS MADE:

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(A) UNDER SECTION 8694(E)(1) THAT THE

PARTNERSHIP NOT OBJECT TO THE ACTION; OR

(B) UNDER SECTION 8694(E)(5)(I) THAT THE

PLAINTIFF CONTINUE THE ACTION;

(2) DEMAND IS EXCUSED UNDER SUBSECTION (B);

(3) THE ACTION IS MAINTAINED FOR THE LIMITED PURPOSE OF

SEEKING COURT REVIEW UNDER SECTION 8694(F); OR

(4) THE COURT HAS ALLOWED THE ACTION TO CONTINUE UNDER

THE CONTROL OF THE PLAINTIFF UNDER SECTION 8694(F)(3)(II).

(b) Prior demand excused.--

(1) A demand under subsection (a)(1) is excused only if

the partner makes a specific showing that IMMEDIATE AND

irreparable harm to the limited partnership would otherwise

result.

(2) If demand is excused under paragraph (1), demand

shall be made promptly after commencement of the action.

(c) Contents of demand.--A demand under this section shall

MUST BE IN RECORD FORM AND give notice with reasonable

specificity of the essential facts relied upon to support each

of the claims made in the demand.

(d) Additional claims.--If a derivative action is commenced

after a demand has been made under this section and includes a

claim that was not fairly subsumed under the demand, a new

demand must be made with respect to that claim. THE NEW DEMAND

SHALL NOT RELATE BACK TO THE DATE OF THE ORIGINAL DEMAND FOR

PURPOSES OF SUBSECTION (E).

(e) Statute of limitations.--The making of a demand tolls

any applicable statute of limitations with respect to a claim

asserted in the demand until the later EARLIER of the date:

(1) the partner making the demand is notified either:

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(i) that the general partners have decided not to

bring an action and not to appoint a special litigation

committee; or

(ii) of the A determination under section 8695(e)

8694(E) AFTER THE APPOINTMENT of a special litigation

committee that has been appointed as provided in section

8695 UNDER SECTION 8694 ; or

(2) the court determines under section 8695(f) either

to:

(i) enforce the determination of the special

litigation committee; or

(ii) allow the action to continue under the control

of the plaintiff. PLAINTIFF COMMENCES AN ACTION ASSERTING

THE CLAIM.

(f) Cross reference.--See section 8615(c)(17) (relating to

contents of partnership agreement).

§ 8693. Proper plaintiff.

(a) General rule.--A derivative action to enforce a right of

a limited partnership may be maintained only by a person that is

a partner at the time the action is commenced and:

(1) who was a partner when the conduct giving rise to

the action occurred; or

(2) whose status as a partner devolved on the person by

operation of law or pursuant to the terms of the partnership

agreement from a person that was a partner at the time of the

conduct.

(b) Cross reference.--See section 8615(c)(12) (relating to

contents of partnership agreement).

§ 8694. Pleading.

Except where demand is excused under section 8692(b)

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(relating to derivative action), the complaint in a derivative

action must state with particularity the date and content of the

plaintiff's demand and the response to the demand by the general

partner.

§ 8693. SECURITY FOR COSTS.

IN ANY ACTION OR PROCEEDING INSTITUTED OR MAINTAINED BY

PARTNERS HOLDING TRANSFERABLE INTERESTS ENTITLED TO RECEIVE LESS

THAN 5% OF ANY DISTRIBUTION BY A LIMITED PARTNERSHIP, UNLESS THE

TRANSFERABLE INTERESTS HELD BY THE PARTNERS HAVE AN AGGREGATE

FAIR MARKET VALUE IN EXCESS OF $200,000, THE PARTNERSHIP IN

WHOSE RIGHT THE ACTION OR PROCEEDING IS BROUGHT SHALL BE

ENTITLED AT ANY STAGE OF THE PROCEEDINGS TO REQUIRE THE

PLAINTIFFS TO GIVE SECURITY FOR THE REASONABLE EXPENSES,

INCLUDING ATTORNEYS' FEES, THAT MAY BE INCURRED BY THE

PARTNERSHIP IN CONNECTION THEREWITH OR FOR WHICH IT MAY BECOME

LIABLE PURSUANT TO SECTION 8468(B) (RELATING TO REIMBURSEMENT,

INDEMNIFICATION, ADVANCEMENT AND INSURANCE) TO WHICH SECURITY

THE PARTNERSHIP SHALL HAVE RECOURSE IN SUCH AMOUNT AS THE COURT

DETERMINES UPON THE TERMINATION OF THE ACTION OR PROCEEDING. THE

AMOUNT OF SECURITY MAY, FROM TIME TO TIME, BE INCREASED OR

DECREASED IN THE DISCRETION OF THE COURT UPON SHOWING THAT THE

SECURITY PROVIDED HAS OR IS LIKELY TO BECOME INADEQUATE OR

EXCESSIVE. THE SECURITY MAY BE DENIED OR LIMITED BY THE COURT IF

THE COURT FINDS AFTER AN EVIDENTIARY HEARING THAT UNDUE HARDSHIP

ON PLAINTIFFS AND SERIOUS INJUSTICE WOULD RESULT.

§ 8695 8694 . Special litigation committee.

(a) General rule.--If a limited partnership receives OR THE

GENERAL PARTNERS RECEIVE a demand to bring an action to enforce

a right of the partnership, or if a derivative action is

commenced before demand has been made on the partnership OR THE

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GENERAL PARTNERS , the partnership GENERAL PARTNERS may appoint a

special litigation committee to investigate the claims asserted

in the demand or action and to determine on the basis of that

investigation BEHALF OF THE LIMITED PARTNERSHIP OR RECOMMEND TO

THE GENERAL PARTNERS whether pursuing any of the claims asserted

is in the best interests of the partnership. THE PARTNERSHIP

SHALL SEND A NOTICE IN RECORD FORM TO THE PLAINTIFF PROMPTLY

AFTER THE APPOINTMENT OF THE COMMITTEE UNDER THIS SECTION

NOTIFYING THE PLAINTIFF THAT A COMMITTEE HAS BEEN APPOINTED AND

IDENTIFYING BY NAME THE MEMBERS OF THE COMMITTEE.

(b) Discovery stay.--If the partnership appoints GENERAL

PARTNERS APPOINT a special litigation committee and an action is

commenced before the committee has made a determination HAS BEEN

MADE under subsection (e):

(1) On motion by the committee made in the name of the

partnership , except for good cause shown, the court shall

stay discovery for the time reasonably necessary to permit

the committee to make its investigation , EXCEPT FOR GOOD

CAUSE SHOWN .

(2) The time for the defendants to plead shall be tolled

until the process provided for under subsection (f) has been

completed.

(c) Composition of committee.--A special litigation

committee shall be composed of two or more individuals who:

(1) are not interested in the CLAIMS ASSERTED IN THE

DEMAND OR action;

(2) are capable as a group of objective judgment in the

circumstances; and

(3) may, but need not, be general or limited partners.

(d) Appointment of committee.--A special litigation

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committee may be appointed:

(1) by a majority of the general partners not named as

actual or potential parties in the demand or action; or

(2) if all general partners are named as actual or

potential parties in the demand or action, by a majority of

the general partners so named.

(e) Determination by committee .--After appropriate

investigation , BY a special litigation committee , THE COMMITTEE

OR THE GENERAL PARTNERS may determine that it is in the best

interests of the limited partnership that:

(1) an action based on some or all of the claims

asserted in the demand not be brought by the partnership but

that the partnership not object to an action being brought by

the party that made the demand;

(2) an action based on some or all of the claims

asserted in the demand be brought by the partnership;

(3) some or all of the claims asserted in the demand be

settled on terms approved by the committee;

(4) an action not be brought based on any of the claims

asserted in the demand;

(5) an action already commenced continue under the

control of:

(i) the plaintiff; or

(II) THE LIMITED PARTNERSHIP; OR

(ii) (III) the committee;

(6) some or all of the claims asserted in an action

already commenced be settled on terms approved by the

committee; or

(7) an action already commenced be dismissed.

(f) Court review and action.--If a special litigation

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committee is appointed and an action is commenced before the

committee makes a determination A DETERMINATION IS MADE under

subsection (e):

(1) The limited partnership shall file with the court

after the committee makes a determination A DETERMINATION IS

MADE under subsection (e) a statement of the committee's

determination and a report supporting the determination OF

THE COMMITTEE . The partnership shall serve each party with a

copy of the determination and report. If the partnership

moves to file the report under seal, the report shall be

served on the parties subject to an appropriate protective

order STIPULATION agreed to by the parties or ordered A

PROTECTIVE ORDER ISSUED by the court.

(2) The partnership shall file with the court a motion,

pleading or notice consistent with the determination of the

committee under subsection (e).

(3) If the committee makes a determination DETERMINATION

IS ONE described in subsection (e)(2), (3), (4), (5)(ii), (6)

or (7), the court shall determine whether the members of the

committee met the qualifications required under subsection

(c)(1) and (2) and whether the committee conducted its

investigation and made its recommendation in good faith,

independently and with reasonable care. If the court finds

that the members of the committee met the qualifications

required under subsection (c)(1) and (2) and that the

committee acted in good faith, independently and with

reasonable care, the court shall enforce the determination of

the committee. Otherwise, the court shall:

(i) dissolve any stay of discovery entered under

subsection (b);

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(ii) allow the action to continue under the control

of the plaintiff; and

(iii) permit the defendants to file preliminary

objections and other appropriate motions and pleadings.

(G) ATTORNEY GENERAL.--NOTHING IN THIS SECTION SHALL LIMIT

THE RIGHTS, POWERS AND DUTIES OF THE ATTORNEY GENERAL UNDER

OTHER APPLICABLE LAW WITH RESPECT TO A LIMITED PARTNERSHIP

ORGANIZED FOR A CHARITABLE PURPOSE.

(g) (H) Cross reference.--See section 8615(c)(18) (relating

to contents of partnership agreement).

§ 8696 8695 . Proceeds and expenses.

(a) Proceeds.--Except as provided in subsection (b):

(1) any proceeds or other benefits of a derivative

action, whether by judgment, compromise or settlement, belong

to the limited partnership and not to the plaintiff; and

(2) if the plaintiff OR ITS COUNSEL receives any

proceeds, the plaintiff shall remit them PROCEEDS SHALL BE

REMITTED immediately to the partnership.

(b) Expenses.--If a derivative action is successful in whole

or in part, the court may award the plaintiff reasonable

expenses, including reasonable attorney fees and costs, from the

recovery of the limited partnership . , BUT IN NO EVENT SHALL THE

ATTORNEY FEES AWARDED EXCEED A REASONABLE PROPORTION OF THE

VALUE OF THE RELIEF, INCLUDING NONPECUNIARY RELIEF, OBTAINED BY

THE PLAINTIFF FOR THE LIMITED PARTNERSHIP.

(c) Cross reference.--See section 8615(c)(13) 8615(C)(7)

(relating to contents of partnership agreement).

Section 28. Sections 8701, 8702 and 8705 of Title 15 are

amended to read:

§ 8701. Scope and definition.

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(a) Application of chapter.--This chapter applies to a

general or limited partnership formed under the laws of this

Commonwealth that elects to be governed by this chapter. Any

partnership that desires to elect to be governed by this

chapter, or to amend or terminate the election, shall [file in]

deliver to the Department of State for filing a statement of

election, amendment or termination, as the case may be, which

shall be signed by a general partner and shall set forth:

(1) The name of the partnership.

(2) The location of the principal place of business.

(3) The name of each general partner of the partnership

as of the date of the statement.

(4) A statement that the partnership elects to be

governed by this chapter or that the election to be governed

by this chapter shall be amended or terminated, as the case

may be.

(5) If the election is to be made or terminated, a

statement that the election or termination has been

authorized by at least a majority in interest of the

partners.

(a.1) Effective date and time.--Subject to section 136(c)

(relating to processing of documents by Department of State),

[Upon] upon the filing of the statement of election, amendment

or termination in the department, the election to be governed by

this chapter shall be effective, amended or terminated, as the

case may be.

(b) Effect of election.--As long as an election under

subsection (a) is in effect, the partnership shall be governed

by the provisions of this chapter and, to the extent not

inconsistent with this chapter, Chapter [83] 84 (relating to

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general partnerships) [and] OR, if a limited partnership,

Chapter [85] 86 (relating to limited partnerships).

(c) Definition.--As used in this chapter, the term "electing

partnership" means a partnership as to which an election under

subsection (a) is in effect.

(d) Cross [reference.--See section] references.--See

sections 134 (relating to docketing statement) and 135 (relating

to requirements to be met by filed documents).

§ 8702. Centralized management.

The business and affairs of every electing partnership shall

be managed by one-third or less, but not less than one, of the

partners selected for that purpose in the manner provided by any

agreement between the partners, and no other partner shall have

a right to participate in the management of the partnership. A

partner of an electing partnership shall be an agent of the

partnership only to the extent that an employee of the

partnership would be under like circumstances. In making such a

determination, the court may consider among other things whether

a person dealing with the partnership has knowledge, as defined

in section [8303(a) (relating to knowledge)] 8413(a) (relating

to knowledge and notice), that this section is applicable to the

partnership.

§ 8705. Limited liability in certain cases.

(a) General rule.--The liability of a partner of an electing

partnership for the debts and obligations of the partnership

shall be satisfied out of partnership assets alone if[:

(1)] the debt or obligation arises from a transaction or

occurrence in which the person dealing with the partnership

has notice, as defined in section [8303(b) (relating to

notice)] 8413(b) (relating to knowledge and notice), that

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this section is applicable to the partnership.[; or

(2) the fact that this section is applicable to the

partnership has been advertised in the manner provided by

section 8357(a)(2)(ii) (relating to power of partner to bind

partnership to third persons).]

(b) Exceptions.--Subsection (a) does not apply:

(1) Unless otherwise agreed by the obligee, to a debt or

obligation arising prior to the time a partnership becomes an

electing partnership [and complies with subsection (a)(1) or

(2)].

(2) To a transaction or occurrence involving the

furnishing or sale of any goods or services by the

partnership.

(c) Professional relationship unaffected.--Subsection (a)

shall not afford the partners of an electing partnership

providing professional services with greater immunity than is

available to the officers, shareholders, employees or agents of

a professional corporation. See section 2925 (relating to

professional relationship retained).

Section 29 Title 15 is amended by adding a chapter to read:

CHAPTER 88

LIMITED LIABILITY COMPANIES

Subchapter

A. General Provisions

B. Formation and Filings

C. Relations of Members and Managers to Persons Dealing with

Limited Liability Company

D. Relations of Members to Each Other and to Limited

Liability Company

E. Transferable Interests and Rights of Transferees and

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Creditors

F. Dissociation

G. Dissolution and Winding Up

H. Actions by Members

SUBCHAPTER A

GENERAL PROVISIONS

Sec.

8811. Short title and application of chapter.

8812. Definitions.

8813. Knowledge and notice.

8814. Governing law.

8815. Contents of operating agreement.

8816. Application of operating agreement.

8817. Amendment and effect of operating agreement.

8818. Characteristics of limited liability company.

8819. Powers.

§ 8811. Short title and application of chapter.

(a) Short title.--This chapter may be cited as the

Pennsylvania Uniform Limited Liability Company Act of 2015.

(b) Initial application.--Before July 1, 2016, this chapter

governs only:

(1) a limited liability company formed on or after [the

Legislative Reference Bureau shall insert here the effective

date of this chapter]; and

(2) except as provided in subsection (c), a limited

liability company formed before [the Legislative Reference

Bureau shall insert here the effective date of this chapter]

which elects, in the manner provided in its operating

agreement or by law for amending the operating agreement, to

be subject to this chapter.

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(c) Full effective date.--Except as provided in subsection

(d), on and after July 1, 2016, this chapter governs all limited

liability companies.

(d) Certificates of membership interest.--For purposes of

applying this chapter to a limited liability company formed

before [the Legislative Reference Bureau shall insert here the

effective date of this chapter], language in the company's

certificate of organization authorizing the issuance of

certificates of membership interest operates as if that language

were in the operating agreement.

(e) Cross reference.--See section 8815(c)(5) (relating to

contents of operating agreement).

§ 8812. Definitions.

(a) General definitions.--The following words and phrases

when used in this chapter shall have the meanings given to them

in this section unless the context clearly indicates otherwise:

"Certificate of organization." The certificate required by

section 8821 (relating to formation of limited liability company

and certificate of organization). The term includes the

certificate as amended or restated.

"Contribution." Property or a benefit described under

section 8842 (relating to form of contribution) which is

provided by a person to a limited liability company to become a

member or in the capacity of a person as a member.

"Distribution." A direct or indirect transfer of money or

other property from a limited liability company to a person on

account of a transferable interest or in the person's capacity

as a member. The term:

(1) includes:

(i) a redemption or other purchase by a limited

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liability company of a transferable interest; and

(ii) a transfer to a member in return for the

member's relinquishment of any right to participate as a

member in the management or conduct of the company's

activities and affairs or to have access to records or

other information concerning the company's activities and

affairs; and

(2) does not include:

(i) amounts constituting reasonable compensation for

present or past service or payments made in the ordinary

course of business under a bona fide retirement plan or

other bona fide benefits program;

(ii) the making of, or payment or performance on, a

guaranty or similar arrangement by a company for the

benefit of any or all of its members;

(iii) a direct or indirect allocation or transfer

effected under Chapter 3 (relating to entity

transactions) with the approval of the members; or

(iv) a direct or indirect transfer of:

(A) a governance or transferable interest; or

(B) options, rights or warrants to acquire a

governance or transferable interest.

"Limited liability company." An association formed under

this chapter or which becomes subject to this chapter under

Chapter 3 or section 8811 (relating to short title and

application of chapter).

"Manager." A person that under the operating agreement of a

manager-managed limited liability company is responsible, alone

or in concert with others, for performing the management

functions stated under section 8847(c) (relating to management

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of limited liability company).

"Manager-managed limited liability company." A limited

liability company that qualifies as such under section 8847(a).

"Member." A person that:

(1) has become a member of a limited liability company

under section 8841 (relating to becoming a member) or was a

member in a company when the company became subject to this

chapter under section 8811(b); and

(2) has not dissociated as a member under section 8861

(relating to events causing dissociation).

"Member-managed limited liability company." A limited

liability company that is not a manager-managed limited

liability company.

"Operating agreement." The agreement, whether or not

referred to as an operating agreement and whether oral, implied,

in record form or in any combination thereof, of all the members

of a limited liability company, including a sole member,

concerning matters described in section 8815(a) (relating to

contents of operating agreement). The term includes the

agreement as amended or restated.

"Organizer." A person that acts under section 8821 to form a

limited liability company.

"Professional company." A limited liability company that

renders one or more professional services.

"Transferable interest." The right, as initially owned by a

person in the person's capacity as a member, to receive

distributions from a limited liability company, whether or not

the person remains a member or continues to own any part of the

right. The term applies to any fraction of the interest, by

whomever owned.

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"Transferee." A person to which all or part of a

transferable interest has been transferred, whether or not the

transferor is a member. The term includes a person that owns a

transferable interest under section 8863(a)(3) (relating to

effect of dissociation).

(b) Index of other definitions.--Following is a nonexclusive

list of definitions in section 102 (relating to definitions)

that apply to this chapter:

"Act" or "action."

"Debtor in bankruptcy."

"Department."

"Jurisdiction of formation."

"Principal office."

"Professional services."

"Property."

"Record form."

"Sign."

"Transfer."

§ 8813. Knowledge and notice.

(a) Knowledge.--A person knows a fact if the person:

(1) has actual knowledge of it; or

(2) is deemed to know it under subsection (d) or law

other than this chapter.

(b) Notice.--A person has notice of a fact if the person has

reason to know the fact from all the facts known to the person

at the time in question.

(c) Constructive notice.--A person not a member or manager

is deemed to have notice of:

(1) the dissolution of a limited liability company 90

days after a certificate of dissolution under section 8872(b)

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(2)(i) (relating to winding up and filing of optional

certificates) is effective;

(2) the termination of a company 90 days after a

certificate of termination under section 8872(b)(2)(vi) is

effective; and

(3) the participation of a company in a merger, interest

exchange, conversion, division or domestication, 90 days

after a statement of merger, interest exchange, conversion,

division or domestication under Chapter 3 (relating to entity

transactions) becomes effective.

(d) Notification.--Except as provided under section 113(b)

(relating to delivery of document), a person notifies another

person of a fact by taking steps reasonably required to inform

the other person in ordinary course, whether or not those steps

cause the other person to know the fact.

(e) Transfer of real property.--A person not a member or

manager is deemed to know of a limitation on authority to

transfer real property as provided under section 8832(g)

(relating to certificate of authority).

(f) Effect of manager's knowledge or notice.--If the

certificate of organization of a limited liability company

provides that it is manager-managed, a manager's knowledge or

notice of a fact relating to the company is effective

immediately as knowledge of or notice to the company, except in

the case of a fraud on the company committed by or with the

consent of the manager.

§ 8814. Governing law.

(a) General rule.--The law of this Commonwealth governs:

(1) the internal affairs of a limited liability company;

and

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(2) the liability of a member as member and of a manager

as manager for the debts, obligations or other liabilities of

a limited liability company.

(b) Cross reference.--See section 8815(c)(6) (relating to

contents of operating agreement).

§ 8815. Contents of operating agreement.

(a) Scope of operating agreement.--Except as provided under

subsections (c) and (d), the operating agreement governs:

(1) relations among the members as members and between

the members and the limited liability company;

(2) the rights and duties under this title of a person

in the capacity of a member or manager;

(3) the activities and affairs of the company and the

conduct of those activities and affairs;

(4) the means and conditions for amending the operating

agreement; and

(5) the means and conditions for approving a transaction

under Chapter 3 (relating to entity transactions).

(b) Title applies generally.--To the extent the operating

agreement does not provide for a matter described in subsection

(a), this title governs the matter.

(c) Limitations.--An operating agreement may not do any of

the following:

(1) Vary a provision of Chapter 1 (relating to general

provisions) or Subchapter A of Chapter 2 (relating to names ).

(2) Vary the right of a member to approve a merger,

interest exchange, conversion, division or domestication

under section 333(a)(2) (relating to approval of merger),

343(a)(2) (relating to approval of interest exchange), 353(a)

(2) 353(A)(3) (relating to approval of conversion), 363(a)(2)

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(relating to approval of division) or 373(a)(2) (relating to

approval of domestication).

(3) Vary the required contents of a plan of merger under

section 332(a) (relating to plan of merger), plan of interest

exchange under section 342(a) (relating to plan of interest

exchange), plan of conversion under section 352(a) (relating

to plan of conversion), plan of division under section 362(a)

(relating to plan of division) or plan of domestication under

section 372(a) (relating to plan of domestication).

(4) Vary a provision of Chapter 81 (relating to general

provisions).

(5) Vary the provisions of section 8811(b), (c) and (d)

(relating to short title and application of chapter).

(6) Vary the law applicable under section 8814 (relating

to governing law).

(7) Vary a provision of section 8818(d) (relating to

characteristics of limited liability company).

(8) Vary a provision of section 8819 (relating to

powers).

(9) Vary any requirement, procedure or other provision

of this title pertaining to:

(i) registered offices; or

(ii) the department, including provisions pertaining

to documents authorized or required to be delivered to

the department for filing under this title.

(10) Provide indemnification against, or relieve or

exonerate a person from, liability for an action that has

been determined by a court to constitute recklessness,

willful misconduct or a knowing violation of law. OR

EXONERATION IN VIOLATION OF THE LIMITATIONS IN SECTIONS

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8848(G) (RELATING TO REIMBURSEMENT, INDEMNIFICATION,

ADVANCEMENT AND INSURANCE), 8849.1(J) (RELATING TO STANDARDS

OF CONDUCT FOR MEMBERS) AND 8849.2(H) (RELATING TO STANDARDS

OF CONDUCT FOR MANAGERS).

(11) Eliminate the duty of loyalty provided for in

section 8849.1(b)(1)(i) or (ii) or (2) (relating to standards

of conduct for members) or the duty of care of a member in a

member-managed company, except as provided in subsection (d).

(12) Eliminate the duty of loyalty provided for in

section 8849.2(b)(1)(i) or (ii) or (2) (relating to standards

of conduct for managers) or the duty of care of a manager,

except as provided in subsection (d).

(13) Vary the contractual obligation of good faith and

fair dealing under section 8849.1(d) or 8849.2(d), except as

provided in subsection (d).

(14) Restrict the duties and rights under section 8850

(relating to rights to information), except as provided in

subsection (d).

(15) Vary the causes of dissolution specified in section

8871(a)(4) (relating to events causing dissolution).

(16) Vary the requirement to wind up the company's

activities and affairs as specified in section 8872(a), (b)

(1), and (e) (relating to winding up and filing of optional

certificates).

(17) Unreasonably restrict the right of a member to

maintain an action under Subchapter H (relating to actions by

members).

(18) Vary the provisions of section 8885 8884 (relating

to special litigation committee), except that the operating

agreement may provide that the company may not have a special

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litigation committee.

(19) Except as provided in section 8817(b) (relating to

amendment and effect of operating agreement), restrict the

rights under this title of a person other than a member or

manager.

(d) Permitted terms.--Subject to subsection (c)(10), the

following rules apply:

(1) The operating agreement may:

(i) specify the method by which a specific act or

transaction that would otherwise violate the duty of

loyalty may be authorized or ratified by one or more

disinterested and independent persons after full

disclosure of all material facts;

(ii) alter the prohibition stated in section 8845(a)

(2) (relating to limitations on distributions) so that

the prohibition requires only that the company's total

assets not be less than the sum of its total liabilities;

and

(iii) impose reasonable restrictions on the

availability and use of information obtained under

section 8850 and may define appropriate remedies,

including liquidated damages, for a breach of any

reasonable restriction on use.

(2) To the extent the operating agreement of a member-

managed limited liability company expressly relieves a member

of a responsibility that the member would otherwise have

under this title and imposes the responsibility on one or

more other members, the operating agreement also may

eliminate or limit any fiduciary duty of the member relieved

of the responsibility that would have pertained to the

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responsibility.

(3) If not manifestly unreasonable, the operating

agreement may:

(i) alter the aspects of the duty of loyalty stated

under section 8849.1(b)(1)(i) or (ii) or (2) or 8849.2(b)

(1)(i) or (ii) or (2);

(ii) prescribe the standards, if not manifestly

unreasonable, by which the performance of the contractual

obligation of good faith and fair dealing under section

8849.1(d) or 8849.2(d) is to be measured;

(iii) identify specific types or categories of

activities that do not violate the duty of loyalty;

(iv) alter the duty of care; and

(v) alter or eliminate any other fiduciary duty.

(e) Determination of manifest unreasonableness.--The court

shall decide as a matter of law whether a term of an operating

agreement is manifestly unreasonable under subsection (d)(3).

The court:

(1) shall make its determination as of the time the

challenged term became part of the operating agreement and by

considering only circumstances existing at that time; and

(2) may invalidate the term only if, in light of the

purposes, activities and affairs of the limited liability

company, it is readily apparent that:

(i) the objective of the term is unreasonable; or

(ii) the term is an unreasonable means to achieve

the term's objective.

§ 8816. Application of operating agreement.

(a) Company bound.--A limited liability company is bound by

and may enforce the operating agreement, whether or not the

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company has itself manifested assent to the agreement.

(b) Deemed assent.--A person that becomes a member of a

limited liability company is deemed to assent to the operating

agreement.

(c) Preformation agreement.--Two or more persons intending

to become the initial members of a limited liability company may

make an agreement providing that upon the formation of the

company the agreement will become the operating agreement. One

person intending to become the initial member of a limited

liability company may assent to terms providing that upon the

formation of the company the terms will become the operating

agreement.

§ 8817. Amendment and effect of operating agreement.

(a) Approval of amendments.--An operating agreement may

specify that its amendment requires the approval of a person

that is not a party to the agreement or the satisfaction of a

condition. An amendment is ineffective if its adoption does not

include the required approval or satisfy the specified

condition. See section 8847(b)(6) and (c)(3)(iii) (relating to

management of limited liability company).

(b) Obligations to nonmembers.--The obligations of a limited

liability company and its members to a person in the person's

capacity as a transferee or a person dissociated as a member are

governed by the operating agreement. Except as provided in

section 8844(d) (relating to sharing of and right to

distributions before dissolution) or in a court order issued

under section 8853(b)(2) (relating to charging order) to

effectuate a charging order, an amendment to the operating

agreement made after a person becomes a transferee or is

dissociated as a member:

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(1) is effective with regard to any debt, obligation or

other liability of the limited liability company or its

members to the person in the person's capacity as a

transferee or person dissociated as a member; and

(2) is not effective to the extent the amendment imposes

a new debt, obligation or other liability on the transferee

or person dissociated as a member.

(c) Provisions in filed documents.--If a document delivered

by a limited liability company to the department for filing

contains a provision that would be ineffective under section

8815(c) or (d)(3) (relating to contents of operating agreement)

if contained in the operating agreement, the provision is

ineffective in the document.

(d) Conflicts with operating agreement.--Subject to

subsection (c):

(1) If a provision of the certificate of organization

conflicts with a provision of the operating agreement, the

provision of the certificate prevails.

(2) If a document other than its certificate of

organization has been delivered by the company to the

department for filing and conflicts with a provision of the

operating agreement:

(i) the operating agreement prevails as to members,

dissociated members, transferees and managers; and

(ii) the document prevails as to other persons to

the extent they reasonably rely on the document.

(e) Prohibition of oral amendments.--If a provision of an

operating agreement in record form provides that the operating

agreement cannot be amended, modified or rescinded except in

record form, an oral agreement, amendment, modification or

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rescission shall not be enforceable.

§ 8818. Characteristics of limited liability company.

(a) Separate entity.--A limited liability company is an

entity distinct from its member or members.

(b) Purpose.--A limited liability company may have any

lawful purpose OTHER THAN ACTING AS AN INSURER , regardless of

whether the purpose is for profit. Nothing under this section

shall prohibit the organization of an insurance agency licensed

in this Commonwealth as a limited liability company. See section

8102 (relating to interchangeability of partnership, limited

liability company and corporate forms of organization).

(c) Duration.--A limited liability company has perpetual

duration.

(d) Restrictions on nonprofit companies.--If a limited

liability company has a purpose that is not for profit:

(1) Its purpose must be stated in the certificate of

organization.

(2) The company shall not distribute any part of its

income or profits to its members, managers or officers,

except that it may pay compensation in a reasonable amount to

those persons for services rendered.

(3) The company may confer benefits on members or

nonmembers in conformity with its purposes, may repay capital

contributions and may redeem evidences of indebtedness,

except when the company is currently insolvent or would

thereby be made insolvent or rendered unable to carry on its

purposes, or when the fair value of the assets of the company

remaining after the conferring of benefits, payment or

redemption would be insufficient to meet its liabilities. The

company may make distributions of money or property to

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members upon dissolution or final liquidation as permitted by

this chapter.

(4) If the company is organized for a charitable purpose

or purposes , it may take, receive and hold real and personal

property as may be given, devised to or otherwise vested in

the company, in trust, for the purpose or purposes set forth

in its certificate of organization. The members, if it is

member-managed, or the managers, if it is manager-managed,

shall, as trustees of the property, be held to the same

degree of responsibility and accountability as other

trustees, unless:

(i) a lesser degree or a particular degree of

responsibility and accountability is prescribed in the

trust instrument;

(ii) if the company is member-managed, the members

remain under the control of third persons who retain the

right to direct, and do direct, the actions of the

members as to the use of the trust property from time to

time; or

(iii) if the company is manager-managed, the

managers remain under the control of the members or third

persons who retain the right to direct, and do direct,

the actions of the managers as to the use of the trust

property from time to time.

(5) Property of the company committed to charitable

purposes shall not, by any proceeding under Chapter 3

(relating to entity transactions) or otherwise, be diverted

from the objects to which it was donated, granted or devised,

unless and until the company obtains from the court an order

under 20 Pa.C.S. Ch. 77 (relating to trusts) specifying the

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disposition of the property.

(e) Cross reference.--See section 8815(c)(7) (relating to

contents of operating agreement).

§ 8819. Powers.

(a) General rule.--A limited liability company has the power

to do all things necessary or convenient to carry on its

activities and affairs.

(b) Capacity to sue and be sued.--A limited liability

company has the capacity to sue and be sued in its own name.

(c) Certain specifically authorized debt terms.--A limited

liability company shall be subject to section 1510 (relating to

certain specifically authorized debt terms) to the same extent

as if it were a business corporation.

(d) Cross references.--See sections 8102 (relating to

interchangeability of partnership, limited liability company and

corporate forms of organization) and 8815(c)(8) (relating to

contents of operating agreement).

SUBCHAPTER B

FORMATION AND FILINGS

Sec.

8821. Formation of limited liability company and certificate of

organization.

8822. Amendment or restatement of certificate of organization.

8823. Signing of filed documents.

8824. Liability of member, manager or other person for false or

missing information in filed document.

8825. Registered office.

§ 8821. Formation of limited liability company and certificate

of organization.

(a) Formation.--One or more persons may act as organizers to

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form a limited liability company by delivering to the department

for filing a certificate of organization.

(b) Required contents of certificate.--A certificate of

organization must state:

(1) the name of the limited liability company, which

must comply with Subchapter A of Chapter 2 (relating to

names ); and

(2) subject to section 109 (relating to name of

commercial registered office provider in lieu of registered

address), the address, including street and number, if any,

of the company's registered office.

(c) Optional contents of certificate.--A certificate of

organization may contain statements as to matters other than

those required by subsection (b), but may not vary or otherwise

affect the provisions specified under section 8815(c) and (d)

(relating to contents of operating agreement) in a manner

inconsistent with that section.

(d) Substitute certificate of authority.--A statement in a

certificate of organization with respect to a matter described

in section 8832(a)(2) or (3) (relating to certificate of

authority) is effective as a certificate of authority and the

statement is subject to the provisions of section 8832 in the

same manner as a certificate of authority.

(e) Effect of certificate of organization.--A provision of

the certificate of organization shall be deemed to be a

provision of the operating agreement for purposes of any

provision of this title that refers to a rule as set forth in

the operating agreement.

(f) Time of formation.--A limited liability company is

formed when its certificate of organization becomes effective.

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(g) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8818(d)(1) (relating to characteristics of

limited liability company).

Section 8823 (relating to signing of filed documents).

§ 8822. Amendment or restatement of certificate of

organization.

(a) General rule.--A certificate of organization may be

amended or restated at any time.

(b) Required contents of certificate of amendment.--To amend

its certificate of organization, a limited liability company

must deliver to the department for filing a certificate of

amendment that states:

(1) the name of the company;

(2) the date of filing of its initial certificate of

organization;

(3) subject to section 109 (relating to name of

commercial registered office provider in lieu of registered

address), the address, including street and number, if any,

of its registered office; and

(4) the amendment.

(c) Restatement.--To restate its certificate of

organization, a limited liability company must deliver to the

department for filing a certificate of amendment that:

(1) is designated as a restatement; and

(2) includes a statement that the restated certificate

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supersedes the original certificate and all previous

amendments.

(d) Obligation to correct.--If a member of a member-managed

limited liability company, or a manager of a manager-managed

limited liability company, knows that any information in a filed

certificate of organization is inaccurate, the member or manager

shall promptly:

(1) cause the certificate to be amended; or

(2) if appropriate, deliver to the department for filing

a statement of correction under section 138 (relating to

statement of correction) or a statement of abandonment under

section 141 (relating to abandonment of filing before

effectiveness).

(e) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8823 (relating to signing of filed documents).

§ 8823. Signing of filed documents.

(a) Required signatures.-- A EXCEPT AS PROVIDED IN THIS

TITLE, A document delivered to the department for filing under

this title relating to a limited liability company must be

signed as follows:

(1) Except as provided in paragraphs (2) and (3), a

document signed on behalf of a limited liability company must

be signed by a person authorized by the company.

(2) A company's initial certificate of organization must

be signed by each organizer.

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(3) A document delivered on behalf of a dissolved

company that has no member must be signed by the person

winding up the company's activities and affairs under section

8872(c) (relating to winding up and filing of optional

certificates) or a person appointed under section 8872(d) to

wind up the activities and affairs.

(4) A certificate of denial by a person under section

8833 (relating to certificate of denial) must be signed by

that person.

(5) Any other document delivered on behalf of a person

to the department for filing must be signed by that person.

(b) Cross reference.--See section 142 (relating to effect of

signing filings).

§ 8824. Liability of member, manager or other person for false

or missing information in filed document.

(a) General rule.--If a document delivered to the department

for filing under this title and filed by the department contains

a materially false statement or fails to state a material fact

required to be stated, a person that suffers loss by reasonable

reliance on the statement or failure to state a material fact

may recover damages for the loss from:

(1) a person that signed the document or caused another

to sign it on the person's behalf and knew there was false or

missing information in the document at the time it was

signed; and

(2) subject to subsection (b), a member of a member-

managed limited liability company or a manager of a manager-

managed limited liability company if:

(i) the document was delivered for filing on behalf

of the company; and

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(ii) the member or manager knew or had notice there

was false or missing information for a reasonably

sufficient time before the document was relied upon so

that, before the reliance, the member or manager

reasonably could have:

(A) effected an amendment under section 8822

(relating to amendment or restatement of certificate

of organization);

(B) filed a petition under section 144 (relating

to signing and filing pursuant to judicial order); or

(C) delivered to the department for filing a

statement of correction under section 138 (relating

to statement of correction) or a statement of

withdrawal under section 141 (relating to abandonment

of filing before effectiveness).

(b) Substitute responsibility.--To the extent the operating

agreement of a member-managed limited liability company

expressly relieves a member of responsibility for maintaining

the accuracy of information contained in documents delivered on

behalf of the company to the department for filing under this

chapter and imposes that responsibility on one or more other

members, the liability stated under subsection (a)(2) applies to

those other members and not to the member that the operating

agreement relieves of the responsibility.

§ 8825. Registered office.

(a) General rule.--Every limited liability company shall

have and continuously maintain in this Commonwealth a registered

office which may, but need not, be the same as its place of

business.

(b) Change of registered office.--After organization, a

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change in the location of the registered office may be effected

at any time by the company. Before the change becomes effective,

the company shall amend its certificate of organization under

the provisions of this chapter to reflect the change in location

or shall file with the department a certificate of change of

registered office setting forth:

(1) The name of the company.

(2) The address, including street and number, if any, of

its then registered office.

(3) The address, including street and number, if any, to

which the registered office is to be changed.

(c) Alternative procedure.--A limited liability company may

satisfy the requirements of this chapter concerning the

maintenance of a registered office in this Commonwealth by

setting forth in any document filed in the department under any

provision of this chapter that permits or requires the statement

of the address of its then registered office, in lieu of that

address, the statement authorized under section 109(a) (relating

to name of commercial registered office provider in lieu of

registered address).

(d) Cross references.--See:

Section 108 (relating to change in location or status of

registered office provided by agent).

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8815(c)(7) (relating to contents of operating

agreement).

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Section 8823 (relating to signing of filed documents).

SUBCHAPTER C

RELATIONS OF MEMBERS AND MANAGERS

TO PERSONS DEALING WITH LIMITED LIABILITY COMPANY

Sec.

8831. Status of member or manager as agent.

8832. Certificate of authority.

8833. Certificate of denial.

8834. Liability of members and managers.

8835. Taxation of limited liability companies.

§ 8831. Status of member or manager as agent.

(a) No agency power of member as member.--A member is not an

agent of a limited liability company solely by reason of being a

member.

(b) Agency power of manager.--If the certificate of

organization states that the company is manager-managed, the act

of a manager for apparently carrying on in the usual way the

business of the company binds the company unless the manager so

acting has in fact no authority to act for the company in the

particular matter and the person with whom the manager is

dealing has knowledge of the fact that the manager does not have

that authority.

(c) Liability of company under other law.--A person's status

as a member or manager does not prevent or restrict law other

than this chapter from imposing liability on a limited liability

company because of the person's conduct.

§ 8832. Certificate of authority.

(a) General rule.--A limited liability company may deliver

to the department for filing a certificate of authority signed

by the company. The certificate:

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(1) must include the name of the company and, subject to

section 109 (relating to name of commercial registered office

provider in lieu of registered address), the address,

including street and number, if any, of its registered

office;

(2) with respect to any position that exists in or with

respect to the company, may state the authority, or

limitations on the authority, of all persons holding the

position to:

(i) transfer real property held in the name of the

company, including signing an instrument of transfer; or

(ii) enter into other transactions on behalf of, or

otherwise act for or bind, the company; and

(3) may state the authority, or limitations on the

authority, of a specific person to:

(i) transfer real property held in the name of the

company, including signing an instrument of transfer; or

(ii) enter into other transactions on behalf of, or

otherwise act for or bind, the company.

(b) Amendment or cancellation.--To amend or cancel a

certificate of authority filed by the department, a limited

liability company must deliver to the department for filing an

amendment or cancellation that states:

(1) the name of the company;

(2) subject to section 109, the address, including

street and number, if any, of the company's registered

office;

(3) the date the certificate being affected became

effective; and

(4) the contents of the amendment or a statement that

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the certificate is canceled.

(c) Effect.--A certificate of authority:

(1) supersedes any inconsistent provision of the

certificate of organization in effect at the time the

certificate of authority becomes effective;

(2) affects only the power of a person to bind a limited

liability company with respect to persons that are not

members; and

(3) is not binding on the department for purposes of the

administration of this title or any other provision of law.

(d) Certificate not evidence of knowledge or notice.--Except

as provided in subsections (e), (f), (g) and (h), a limitation

on the authority of a person or a position contained in an

effective certificate of authority is not by itself evidence of

knowledge or notice of the limitation by any person.

(e) Authority not pertaining to real property.--A grant of

authority not pertaining to transfers of real property and

contained in an effective certificate of authority is conclusive

in favor of a person that gives value in reliance on the grant,

except to the extent that when the person gives value:

(1) the person has knowledge to the contrary;

(2) the certificate has been canceled or restrictively

amended under subsection (b); or

(3) a limitation on the grant is contained in another

certificate of authority that became effective after the

certificate containing the grant became effective.

(f) Authority to transfer real property.--An effective

certificate of authority or certificate of organization that

grants authority to transfer real property held in the name of a

limited liability company, a certified copy of which certificate

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is recorded in the office of the recorder of deeds for the

county in which the property is located, is conclusive in favor

of a person that gives value in reliance on the grant without

knowledge to the contrary, except to the extent that when the

person gives value:

(1) the certificate has been canceled or restrictively

amended under subsection (b), and a certified copy of the

cancellation or restrictive amendment has been recorded in

the office of the recorder of deeds; or

(2) a limitation on the grant is contained in another

certificate of authority that became effective after the

certificate containing the grant became effective, and a

certified copy of the later-effective certificate is recorded

in the office of the recorder of deeds.

(g) Effect of recorded certificate.--If a certified copy of

an effective certificate containing a limitation on the

authority to transfer real property held in the name of a

limited liability company is recorded in the office of the

recorder of deeds for the county in which the real property is

located, all persons are deemed to know of the limitation.

(h) Effect of dissolution or termination of company.--An

effective certificate of dissolution does not cancel a filed

certificate of authority for the purposes of subsection (f) and

is a limitation on authority for the purposes of subsection

(g). An effective certificate of termination cancels a filed

certificate of authority.

(i) Automatic cancellation.--Unless earlier canceled, an

effective certificate of authority that names an individual as

having authority is canceled by operation of law five years

after the date on which the certificate, or its most recent

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amendment, becomes effective. The cancellation operates without

need for any recording under subsection (f) or (g).

(j) Effect of certificate of denial.--An effective

certificate of denial:

(1) operates as a restrictive amendment under this

section and a certified copy may be recorded as provided in

subsection (f)(1) by the limited liability company or the

person that delivered the certificate of denial to the

department for filing;

(2) affects only the authority of a person to bind the

company with respect to persons that are not members; and

(3) supersedes any inconsistent provision of the

certificate of organization in effect at the time the

certificate of denial becomes effective.

(k) Foreign companies.--A foreign limited liability company

may deliver a certificate of authority to the department for

filing and may record a copy as provided in this section in the

same manner and with the same effect as if it were a domestic

company and regardless of whether the foreign company is

registered to do business in this Commonwealth under Chapter 4

(relating to foreign associations).

(l) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8823 (relating to signing of filed documents).

§ 8833. Certificate of denial.

(a) General rule.--A person named in a filed certificate of

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authority granting that person authority may deliver to the

department for filing a certificate of denial that:

(1) states:

(i) the name of the limited liability company;

(ii) subject to section 109 (relating to name of

commercial registered office provider in lieu of

registered address), the address, including street and

number, if any, of the registered office of the company;

and

(iii) the date the certificate of authority to which

the certificate of denial pertains was filed; and

(2) denies the grant of authority.

(b) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8823 (relating to signing of filed documents).

Section 8832(j) (relating to certificate of authority).

§ 8834. Liability of members and managers.

(a) General rule.--A debt, obligation or other liability of

a limited liability company is solely the debt, obligation or

other liability of the company. A member or manager is not

personally liable, directly or indirectly, by way of

contribution or otherwise, for a debt, obligation or other

liability of the company solely by reason of being or acting as

a member or manager. This subsection applies regardless of : A

MEMBER OR MANAGER. THIS SUBSECTION APPLIES REGARDLESS OF:

(1) WHETHER THE COMPANY HAS A SINGLE MEMBER OR MULTIPLE

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MEMBERS; AND

(2) the dissolution, winding up or termination of the

company.

(b) Professional relationship unaffected.--Subsection (a)

shall not afford members of a professional company with greater

immunity than is available to the officers, shareholders,

employees or agents of a professional corporation. See section

2925 (relating to professional relationship retained).

(c) Disciplinary jurisdiction unaffected.--A professional

company shall be subject to the applicable rules and regulations

adopted by, and all the disciplinary powers of, the court,

department, board, commission or other government unit

regulating the profession in which the company is engaged. The

court, department, board or other government unit may require

that a company include in its certificate of organization or

operating agreement provisions that conform to any rule or

regulation promulgated before, on or after the effective date of

this section for the purpose of enforcing the ethics of a

profession. This chapter shall not affect or impair the

disciplinary powers of the court, department, board, commission

or other government unit over licensed persons or any law, rule

or regulation pertaining to the standards for professional

conduct of licensed persons or to the professional relationship

between any licensed person rendering professional services and

the person receiving professional services.

(d) Rendering professional services.--

(1) Except as provided by a statute, rule or regulation

applicable to a particular profession, a professional company

may lawfully render professional services only through

licensed persons. The company may employ persons not so

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licensed except that those persons shall not render any

professional services rendered or to be rendered by it.

(2) Paragraph (1) shall not be interpreted to preclude

the use of clerks, secretaries, nurses, administrators,

bookkeepers, technicians and other assistants or

paraprofessionals who are not usually and ordinarily

considered by law, custom and practice to be rendering the

professional service or services for which the professional

company was organized nor to preclude the use of any other

person who performs all of the person's employment under the

direct supervision and control of a licensed person. A person

shall not under the guise of employment render professional

services unless duly licensed or admitted to practice as

required by law.

(3) Notwithstanding any other provision of law, a

professional company may charge for the professional services

rendered by it, may collect those charges and may compensate

those who render the professional services.

(e) Medical professional liability.--A professional company

shall be deemed to be a partnership for purposes of section 744

of the act of March 20, 2002 (P.L.154, No.13), known as the

Medical Care Availability and Reduction of Error (Mcare) Act .

(f) Cross reference.--See section 8105 (relating to

ownership of certain professional partnerships).

§ 8835. Taxation of limited liability companies.

(a) General rule.--For the purposes of the imposition by the

Commonwealth of any tax or license fee on or with respect to any

income, property, privilege, transaction, subject or occupation,

other than the corporate net income tax, capital stock and

foreign franchise tax and personal income tax, a domestic or

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foreign limited liability company shall be deemed to be a

corporation organized and existing under Part II (relating to

corporations), and a member of the company, as such, shall be

deemed to be a shareholder of a corporation.

(b) Financial institutions.--For purposes of the bank shares

tax and the mutual thrift institutions tax, a bank, bank and

trust company, trust company, savings bank, building and loan

association, savings and loan association or savings institution

that is a domestic or foreign limited liability company shall be

considered an "institution" as defined by Article VII or Article

XV of the Tax Reform Code of 1971.

(c) Political subdivisions.--Nothing in this section shall

impair or preempt the ability of a political subdivision to

levy, assess or collect any applicable taxes or license fees

authorized under the act of December 31, 1965 (P.L.1257,

No.511), known as The Local Tax Enabling Act, on any limited

liability company.

SUBCHAPTER D

RELATIONS OF MEMBERS TO EACH OTHER

AND TO LIMITED LIABILITY COMPANY

Sec.

8841. Becoming a member.

8842. Form of contribution.

8843. Liability for contributions.

8844. Sharing of and right to distributions before dissolution.

8845. Limitations on distributions.

8846. Liability for improper distributions.

8847. Management of limited liability company.

8848. Reimbursement, indemnification, advancement and

insurance.

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8849. (Reserved).

8849.1. Standards of conduct for members.

8849.2. Standards of conduct for managers.

8850. Rights to information.

§ 8841. Becoming a member.

(a) Single initial member.--If a limited liability company

is initially to have only one member, the person becomes a

member as agreed by that person and the organizer of the

company. That person and the organizer may be, but need not be,

different persons. If the initial member and the organizer are

different persons, the organizer acts on behalf of the initial

member.

(b) Multiple initial members.--If a limited liability

company is initially to have more than one member, those persons

become members as agreed by those persons and the organizer

before the formation of the company. The organizer acts on

behalf of the persons in forming the company and may be, but

need not be, one of the persons.

(c) Powers and authority of organizer.--Until a limited

liability company has its first member, the organizer is deemed

to be a manager of the company.

(d) Admission after formation.--After formation of a limited

liability company, a person becomes a member:

(1) by action of the organizer if the company does not

have any members;

(2) as provided in the operating agreement;

(3) as the result of a transaction effective under

Chapter 3 (relating to entity transactions);

(4) with the affirmative vote or consent of all the

members; or

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(5) as provided in section 8871(a)(3) (relating to

events causing dissolution).

(e) Noneconomic members.--A person may become a member

without:

(1) acquiring a transferable interest; or

(2) making or being obligated to make a contribution to

the limited liability company.

(f) Nature of interest.--The interest of a member in a

limited liability company is personal property.

§ 8842. Form of contribution.

A contribution may consist of:

(1) property transferred to, services performed for or

another benefit provided to the limited liability company;

(2) an agreement to transfer property to, perform

services for or provide another benefit to the company; or

(3) any combination of items listed in paragraphs (1)

and (2).

§ 8843. Liability for contributions.

(a) Obligation not excused.--A person's obligation to make a

contribution to a limited liability company is not excused by

the person's death, disability, termination or other inability

to perform personally.

(b) Substitute payment.--If a person does not fulfill an

obligation to make a contribution other than money, the person

is obligated at the option of the limited liability company to

contribute money equal to the value, as stated in the records of

the company, of the part of the contribution which has not been

made.

(c) Compromise of obligation.--The obligation of a person to

make a contribution may be compromised only by the affirmative

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vote or consent of all the members. If a creditor of a limited

liability company extends credit or otherwise acts in reliance

on an obligation described under subsection (a) without

knowledge or notice of a compromise under this subsection, the

creditor may enforce the obligation.

§ 8844. Sharing of and right to distributions before

dissolution.

(a) General rule.--Any distribution made by a limited

liability company before its dissolution and winding up shall be

in equal shares among members and persons dissociated as

members, except to the extent necessary to comply with a

transfer effective under section 8852 AS PROVIDED IN SECTION

8852(B) (relating to transfer of transferable interest) or TO

THE EXTENT NECESSARY TO COMPLY WITH A charging order in effect

under section 8853 (relating to charging order).

(b) No entitlement to distribution.--Except as provided

under subsection (e), a person has a right to a distribution

before the dissolution and winding up of a limited liability

company only if the company decides to make an interim

distribution.

(c) Distribution in kind.--A person does not have a right to

demand or receive a distribution from a limited liability

company in any form other than money. Except as provided in

section 8877(d) (relating to disposition of assets in winding

up), a limited liability company may distribute an asset in kind

only if each part of the asset is fungible with each other part

and each person receives a percentage of the asset equal in

value to the person's share of distributions.

(d) Status as creditor.--If a member or transferee becomes

entitled to receive a distribution, the member or transferee has

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the status of, and is entitled to all remedies available to, a

creditor of the limited liability company with respect to the

distribution, except that the company's obligation to make a

distribution is subject to offset for any amount owed to the

company by the member or transferee on whose account the

distribution is made.

(e) Distribution upon an event of dissociation.--Upon the

effectiveness of a transaction under Chapter 3 (relating to

entity transactions) or an amendment of the certificate of

organization or operating agreement that results in either case

in an event of dissociation but does not result in the

dissolution of the limited liability company, the dissociating

member may elect in record form to receive in lieu of the

property that the person would be entitled to receive pursuant

to the terms of the transaction or amendment:

(1) any distribution to which the member is entitled

under the operating agreement on the terms provided in the

operating agreement; and

(2) within a reasonable time after dissociation, the

fair value of the interest of the member in the company as of

the date of dissociation based upon the right of the member

to share in distributions from the company.

§ 8845. Limitations on distributions.

(a) General rule.--A limited liability company may not make

a distribution, including a distribution under section 8877

(relating to disposition of assets in winding up), if after the

distribution:

(1) the company would not be able to pay its debts as

they become due in the ordinary course of the company's

activities and affairs; or

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(2) the company's total assets would be less than the

sum of its total liabilities plus the amount that would be

needed, if the company were to be dissolved and wound up at

the time of the distribution, to satisfy the preferential

rights upon dissolution and winding up of members and

transferees whose preferential rights are superior to the

rights of persons receiving the distribution.

(b) Valuation.--A limited liability company may base a

determination that a distribution is not prohibited under

subsection (a)(2) on:

(1) the book values of the assets and liabilities of the

company, as reflected on its books and records;

(2) a valuation that takes into consideration unrealized

appreciation and depreciation or other changes in value of

the assets and liabilities of the company;

(3) the current value of the assets and liabilities of

the company, either valued separately or valued in segments

or as an entirety as a going concern; or

(4) any other method that is reasonable in the

circumstances.

(c) Excluded liabilities.--In determining whether a

distribution is prohibited under subsection (a)(2), the company

need not consider obligations and liabilities unless they are

required to be reflected on a balance sheet, not including the

notes to the balance sheet , prepared on the basis of generally

accepted accounting principles, or such other accounting

practices and principles as are used generally by the company in

the maintenance of its books and records and as are reasonable

in the circumstances.

(d) Measuring date of distribution.--Except as provided in

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subsection (e), the effect of a distribution under subsection

(a) is measured:

(1) as of the date specified by the company when it

authorizes the distribution if the distribution occurs within

125 days of the earlier of the date so specified or the date

of authorization; or

(2) as of the date of distribution in all other cases.

(e) Date of redemption.--In the case of a distribution

described under paragraph (1) of the definition of

"distribution" in section 8812 (relating to definitions), the

distribution is deemed to occur as of the earlier of the date

money or other property is transferred or debt is incurred by

the company or the date the person entitled to the distribution

ceases to own the interest or right being acquired by the

company in return for the distribution.

(f) Status of distribution debt.--The indebtedness of a

limited liability company to a member or transferee incurred by

reason of a distribution made in accordance with this section

shall be at least on a parity with the company's indebtedness to

its general, unsecured creditors, except to the extent

subordinated by agreement.

(g) Certain subordinated debt.--The indebtedness of a

limited liability company, including indebtedness issued as a

distribution, is not a liability for purposes of subsection (a)

if the terms of the indebtedness provide that payment of

principal and interest is made only if and to the extent that

payment of a distribution could then be made under this

section. If the indebtedness is issued as a distribution, each

payment of principal or interest is treated as a distribution,

the effect of which is measured on the date the payment is made.

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(h) Distributions in winding up.--In measuring the effect of

a distribution under section 8877, the liabilities of a

dissolved limited liability company do not include any claim

that has been barred under section 8874 (relating to known

claims against dissolved limited liability company) or 8875

(relating to other claims against dissolved limited liability

company), or for which security has been provided under section

8876 (relating to court proceedings).

(i) Cross references.--See:

Section 8815(d)(1)(ii) (relating to contents of operating

agreement).

Section 8849.1 (relating to standards of conduct for

members).

Section 8849.2 (relating to standards of conduct for

managers).

§ 8846. Liability for improper distributions.

(a) General rule.--Except as provided in subsection (b), if

a member of a member-managed limited liability company or

manager of a manager-managed limited liability company consents

to a distribution made in violation of section 8845 (relating to

limitations on distributions) and in consenting to the

distribution fails to comply with section 8849.1 (relating to

standards of conduct for members) or 8849.2 (relating to

standards of conduct for managers), the member or manager is

personally liable to the company for the amount of the

distribution which exceeds the amount that could have been

distributed without the violation of section 8845.

(b) Members without authority.--To the extent the operating

agreement of a member-managed limited liability company relieves

a member of the authority and responsibility to consent to

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distributions and imposes that authority and responsibility on

one or more other members, the liability stated in subsection

(a) applies to the other members and not the member that the

operating agreement relieves of authority and responsibility.

(c) Recipients.--A person that receives a distribution

knowing that the distribution violated section 8845 is

personally liable to the limited liability company but only to

the extent that the distribution received by the person exceeded

the amount that could have been properly paid under section

8845.

(d) Contribution.--A person against which an action is

commenced because the person is liable under subsection (a) may:

(1) join any other person that is liable under

subsection (a) or otherwise seek to enforce a right of

contribution from the person; and

(2) join any person that is liable under subsection (c)

or otherwise seek to enforce a right of contribution from the

person in the amount the person is liable for under

subsection (c).

(e) Statute of repose.--An action under this section is

barred unless commenced within two years after the distribution.

§ 8847. Management of limited liability company.

(a) Determination of management of company.--A limited

liability company is a member-managed limited liability company

unless the operating agreement:

(1) expressly provides that:

(i) the company is or will be manager-managed;

(ii) the company is or will be managed by managers;

or

(iii) management of the company is or will be vested

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in managers; or

(2) includes words of similar import.

(b) Member-managed company.--In a member-managed limited

liability company, the following rules apply:

(1) Except as expressly provided in this title, the

management and conduct of the company are vested in the

members.

(2) Each member has equal rights in the management and

conduct of the company's activities and affairs.

(3) A difference arising among members as to a matter in

the ordinary course of the activities and affairs of the

company may be decided by a majority of the members.

(4) Except as provided under section 325 (relating to

approval by limited liability company) with respect to a

transaction under Chapter 3 (relating to entity

transactions), an act outside the ordinary course of the

activities and affairs of the company may be undertaken only

with the affirmative vote or consent of all members.

(5) Except as provided under section 8822(d) (relating

to amendment or restatement of certificate of organization),

the certificate of organization may be amended only with the

affirmative vote or consent of all members.

(6) The operating agreement may be amended only with the

affirmative vote or consent of all members.

(c) Manager-managed company.--In a manager-managed limited

liability company, the following rules apply:

(1) Except as expressly provided in this title, any

matter relating to the activities and affairs of the company

is decided exclusively by the manager, or, if there is more

than one manager, by a majority of the managers.

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(2) Each manager has equal rights in the management and

conduct of the company's activities and affairs.

(3) The affirmative vote or consent of all members is

required:

(i) except as provided under section 325 with

respect to a transaction under Chapter 3, to undertake

any act outside the ordinary course of the company's

activities and affairs;

(ii) except as provided under section 8822(d), to

amend the certificate of organization; or

(iii) to amend the operating agreement.

(4) A manager may be chosen at any time by the

affirmative vote or consent of a majority of the members and

remains a manager until a successor has been chosen, unless

the manager at an earlier time resigns, is removed or dies,

or, in the case of a manager that is not an individual,

terminates. A manager may be removed at any time by the

affirmative vote or consent of a majority of the members

without notice or cause.

(5) A person need not be a member to be a manager,

except that the dissociation of a member that is also a

manager removes the person as a manager. If a person that is

both a manager and a member ceases to be a manager, that

cessation does not by itself dissociate the person as a

member.

(6) A person's ceasing to be a manager does not

discharge any debt, obligation or other liability to the

limited liability company or members which the person

incurred while a manager.

(d) Action by consent or proxy.--An action requiring the

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vote or consent of members under this title may be taken without

a meeting and a member may appoint a proxy or other agent to

vote, consent or otherwise act for the member by signing an

appointing document in record form, personally or by the

member's agent.

(e) Effect of dissolution.--The dissolution of a limited

liability company does not affect the applicability of this

section, except that a person that wrongfully causes dissolution

of the company loses the right to participate in management as a

member and a manager.

(f) Reimbursement of advances.--A limited liability company

shall reimburse a member for an advance to the company beyond

the amount of capital the member agreed to contribute.

(g) Interest on advance.--A payment or advance made by a

member which gives rise to an obligation of the limited

liability company under subsection (f) or section 8848(a)

(relating to reimbursement, indemnification, advancement and

insurance) constitutes a loan to the company which accrues

interest from the date of the payment or advance.

(h) No remuneration for services.--A member is not entitled

to remuneration for services performed for a member-managed

limited liability company, except for reasonable compensation

for services rendered in winding up the activities of the

company.

(i) Increased vote requirements.--Whenever the certificate

of organization or operating agreement requires for the taking

of any action by the members or a class of members a specific

number or percentage of votes or consents, the provision of the

certificate or agreement setting forth that requirement shall

not be amended or repealed by any lesser number or percentage of

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votes or consents of the members or the class of members. This

subsection does not apply to a provision setting forth the right

of members to act by unanimous consent in lieu of a meeting.

(j) Exception.--None of the following shall be considered an

amendment of the certificate of organization for purposes of the

voting rules in subsections (b)(6) and (c)(3)(iii):

(1) a restatement of all the operative provisions of the

certificate of organization without change;

(2) a change in the name or registered office of the

limited liability company; or

(3) any combination of the foregoing purposes.

(k) Approval of minor amendments.--Unless otherwise provided

in record form in the operating agreement, an amendment

described in subsection (j) may be made by the affirmative vote

or consent of a majority of the managers or, in the case of a

member-managed limited liability company, of a majority of the

members.

§ 8848. Reimbursement, indemnification, advancement and

insurance.

(a) Reimbursement.--A limited liability company shall

reimburse a member of a member-managed company or manager of a

manager-managed company for any payment made by the member or in

the course of the member's or manager's activities on behalf of

the company, if the member or manager complied with the

applicable provisions of sections 8847 (relating to management

of limited liability company), 8849.1 (relating to standards of

conduct for members) and 8849.2 (relating to standards of

conduct for managers) in making the payment.

(b) Indemnification.--A limited liability company shall

indemnify and hold harmless a person with respect to any claim

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or demand against the person and any debt, obligation or other

liability incurred by the person by reason of the person's

former or present capacity as a member or manager, if the claim,

demand, debt, obligation or other liability does not arise from

the person's breach of section 8845 (relating to limitations on

distributions), 8847, 8849.1 or 8849.2.

(c) Advancement.--In the ordinary course of its activities

and affairs, a limited liability company may advance reasonable

expenses, including attorney fees and costs, incurred by a

person in connection with a claim or demand against the person

by reason of the person's former or present capacity as a member

or manager, if the person promises to repay the company if the

person ultimately is determined not to be entitled to be

indemnified.

(d) Insurance.--A limited liability company may purchase and

maintain insurance on behalf of a member or manager of the

company against liability asserted against or incurred by the

member or manager in that capacity or arising from that status

even if, under section 8815(c)(8) (relating to contents of

operating agreement) SUBSECTION (G) , the operating agreement

could not provide indemnification against the liability or

eliminate or limit the person's liability to the company for the

conduct giving rise to the liability.

(e) Nonexclusivity.--The rights provided by subsections (a),

(b), (c) and (d) shall not be deemed exclusive of any other

rights to which a person seeking reimbursement, indemnification,

advancement of expenses or insurance may be entitled under the

operating agreement, vote of members or disinterested managers,

contract or otherwise, both as to action in his official

capacity and as to action in another capacity while holding that

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position. Sections 8849.1(f) and 8849.2(e) shall be applicable

to a vote, contract or other action under this subsection. A

limited liability company may create a fund of any nature, which

may, but need not be, under the control of a trustee, or

otherwise secure or insure in any manner its indemnification

obligations, whether arising under this section or otherwise.

(f) Grounds.--Indemnification under subsection (e) may be

granted for any action taken and may be made whether or not the

limited liability company would have the power to indemnify the

person under any other provision of law except as provided

under section 8815(c)(8) IN THIS SECTION and whether or not the

indemnified liability arises or arose from any threatened,

pending or completed action by or in the right of the company.

Indemnification under subsection (e) is declared to be

consistent with the public policy of the Commonwealth.

(G) LIMITATION.--INDEMNIFICATION UNDER THIS SECTION SHALL

NOT BE MADE IN ANY CASE WHERE THE ACT GIVING RISE TO THE CLAIM

FOR INDEMNIFICATION IS DETERMINED BY A COURT TO CONSTITUTE

RECKLESSNESS, WILLFUL MISCONDUCT OR A KNOWING VIOLATION OF LAW.

§ 8849. (Reserved).

§ 8849.1. Standards of conduct for members.

(a) General rule.--A member of a member-managed limited

liability company owes to the company and, subject to section

8881(b) (relating to direct action by member), the other members

the duties of loyalty and care stated under subsections (b) and

(c).

(b) Duty of loyalty.--The fiduciary duty of loyalty of a

member in a member-managed limited liability company includes

the duties:

(1) to account to the company and to hold as trustee for

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it any property, profit or benefit derived by the member:

(i) in the conduct or winding up of the company's

activities and affairs;

(ii) from a use by the member of the company's

property; or

(iii) from the appropriation of a company

opportunity;

(2) to refrain from dealing with the company in the

conduct or winding up of the company's activities and affairs

as or on behalf of a person having an interest adverse to the

company; and

(3) to refrain from competing with the company in the

conduct of the company's activities and affairs before the

dissolution of the company.

(c) Duty of care.--The duty of care of a member of a member-

managed limited liability company in the conduct or winding up

of the company's activities and affairs is to refrain from

engaging in gross negligence, recklessness, willful misconduct

or knowing violation of law.

(d) Good faith and fair dealing.--A member shall discharge

the duties and obligations under this title or under the

operating agreement and exercise any rights consistent with the

contractual obligation of good faith and fair dealing.

(e) Self-serving conduct.--A member does not violate a duty

or obligation under this title or under the operating agreement

solely because the member's conduct furthers the member's own

interest.

(f) Authorization or ratification.--All the members of a

member-managed limited liability company may authorize or

ratify, after disclosure of all material facts, a specific act

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or transaction that otherwise would violate the duty of loyalty

of a member.

(g) Fairness as a defense.--It is a defense to a claim under

subsection (b)(2) and any comparable claim in equity or at

common law that the transaction was fair to the limited

liability company at the time it is authorized or ratified under

subsection (f).

(h) Rights and obligations in approved transaction.--If a

member enters into a transaction with the limited liability

company which otherwise would be prohibited under subsection (b)

(2), and the transaction is authorized or ratified as provided

under subsection (f) or the operating agreement, the member's

rights and obligations arising from the transaction are the same

as those of a person that is not a member.

(i) Duties of members in manager-managed company.--Subject

to subsection (d), a member does not have any duty to a manager-

managed limited liability company or to any other member of the

company solely by reason of being or acting as a member.

(J) EXONERATION.--THE OPERATING AGREEMENT MAY PROVIDE THAT A

MEMBER IN A MEMBER-MANAGED LIMITED LIABILITY COMPANY SHALL NOT

BE PERSONALLY LIABLE FOR MONETARY DAMAGES TO THE COMPANY OR THE

OTHER MEMBERS FOR A BREACH OF SUBSECTION (C), EXCEPT THAT A

MEMBER MAY NOT BE EXONERATED FOR AN ACT THAT CONSTITUTES

RECKLESSNESS, WILLFUL MISCONDUCT OR A KNOWING VIOLATION OF LAW.

(j) (K) Cross reference.--See section 8815 (relating to

contents of operating agreement).

§ 8849.2. Standards of conduct for managers.

(a) General rule.--A manager of a manager-managed limited

liability company owes to the company and, subject to section

8881(b) (relating to direct action by member), the members the

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duties of loyalty and care stated under subsections (b) and (c).

(b) Duty of loyalty.--The fiduciary duty of loyalty of a

manager in a manager-managed limited liability company includes

the duties:

(1) to account to the company and to hold as trustee for

it any property, profit or benefit derived by the manager:

(i) in the conduct or winding up of the company's

activities and affairs;

(ii) from a use by the manager of the company's

property; or

(iii) from the appropriation of a company

opportunity;

(2) to refrain from dealing with the company in the

conduct or winding up of the company's activities and affairs

as or on behalf of a person having an interest adverse to the

company; and

(3) to refrain from competing with the company in the

conduct of the company's activities and affairs until

completion of the winding up of the company.

(c) Duty of care.--The duty of care of a manager of a

manager-managed limited liability company in the conduct or

winding up of the company's activities and affairs is to refrain

from engaging in gross negligence, recklessness, willful

misconduct or knowing violation of law.

(d) Good faith and fair dealing.--A manager of a manager-

managed limited liability company shall discharge the duties and

obligations under this title or under the operating agreement

and exercise any rights consistently with the contractual

obligation of good faith and fair dealing.

(e) Ratification of breach of duty of loyalty.--All the

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members, or a majority of disinterested managers, of a manager-

managed limited liability company may authorize or ratify, after

disclosure of all material facts, a specific act or transaction

by a manager that otherwise would violate the duty of loyalty.

(f) Fairness as a defense.--It is a defense to a claim under

subsection (b)(2) and any comparable claim in equity or at

common law that the transaction was fair to the limited

liability company.

(g) Manager's rights in approved transaction.--If a manager

enters into a transaction with the limited liability company

which otherwise would be prohibited by subsection (b)(2), and

the transaction is approved or ratified as provided by

subsection (e) or the operating agreement, the manager's rights

and obligations arising from the transaction are the same as

those of a person that is not a manager.

(H) EXONERATION.--THE OPERATING AGREEMENT MAY PROVIDE THAT A

MANAGER IN A MANAGER-MANAGED LIMITED LIABILITY COMPANY SHALL NOT

BE PERSONALLY LIABLE FOR MONETARY DAMAGES TO THE COMPANY OR THE

MEMBERS FOR A BREACH OF SUBSECTION (C), EXCEPT THAT A MANAGER

MAY NOT BE EXONERATED FOR AN ACT THAT CONSTITUTES RECKLESSNESS,

WILLFUL MISCONDUCT OR A KNOWING VIOLATION OF LAW.

(h) (I) Cross reference.--See section 8815 (relating to

contents of operating agreement).

§ 8850. Rights to information.

(a) In member-managed company.--In a member-managed limited

liability company, the following rules apply:

(1) On reasonable notice, a member may inspect and copy

during regular business hours, at a reasonable location

specified by the company, any record maintained by the

company regarding the company's activities, affairs,

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financial condition and other circumstances , to the extent

the information is material to the member's rights and duties

under the operating agreement or this chapter .

(2) The company shall furnish to each member :

(i) , without demand, any information concerning the

company's activities, affairs, financial condition and other

circumstances which the company knows and is material to the

proper exercise of the member's rights and duties under the

operating agreement or this title, except to the extent the

company can establish that it reasonably believes the member

already knows the information . ; and

(ii) on demand, any other information concerning the

company's activities, affairs, financial condition and

other circumstances, except to the extent the demand or

information demanded is unreasonable or otherwise

improper under the circumstances.

(3) The duty to furnish information under paragraph (2)

also applies to each member to the extent the member knows

any of the information described in paragraph (2).

(b) In manager-managed company.--In a manager-managed

limited liability company, the following rules apply:

(1) The informational rights stated in subsection (a)

and the duty stated in subsection (a)(3) apply to the

managers and not the members.

(2) During regular business hours and at a reasonable

location specified by the company, a member may inspect and

copy full information regarding the activities, affairs,

financial condition and other circumstances of the company as

is just and reasonable if:

(i) the member seeks the information for a purpose

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reasonably related to the member's interest as a member;

(ii) the member makes a demand in record form

received by the company, describing with reasonable

particularity the information sought and the purpose for

seeking the information; and

(iii) the information sought is directly connected

to the member's purpose.

(3) Within 10 days after receiving a demand under

paragraph (2)(ii), the company shall, in record form, inform

the member that made the demand of:

(i) the information that the company will provide in

response to the demand and when and where the company

will provide the information; and

(ii) the company's reasons for declining, if the

company declines to provide any demanded information.

(c) Rights of person dissociated as member.--Subject to

subsection (h), within 10 days after receipt by a limited

liability company of a demand made in record form, a person

dissociated as a member may have access to information to which

the person was entitled while a member if:

(1) the information pertains to the period during which

the person was a member;

(2) the person seeks the information in good faith; and

(3) the person satisfies the requirements imposed on a

member under subsection (b)(2).

(d) Response of company.--A limited liability company shall

respond to a demand made under subsection (c) in the manner

provided in subsection (b)(3).

(e) Copying costs.--A limited liability company may charge a

person that makes a demand under this section the reasonable

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costs of copying, limited to the costs of labor and material.

(f) Rights of agent or guardian.--A member or person

dissociated as a member may exercise rights under this section

through an agent or, in the case of an individual under legal

disability, a guardian. Any restriction or condition imposed by

the operating agreement or under subsection (h) applies both to

the agent or guardian and the member or person dissociated as a

member.

(g) No rights of transferee.--Subject to section 8854

(relating to power of personal representative of deceased

member), the rights under this section do not extend to a person

as transferee.

(h) Limitations on access.--In addition to any restriction

or condition stated in the operating agreement, a limited

liability company, as a matter within the ordinary course of its

activities and affairs, may impose reasonable restrictions and

conditions on access to and use of information to be furnished

under this section, including designating information

confidential and imposing nondisclosure and safeguarding

obligations on the recipient. In a dispute concerning the

reasonableness of a restriction under this subsection, the

company has the burden of proving reasonableness.

(i) Cross reference.--See section 8815 (relating to contents

of operating agreement).

SUBCHAPTER E

TRANSFERABLE INTERESTS AND RIGHTS

OF TRANSFEREES AND CREDITORS

Sec.

8851. Nature of transferable interest.

8852. Transfer of transferable interest.

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8853. Charging order.

8854. Power of personal representative of deceased member.

§ 8851. Nature of transferable interest.

(a) Personal property.--A transferable interest is personal

property.

(b) Only right that may be transferred.--A person may not

transfer to a person not a member any rights in a limited

liability company other than a transferable interest.

§ 8852. Transfer of transferable interest.

(a) General rule.--Subject to section 8853(f) (relating to

charging order), a transfer, in whole or in part, of a

transferable interest:

(1) is permissible;

(2) does not by itself cause the dissociation of the

transferor as a member or a dissolution and winding up of the

limited liability company's activities and affairs; and

(3) subject to section 8854 (relating to power of

personal representative of deceased member), does not entitle

the transferee to:

(i) participate in the management or conduct of the

company's activities and affairs; or

(ii) except as provided in subsection (c), have

access to records or other information concerning the

company's activities and affairs.

(b) Right to distributions.--A transferee has the right to

receive, in accordance with the transfer, distributions to which

the transferor would otherwise be entitled.

(c) Right to account on dissolution.--In a dissolution and

winding up of a limited liability company, a transferee is

entitled to an account of the company's transactions only from

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the date of dissolution.

(d) Certificate of interest.--A transferable interest may be

evidenced by a certificate of the interest issued by the limited

liability company in record form and, subject to this section,

the interest represented by the certificate may be transferred

by a transfer of the certificate.

(e) Recognition of transferee's rights.--A limited liability

company need not give effect to a transferee's rights under this

section until the company knows or has notice of the transfer.

(f) Transfer restrictions.--A transfer of a transferable

interest in violation of a restriction on transfer contained in

the operating agreement is ineffective if the intended

transferee has knowledge or notice of the restriction at the

time of transfer.

(g) Rights retained by transferor.--Except as provided in

section 8861(5)(ii) (relating to events causing dissociation),

if a member transfers a transferable interest, the transferor

retains the rights of a member other than the transferable

interest transferred and retains all the duties and obligations

of a member.

§ 8853. Charging order.

(a) General rule.--On application by a judgment creditor of

a member or transferee, a court may enter a charging order

against the transferable interest of the judgment debtor for the

unsatisfied amount of the judgment. Except as provided in

subsection (f), a charging order constitutes a lien on a

judgment debtor's transferable interest and requires the limited

liability company to pay over to the person to which the

charging order was issued any distribution that otherwise would

be paid to the judgment debtor.

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(b) Available relief.--To the extent necessary to effectuate

the collection of distributions pursuant to a charging order in

effect under subsection (a), the court may:

(1) appoint a receiver of the distributions subject to

the charging order, with the power to make all inquiries the

judgment debtor might have made; and

(2) make all other orders necessary to give effect to

the charging order.

(c) Foreclosure.--Upon a showing that distributions under a

charging order will not pay the judgment debt within a

reasonable time, the court may foreclose the lien and order the

sale of the transferable interest. Except as provided in

subsection (f), the purchaser at the foreclosure sale only

obtains the transferable interest, does not thereby become a

member, and is subject to section 8852 (relating to transfer of

transferable interest).

(d) Satisfaction of judgment.--At any time before

foreclosure under subsection (c), the member or transferee whose

transferable interest is subject to a charging order under

subsection (a) may extinguish the charging order by satisfying

the judgment and filing a certified copy of the satisfaction

with the court that issued the charging order.

(e) Purchase of rights.--At any time before foreclosure

under subsection (c), a limited liability company or one or more

members whose transferable interests are not subject to the

charging order may pay to the judgment creditor the full amount

due under the judgment and thereby succeed to the rights of the

judgment creditor, including the charging order.

(f) Foreclosure against sole member.--If a court orders

foreclosure of a charging order lien against the sole member of

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a limited liability company:

(1) the court shall confirm the sale;

(2) the purchaser at the sale obtains the member's

entire interest, not only the member's transferable interest;

(3) the purchaser thereby becomes a member; and

(4) the person whose interest was subject to the

foreclosed charging order is dissociated as a member.

(g) Exemption laws preserved.--This chapter shall not

deprive any member or transferee of the benefit of any exemption

laws applicable to the transferable interest of the member or

transferee.

(h) Exclusive remedy.--This section provides the exclusive

remedy by which a person seeking to enforce a judgment against a

member or transferee may, in the capacity of judgment creditor,

satisfy the judgment from the judgment debtor's transferable

interest.

§ 8854. Power of personal representative of deceased member.

If a member dies, the deceased member's personal

representative may exercise:

(1) the rights of a transferee provided in section

8852(c) (relating to transfer of transferable interest); and

(2) for the purposes of settling the estate, the rights

the deceased member had under section 8850 (relating to

rights to information).

SUBCHAPTER F

DISSOCIATION

Sec.

8861. Events causing dissociation.

8862. Power to dissociate and wrongful dissociation.

8863. Effects of dissociation.

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§ 8861. Events causing dissociation.

A person is dissociated as a member when any of the following

occurs:

(1) The limited liability company knows or has notice of

the person's express will to withdraw as a member, except

that, if the person specified a withdrawal date later than

the date the company knew or had notice, on that later date.

(2) An event stated in the operating agreement as

causing the person's dissociation occurs.

(3) The person's entire interest is transferred in a

foreclosure sale under section 8853(f) (relating to charging

order).

(4) The person is expelled as a member pursuant to the

operating agreement.

(5) The person is expelled as a member by the

affirmative vote or consent of all the other members if:

(i) it is unlawful to carry on the company's

activities and affairs with the person as a member;

(ii) there has been a transfer of all the person's

transferable interest in the company, other than:

(A) a transfer for security purposes; or

(B) a charging order in effect under section

8853 which has not been foreclosed;

(iii) the person is an entity and:

(A) the company notifies the person that it will

be expelled as a member because:

(I) the person has filed a certificate of

dissolution or the equivalent;

(II) the person has been administratively

dissolved;

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(III) the person's charter or its equivalent

has been revoked; or

(IV) the person's right to conduct business

has been suspended by the person's jurisdiction

of formation; and

(B) within 90 days after the notification:

(I) the certificate of dissolution or the

equivalent has not been withdrawn, rescinded or

revoked;

(II) the person has not been reinstated;

(III) the person's charter or the equivalent

has not been reinstated; or

(IV) the person's right to conduct business

has not been reinstated; or

(iv) the person is an unincorporated entity that has

been dissolved and whose activities and affairs are being

wound up.

(6) On application by the company or a member in a

direct action under section 8881 (relating to direct action

by member), the person is expelled as a member by judicial

order because the person:

(i) has engaged or is engaging in wrongful conduct

that has affected adversely and materially, or will

affect adversely and materially, the company's activities

and affairs;

(ii) has committed willfully or persistently, or is

committing willfully and persistently, a material breach

of the operating agreement or a duty or obligation under

section 8849.1 (relating to standards of conduct for

members); or

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(iii) has engaged or is engaging in conduct relating

to the company's activities and affairs which makes it

not reasonably practicable to carry on the activities and

affairs with the person as a member.

(7) In the case of an individual:

(i) the individual dies; or

(ii) in a member-managed limited liability company:

(A) a guardian for the individual is appointed;

or

(B) a court orders that the individual has

otherwise become incapable of performing the

individual's duties as a member under this title or

the operating agreement.

(8) In a member-managed limited liability company, the

person:

(i) becomes a debtor in bankruptcy;

(ii) executes an assignment for the benefit of

creditors; or

(iii) seeks, consents to or acquiesces in the

appointment of a trustee, receiver or liquidator of the

person or of all or substantially all the person's

property.

(9) In the case of a person that is a testamentary or

inter vivos trust or is acting as a member by virtue of being

a trustee of such a trust, the trust's entire transferable

interest in the company is distributed.

(10) In the case of a person that is an estate or is

acting as a member by virtue of being a personal

representative of an estate, the estate's entire transferable

interest in the company is distributed.

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(11) In the case of a person that is not an individual,

the existence of the person terminates.

(12) The company participates in a merger under Chapter

3 (relating to entity transactions) and:

(i) the company is not the surviving entity; or

(ii) otherwise as a result of the merger, the person

ceases to be a member.

(13) The company participates in an interest exchange

under Chapter 3 and, as a result of the interest exchange,

the person ceases to be a member.

(14) The company participates in a conversion under

Chapter 3.

(15) The company participates in a division under

Chapter 3 and:

(i) the company is not a resulting association; or

(ii) as a result of the division, the person ceases

to be a member.

(16) The company participates in a domestication under

Chapter 3 and, as a result of the domestication, the person

ceases to be a member.

(17) The company dissolves and completes winding up.

§ 8862. Power to dissociate and wrongful dissociation.

(a) Power to dissociate.--A person has the power to

dissociate as a member at any time, rightfully or wrongfully, by

withdrawing as a member by express will under section 8861(1)

(relating to events causing dissociation).

(b) Wrongful dissociation.--A person's dissociation as a

member is wrongful only if the dissociation:

(1) is in breach of an express provision of the

operating agreement; or

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(2) occurs before the completion of the winding up of

the limited liability company and:

(i) the person withdraws as a member by express

will;

(ii) the person is expelled as a member by judicial

order under section 8861(6);

(iii) the person is dissociated under section

8861(8); or

(iv) the person is expelled or otherwise dissociated

as a member because it willfully dissolved or terminated,

except that this subparagraph does not apply to a person

that is:

(A) a trust that is not a business or statutory

trust;

(B) an estate; or

(C) an individual.

(c) Damages for wrongful dissociation.--A person that

wrongfully dissociates as a member is liable to the limited

liability company and, subject to section 8881 (relating to

direct action by member), to the other members for damages

caused by the dissociation. The liability is in addition to any

debt, obligation or other liability of the member to the company

or the other members.

§ 8863. Effects of dissociation.

(a) General rule.--If a person is dissociated as a member:

(1) the person's rights as a member terminate;

(2) if the company is member-managed, the person's

duties and obligations under section 8849.1 (relating to

standards of conduct for members) as a member end with regard

to matters arising and events occurring after the person's

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dissociation; and

(3) subject to sections 8844(e) (relating to sharing of

and right to distributions before dissolution) and 8854

(relating to power of personal representative of deceased

member) and Chapter 3 (relating to entity transactions), any

transferable interest owned by the person in the person's

capacity as a member immediately before dissociation as a

member is owned by the person solely as a transferee.

(b) Existing obligations not discharged.--A person's

dissociation as a member does not of itself discharge the person

from any debt, obligation or other liability to the company or

the other members which the person incurred while a member.

SUBCHAPTER G

DISSOLUTION AND WINDING UP

Sec.

8871. Events causing dissolution.

8872. Winding up and filing of optional certificates.

8873. Rescinding dissolution (RESERVED) .

8874. Known claims against dissolved limited liability company.

8875. Other claims against dissolved limited liability company.

8876. Court proceedings.

8877. Disposition of assets in winding up.

8878. Voluntary termination by members or organizers.

§ 8871. Events causing dissolution.

(a) General rule.--A limited liability company is dissolved,

and its activities and affairs shall be wound up, upon the

occurrence of any of the following:

(1) An event or circumstance that the operating

agreement states causes dissolution.

(2) The consent of all the members.

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(3) The passage of 90 180 consecutive days after the

company ceases to have any members unless before the end of

the period:

(i) consent to admit at least one specified person

as a member is given by transferees owning the rights to

receive a majority of distributions as transferees at the

time the consent is to be effective; and

(ii) at least one person becomes a member in

accordance with the consent.

(4) On application by a member, the entry by the court

of an order dissolving the company on the grounds that:

(i) the conduct of all or substantially all the

company's activities and affairs is unlawful;

(ii) it is not reasonably practicable to carry on

the company's activities and affairs in conformity with

the certificate of organization and the operating

agreement; or

(iii) the managers or those members in control of

the company:

(A) have acted, are acting, or will act in a

manner that is illegal or fraudulent; or

(B) have acted or are acting in a manner that is

oppressive and was, is or will be directly harmful to

the applicant.

(b) Other remedies.--In a proceeding brought under

subsection (a)(4)(iii)(B), the court may order a remedy other

than dissolution.

(c) Cross reference.--See section 8815(c)(15) (relating to

contents of operating agreement).

§ 8872. Winding up and filing of optional certificates.

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(a) General rule.--A dissolved limited liability company

shall wind up its activities and affairs and , except as provided

in section 8873 (relating to rescinding dissolution), the

company continues after dissolution only for the purpose of

winding up.

(b) Conduct of winding up.--In winding up its activities and

affairs, a limited liability company:

(1) shall discharge the company's debts, obligations and

other liabilities, settle and close the company's activities

and affairs, and marshal and distribute the assets of the

company; and

(2) may:

(i) deliver to the department for filing a

certificate of dissolution stating:

(A) the name of the company;

(B) subject to section 109 (relating to name of

commercial registered office provider in lieu of

registered address), the address, including street

and number, if any, of the registered office of the

company; and

(C) that the company is dissolved;

(ii) preserve the company's activities, affairs and

property as a going concern for a reasonable time;

(iii) prosecute and defend actions and proceedings,

whether civil, criminal or administrative;

(iv) transfer the company's property;

(v) settle disputes by mediation or arbitration; and

(vi) deliver to the department for filing the

certificates required by section 139 (relating to tax

clearance of certain fundamental transactions) and a

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certificate of termination stating:

(A) the name of the company;

(B) subject to section 109, the address,

including street and number, if any, of the

registered office of the company;

(C) that all debts, obligations and liabilities

of the company have been paid and discharged or that

adequate provision has been made therefor;

(D) that all the remaining property and assets

of the company have been distributed among its

members in accordance with their respective rights

and interests;

(E) that there are no actions pending against

the company in any court or that adequate provision

has been made for the satisfaction of any judgment

that may be entered against it in any pending action;

and

(F) that the company is terminated; and

(vii) perform other acts necessary or appropriate to

the winding up.

(c) Conduct of winding up when no members.--If a dissolved

limited liability company has no members, the personal

representative, guardian or other person authorized to act on

behalf of the last person to have been a member may wind up the

activities and affairs of the company. If the person does so,

the person has the powers of a sole manager under section

8847(c) (relating to management of limited liability company)

and is deemed to be a manager for the purposes of section

8834(a) (relating to liability of members and managers).

(d) Action by transferees.--If the personal representative,

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guardian or other person authorized to act under subsection (c)

declines or fails to wind up the company's activities and

affairs, a person may be appointed to do so by the consent of

transferees owning a majority of the rights to receive

distributions as transferees at the time the consent is to be

effective. A person appointed under this subsection:

(1) has the powers of a sole manager under section

8847(c) and is deemed to be a manager for the purposes of

section 8834(a); and

(2) shall promptly deliver to the department for filing

an amendment to the company's certificate of organization

stating:

(i) that the company has no members;

(ii) the name and street and mailing addresses of

the person; and

(iii) that the person has been appointed under this

subsection to wind up the company.

(e) Judicial supervision.--The court may order judicial

supervision of the winding up of a dissolved limited liability

company, including the appointment of a person to wind up the

company's activities and affairs:

(1) on the application of a member, if the applicant

establishes good cause;

(2) on the application of a transferee, if:

(i) the company does not have any members;

(ii) the legal representative of the last person to

have been a member declines or fails to wind up the

company's activities; and

(iii) within a reasonable time following the

dissolution a person has not been appointed under

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subsection (c); or

(3) in connection with a proceeding under section

8871(a)(4) (relating to events causing dissolution).

(f) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (requirements to be met by filed documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8815(c)(16) (relating to contents of operating

agreement).

Section 8823 (relating to signing of filed documents).

§ 8873. Rescinding dissolution.

(a) General rule.--A limited liability company may rescind

its dissolution, unless a certificate of termination applicable

to the company is effective or the court has entered an order

under section 8871(a)(4) (relating to events causing

dissolution) dissolving the company.

(b) Procedure.--Rescinding dissolution under this section

requires:

(1) the affirmative vote or consent of each member; and

(2) if the limited liability company has delivered to

the department for filing a certificate of dissolution and:

(i) the certificate of dissolution has not become

effective, delivery to the department for filing of a

statement of abandonment under section 141 (relating to

abandonment of filing before effectiveness) applicable to

the certificate of dissolution; or

(ii) the certificate of dissolution has become

effective, the delivery to the department for filing of a

certificate of rescission stating:

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(A) the name of the company;

(B) subject to section 109 (relating to name of

commercial registered office provider in lieu of

registered address), the address, including street

and number, if any, of its registered office; and

(C) that dissolution has been rescinded under

this section.

(c) Effects of rescission.--If a limited liability company

rescinds its dissolution:

(1) the company resumes carrying on its activities and

affairs as if dissolution had never occurred;

(2) subject to paragraph (3), any liability incurred by

the company after the dissolution and before the rescission

is effective is determined as if dissolution had never

occurred; and

(3) the rights of a third party arising out of conduct

in reliance on the dissolution before the third party knew or

had notice of the rescission may not be adversely affected.

(d) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8823 (relating to signing of filed documents).

(RESERVED).

§ 8874. Known claims against dissolved limited liability

company.

(a) General rule.--Except as provided in subsection (d), a

dissolved limited liability company may give notice of a known

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claim under subsection (b), which has the effect provided in

subsection (c).

(b) Required notice.--A dissolved limited liability company

may notify in record form its known claimants of the

dissolution. The notice must:

(1) specify the information required to be included in a

claim;

(2) state that a claim must be in writing and provide a

mailing address to which the claim is to be sent;

(3) state the deadline for receipt of a claim, which may

not be less than 120 days after the date the notice is

received by the claimant; and

(4) state that the claim will be barred if not received

by the deadline.

(c) Claims barred.--A claim against a dissolved limited

liability company is barred if the requirements of subsection

(b) are met and:

(1) the claim is not received by the specified deadline;

or

(2) if the claim is timely received but rejected by the

company:

(i) the company causes the claimant to receive a

notice in record form stating that the claim is rejected

and will be barred unless the claimant commences an

action against the company to enforce the claim within 90

days after the claimant receives the notice; and

(ii) the claimant does not commence the required

action within 90 days after the complainant receives the

notice.

(d) Later arising claims.--This section shall not apply to a

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claim based on an event occurring after the effective date of

dissolution or a liability that on that date is contingent.

§ 8875. Other claims against dissolved limited liability

company.

(a) Permissive notice.--A dissolved limited liability

company may publish notice of its dissolution and request

persons having claims against the company to present them in

accordance with the notice.

(b) Notice procedure.--A notice under subsection (a) must:

(1) be officially published one time;

(2) describe the information required to be contained in

a claim, state that the claim must be in writing and provide

a mailing address to which the claim is to be sent; and

(3) state that a claim against the limited liability

company is barred unless an action to enforce the claim is

commenced within two years after publication of the notice.

(c) Claims barred.--If a dissolved limited liability company

publishes a notice in accordance with subsection (b), the claim

of each of the following claimants is barred unless the claimant

commences an action to enforce the claim against the company

within two years after the publication date of the notice:

(1) a claimant that did not receive notice in record

form under section 8874 (relating to known claims against

dissolved limited liability company);

(2) a claimant whose claim was timely sent to the

company but not acted on; and

(3) a claimant whose claim is contingent at, or based on

an event occurring after, the effective date of dissolution.

(d) Claims not barred.--A claim not barred under this

section or section 8874 may be enforced:

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(1) against a dissolved limited liability company, to

the extent of its undistributed assets; and

(2) except as provided in section 8876 (relating to

court proceedings), if assets of the company have been

distributed after dissolution, against a member or transferee

to the extent of that person's proportionate share of the

claim or of the company's assets distributed to the member or

transferee after dissolution, whichever is less, except that

a person's total liability for all claims under this

paragraph may not exceed the total amount of assets

distributed to the person after dissolution.

§ 8876. Court proceedings.

(a) Determination of security.--A dissolved limited

liability company that has officially published a notice under

section 8875 (relating to other claims against dissolved limited

liability company) may file an application with the court for a

determination of the amount and form of security to be provided

for payment of claims that are reasonably expected to arise

after the date of dissolution based on facts known to the

company and:

(1) at the time of application:

(i) are contingent; or

(ii) have not been made known to the company; or

(2) are based on an event occurring after the effective

date of dissolution.

(b) When security not required.--Security is not required

for any claim that is or is reasonably anticipated to be barred

under section 8875(c).

(c) Notice.--Within 10 days after the filing of an

application under subsection (a), the dissolved limited

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liability company shall give notice of the proceeding to each

claimant holding a contingent claim known to the company.

(d) Guardian ad litem.--In any proceeding under this

section, the court may appoint a guardian ad litem to represent

all claimants whose identities are unknown. The reasonable fees

and expenses of the guardian, including all reasonable expert

witness fees, must be paid by the dissolved limited liability

company.

(e) Effect on contingent claims.--A dissolved limited

liability company that provides security in the amount and form

ordered by the court under subsection (a) satisfies the

company's obligations with respect to claims that are

contingent, have not been made known to the company or are based

on an event occurring after the effective date of dissolution.

The claims may not be enforced against a member or transferee

that received assets in liquidation.

§ 8877. Disposition of assets in winding up.

(a) Creditors.--In winding up its activities and affairs, a

limited liability company shall apply its assets to discharge

its obligations to creditors, including members that are

creditors.

(b) Surplus.--After a limited liability company complies

with subsection (a), any surplus shall be distributed in the

following order, subject to any charging order in effect under

section 8853 (relating to charging order):

(1) to each owner of a transferable interest that

reflects contributions made and not previously returned, an

amount equal to the value of the unreturned contributions;

and

(2) among owners of transferable interests in proportion

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to their respective rights to share in distributions

immediately before the dissolution of the company.

(c) Insufficient assets.--If a limited liability company

does not have sufficient surplus to comply with subsection (b)

(1), any surplus must be distributed among the owners of

transferable interests in proportion to the value of the

respective unreturned contributions.

(d) Form of payment.--All distributions made under

subsections (b) and (c) must be paid in money.

§ 8878. Voluntary termination by members or organizers.

(a) General rule.--The members or organizers of a limited

liability company that has not commenced business may effect the

termination of the company by delivering to the department for

filing a certificate of termination signed by a majority of the

organizers or a majority in interest of the members AN ORGANIZER

OR A MEMBER and stating:

(1) the name of the company;

(2) subject to section 109 (relating to name of

commercial registered office provider in lieu of registered

address), the address, including street and number, if any,

of the registered office of the company;

(3) that the company has not commenced business;

(4) that the amounts, if any, actually paid in as

capital contributions, less any part disbursed for necessary

expenses, have been returned to those entitled to the return

of the amounts;

(5) that all liabilities of the company have been

discharged or that adequate provision has been made for those

liabilities; and

(6) that a majority of the organizers or a majority in

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interest of the members elect that the company be terminated.

(b) Effect.--Upon the filing of the certificate of

termination, the existence of the limited liability company

shall cease.

(c) Cross references.--See:

Section 134 (relating to docketing statement).

Section 135 (relating to requirements to be met by filed

documents).

Section 136(c) (relating to processing of documents by

Department of State).

Section 8823 (relating to signing of filed documents).

SUBCHAPTER H

ACTIONS BY MEMBERS

Sec.

8881. Direct action by member.

8882. Derivative action.

8883. Proper plaintiff.

8884. Pleading.

8885. SECURITY FOR COSTS.

8884. Special litigation committee.

8886 8885 . Proceeds and expenses.

§ 8881. Direct action by member.

(a) General rule.--Subject to subsection (b), a member may

maintain a direct action against another member, a manager or

the limited liability company to enforce the member's rights and

protect the member's interests, including rights and interests

under the operating agreement or this title or arising

independently of the membership relationship.

(b) Required injury.--A member maintaining a direct action

under this section must plead and prove an actual or threatened

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injury that is not solely the result of an injury suffered or

threatened to be suffered by the limited liability company.

(c) Cross reference.--See section 8815(c)(17) (relating to

contents of operating agreement).

§ 8882. Derivative action.

(a) General rule.--Subject to subsection (b), a member OR

MANAGER may maintain a derivative action to enforce a right of a

limited liability company only if:

(1) the member PLAINTIFF first makes a demand on the

other members in a member-managed limited liability company,

or the managers of a manager-managed limited liability

company, requesting that they cause the company to bring an

action to enforce the right, unless demand is excused under

subsection (b); and

(2) both:

(i) a special litigation committee is not appointed

under section 8885 (relating to special litigation

committee); and

(ii) the managers or other members do not bring the

action within a reasonable time. ENFORCE THE RIGHT,

UNLESS DEMAND IS EXCUSED UNDER SUBSECTION (B) AND:

(I) IF A SPECIAL LITIGATION COMMITTEE IS NOT

APPOINTED UNDER SECTION 8884 (RELATING TO SPECIAL

LITIGATION COMMITTEE ), THE COMPANY DOES NOT BRING THE

ACTION WITHIN A REASONABLE TIME; OR

(II) IF A SPECIAL LITIGATION COMMITTEE IS APPOINTED

UNDER SECTION 8884, A DETERMINATION IS MADE:

(A) UNDER SECTION 8884(E)(1) THAT THE COMPANY

NOT OBJECT TO THE ACTION; OR

(B) UNDER SECTION 8884(E)(5)(I) THAT THE

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PLAINTIFF CONTINUE THE ACTION;

(2) DEMAND IS EXCUSE UNDER SUBSECTION (B);

(3) THE ACTION IS MAINTAINED FOR THE LIMITED PURPOSE OF

SEEKING COURT REVIEW UNDER SECTION 8884(F); OR

(4) THE COURT HAS ALLOWED THE ACTION TO CONTINUE

UNDER THE CONTROL OF THE PLAINTIFF UNDER SECTION 8884(F)

(3)(II).

(b) Prior demand excused.--

(1) A demand under subsection (a)(1) is excused only if

the member PLAINTIFF makes a specific showing that

irreparable harm to the limited liability company would

otherwise result.

(2) If demand is excused under paragraph (1), demand

should be made promptly after commencement of the action.

(c) Contents of demand.--A demand under this section shall

MUST BE IN RECORD FORM AND give notice with reasonable

specificity of the essential facts relied upon to support each

of the claims made in the demand.

(d) Additional claims.--If a derivative action is commenced

after a demand has been made under this section and includes a

claim that was not fairly subsumed under the demand, a new

demand must be made with respect to that claim. THE NEW DEMAND

SHALL NOT RELATE BACK TO THE DATE OF THE ORIGINAL DEMAND FOR

PURPOSES OF SUBSECTION (E).

(e) Statute of limitations.--The making of a demand tolls

any applicable statute of limitations with respect to a claim

asserted in the demand until the later EARLIER of the date:

(1) the member PLAINTIFF making the demand is notified

either:

(i) that the managers or members have decided not to

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bring an action and not to appoint a special litigation

committee; or

(ii) of the A determination under section 8885(e)

8884(E) AFTER THE APPOINTMENT of a special litigation

committee that has been appointed as provided in UNDER

section 8885 8884 ; or

(2) the court determines under section 8885(f) either

to:

(i) enforce the determination of the special

litigation committee; or

(ii) allow the action to continue under the control

of the plaintiff. PLAINTIFF COMMENCES AN ACTION ASSERTING

THE CLAIM.

(f) Cross reference.--See section 8815(c)(17) (relating to

contents of operating agreement).

§ 8883. Proper plaintiff.

(a) General rule.--A derivative action to enforce a right of

a limited liability company may be maintained only by a person

that is a member at the time the action is commenced and:

(1) who was a member when the conduct giving rise to the

action occurred; or

(2) whose status as a member devolved on the person by

operation of law or pursuant to the terms of the operating

agreement from a person that was a member at the time of the

conduct.

(b) Cross reference.--See section 8815(c)(17) (relating to

contents of operating agreement).

§ 8884. Pleading.

In a derivative action, the complaint must state with

particularity the date and content of the plaintiff's demand and

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the response by the managers or other members to the demand.

SECURITY FOR COSTS.

IN ANY ACTION OR PROCEEDING INSTITUTED OR MAINTAINED BY

MEMBERS HOLDING TRANSFERABLE INTERESTS ENTITLED TO RECEIVE LESS

THAN 5% OF ANY DISTRIBUTION BY A LIMITED LIABILITY COMPANY,

UNLESS THE TRANSFERABLE INTERESTS HELD BY THE MEMBERS HAVE AN

AGGREGATE FAIR MARKET VALUE IN EXCESS OF $200,000, THE COMPANY

IN WHOSE RIGHT THE ACTION OR PROCEEDING IS BROUGHT SHALL BE

ENTITLED AT ANY STAGE OF THE PROCEEDINGS TO REQUIRE THE

PLAINTIFFS TO GIVE SECURITY FOR THE REASONABLE EXPENSES,

INCLUDING ATTORNEY FEES, THAT MAY BE INCURRED BY THE COMPANY IN

CONNECTION THEREWITH OR FOR WHICH IT MAY BECOME LIABLE PURSUANT

TO SECTION 8848(B) (RELATING TO REIMBURSEMENT, INDEMNIFICATION,

ADVANCEMENT AND INSURANCE) TO WHICH SECURITY THE COMPANY SHALL

HAVE RECOURSE IN SUCH AMOUNT AS THE COURT DETERMINES UPON THE

TERMINATION OF THE ACTION OR PROCEEDING. THE AMOUNT OF SECURITY

MAY, FROM TIME TO TIME, BE INCREASED OR DECREASED IN THE

DISCRETION OF THE COURT UPON SHOWING THAT THE SECURITY PROVIDED

HAS OR MAY BECOME INADEQUATE OR EXCESSIVE. THE SECURITY MAY BE

DENIED OR LIMITED BY THE COURT IF THE COURT FINDS AFTER AN

EVIDENTIARY HEARING THAT UNDUE HARDSHIP ON PLAINTIFFS AND

SERIOUS INJUSTICE WOULD RESULT.

§ 8885 8884 . Special litigation committee.

(a) General rule.--If a limited liability company receives

OR ITS MEMBERS OR MANAGERS RECEIVE a demand to bring an action

to enforce a right of the corporation COMPANY , or if a

derivative action is commenced before demand has been made on

the company , the company OR ITS MEMBERS OR MANAGERS, THE MEMBERS

IN A MEMBER-MANAGED LIMITED LIABILITY COMPANY, OR THE MANAGERS

IN A MANAGER-MANAGED LIMITED LIABILITY COMPANY, may appoint a

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special litigation committee to investigate the claims asserted

in the demand or action and to determine on the basis of that

investigation BEHALF OF THE COMPANY OR RECOMMEND TO THE MANAGERS

OR MEMBERS whether pursuing any of the claims asserted is in the

best interests of the company. THE COMPANY SHALL SEND A NOTICE

IN RECORD FORM TO THE PLAINTIFF PROMPTLY AFTER THE APPOINTMENT

OF A COMMITTEE UNDER THIS SECTION NOTIFYING THE PLAINTIFF THAT A

COMMITTEE HAS BEEN APPOINTED AND IDENTIFYING BY NAME THE MEMBERS

OF THE COMMITTEE. A committee may not be appointed under this

section if:

(1) every member of the company is also a manager of the

company; or

(2) the company is member-managed and every member is

actively involved in the management of the company.

(b) Discovery stay.--If a limited liability company appoints

THE MEMBERS OR MANAGERS APPOINT a special litigation committee

and an action is commenced before the committee has made a

determination A DETERMINATION HAS BEEN MADE under subsection

(e):

(1) On motion by the committee made in the name of the

LIMITED LIABILITY company, except for good cause shown, the

court shall stay discovery for the time reasonably necessary

to permit the committee to make its investigation , EXCEPT FOR

GOOD CAUSE SHOWN .

(2) The time for the defendants to plead shall be tolled

until the process provided for under subsection (f) has been

completed.

(c) Composition of committee.--A special litigation

committee shall be composed of two or more disinterested and

independent individuals who:

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(1) are not interested in the action CLAIMS ASSERTED IN

THE DEMAND ;

(2) are capable as a group of objective judgment in the

circumstances; and

(3) may, but need not, be members OR MANAGERS .

(d) Appointment of committee.--A special litigation

committee may be appointed:

(1) in a member-managed limited liability company:

(i) by a majority of the members not named as actual

or potential parties in the demand or action; and

(ii) if all members are named as actual or potential

parties in the demand or action, by a majority of the

members so named; or

(2) in a manager-managed limited liability company:

(i) by a majority of the managers not named as

actual or potential parties in the demand or action; and

(ii) if all managers are named as actual or

potential parties in the demand or action, by a majority

of the managers so named.

(e) Determination by committee .--After appropriate

investigation , BY a special litigation committee , THE COMMITTEE

OR THE MANAGERS OR MEMBERS may determine that it is in the best

interests of the limited liability company that:

(1) an action based on some or all of the claims

asserted in the demand not be brought by the company but that

the company not object to an action being brought by the

party that made the demand:

(2) an action based on some or all of the claims

asserted in the demand be brought by the company;

(3) some or all of the claims asserted in the demand be

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settled on terms approved by the committee;

(4) an action not be brought based on any of the claims

asserted in the demand;

(5) an action already commenced continue under the

control of:

(i) the plaintiff; or

(II) THE COMPANY; OR

(ii) (III) the committee;

(6) some or all of the claims asserted in an action

already commenced be settled on terms approved by the

committee; or

(7) an action already commenced be dismissed.

(f) Court review and action.--If a special litigation

committee is appointed and an action is commenced before the

committee makes a determination A DERIVATIVE ACTION IS COMMENCED

EITHER BEFORE OR AFTER A DETERMINATION IS MADE under subsection

(e):

(1) The limited liability company shall file with the

court after the committee makes a determination A

DETERMINATION IS MADE under subsection (e) a statement of the

committee's determination and a report supporting the

determination OF THE COMMITTEE . The company shall serve each

party with a copy of the determination and report. If the

company moves to file the report under seal, the report shall

be served on the parties subject to an appropriate protective

order STIPULATION agreed to by the parties or ordered A

PROTECTIVE ORDER ISSUED by the court.

(2) The company shall file with the court a motion,

pleading or notice consistent with the determination of the

committee under subsection (e).

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(3) If the committee makes a determination DETERMINATION

IS ONE described in subsection (e)(2), (3), (4), (5)(ii), (6)

or (7), the court shall determine whether the members of the

committee met the qualifications required under subsection

(c)(1) and (2) and whether the committee conducted its

investigation and made its recommendation in good faith,

independently and with reasonable care. If the court finds

that the members of the committee met the qualifications

required under subsection (c)(1) and (2) and that the

committee acted in good faith, independently and with

reasonable care, the court shall enforce the determination of

the committee. Otherwise, the court shall:

(i) dissolve any stay of discovery entered under

subsection (b);

(ii) allow the action to continue under the control

of the plaintiff; and

(iii) permit the defendants to file preliminary

objections and other appropriate motions and pleadings.

(G) ATTORNEY GENERAL.--NOTHING IN THIS SECTION SHALL LIMIT

THE RIGHTS, POWERS AND DUTIES OF THE ATTORNEY GENERAL UNDER

OTHER APPLICABLE LAW WITH RESPECT TO A LIMITED LIABILITY COMPANY

ORGANIZED FOR A CHARITABLE PURPOSE.

(g) (H) Cross reference.--See section 8815(c)(18) (relating

to contents of operating agreement).

§ 8886 8885 . Proceeds and expenses.

(a) Proceeds.--Except as provided in subsection (b):

(1) any proceeds or other benefits of a derivative

action, whether by judgment, compromise or settlement, belong

to the limited liability company and not to the plaintiff;

and

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(2) if the plaintiff OR ITS COUNSEL receives any

proceeds, the plaintiff shall remit them PROCEEDS SHALL BE

REMITTED immediately to the company.

(b) Expenses.--If a derivative action is successful in whole

or in part, the court may award the plaintiff reasonable

expenses, including reasonable attorney fees and costs, from the

recovery of the limited liability company . , BUT IN NO EVENT

SHALL THE ATTORNEY FEES AWARDED EXCEED A REASONABLE PROPORTION

OF THE VALUE OF THE RELIEF, INCLUDING NONPECUNIARY RELIEF,

OBTAINED BY THE PLAINTIFF FOR THE COMPANY.

(c) Cross reference.--See section 8815(c)(13) (relating to

contents of operating agreement).

Section 30. Repeals are as follows:

(1) The General Assembly finds and declares as follows:

(i) The limited liability company has been evolving

as a legal entity over the last 25 years, and statutory

law must be updated to deal with the evolving entity.

(ii) Existing statutory law on limited liability

companies was enacted in 1994. Discrete amendments were

enacted in 1997, 1998, 2006, 2013 and 2014; and

significant amendments were made by section 2 of the act

of June 22, 2001 (P.L.418, No.34), known as the GAA

Amendments Act of 2001. A more comprehensive legislative

approach was taken in sections 54 and 55 of the act of

October 22, 2014 (P.L.2640, No.172), known as the

Associations Transactions Act.

(iii) Section 22 of this act adds a new chapter on

limited liability companies. The new chapter continues

the approach under the GAA Amendments Act of 2001 and the

Associations Transactions Act and extensively revises

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existing statutory law to the degree that identification

of individual changes or reproduction of voluminous text

to be eliminated would inhibit rather than enhance

serious legal analysis.

(iv) The repeal under paragraph (2) is necessary to

carry out this paragraph.

(2) Chapter 89 of Title 15 is repealed.

Section 31. Section 9115 of Title 15 are amended to read:

§ 9115. Ownership and transfer of property.

(a) General rule.--A nonprofit association may acquire, hold

or transfer, in its name, an interest in property.

(b) Testamentary and fiduciary dispositions.--A nonprofit

association may be a beneficiary of a trust or contract, a

legatee or a devisee.

(c) Authority to take and hold trust property.--Every

nonprofit association organized for a charitable purpose or

purposes may take, receive and hold real and personal property

as may be given, devised to or otherwise vested in the nonprofit

association, in trust, for the purpose or purposes set forth in

its governing principles. The managers of the nonprofit

association shall, as trustees of the property, be held to the

same degree of responsibility and accountability as other

trustees, unless a lesser degree or a particular degree of

responsibility and accountability is prescribed in the trust

instrument, or unless the managers remain under the control of

the members of the nonprofit association or third persons who

retain the right to direct, and do direct, the actions of the

managers as to the use of the trust property from time to time.

(d) Nondiversion of certain property.--Property of a

nonprofit association committed to charitable purposes shall

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not, by any proceeding under Chapter 3 (relating to entity

transactions) or otherwise, be diverted from the objects to

which it was donated, granted or devised, unless and until the

nonprofit association obtains from the court an order under 20

Pa.C.S. Ch. 77 (relating to trusts) specifying the disposition

of the property.

Section 32. Section 9302 of Title 15, amended October 22,

2014 (P.L.2640, No.172), is amended to read:

§ 9302. Application of chapter.

(a) General rule.--This chapter shall apply to and the word

"association" in this chapter shall mean a professional

association organized under the act of August 7, 1961 (P.L.941,

No.416), known as the Professional Association Act, which has

not:

(1) Reorganized as an electing partnership under Chapter

87 (relating to electing partnerships).

(2) Elected to become a professional corporation in the

manner provided by section 2905 (relating to election of

professional associations to become professional

corporations).

(3) Converted to a limited liability company under

Subchapter E of Chapter 3 (relating to conversion).

(b) No new associations.--An association may not be

originally organized under this chapter.

Section 33. Sections 9501 and 9506 of Title 15 are amended

to read:

§ 9501. Application and effect of chapter.

(a) General rule.--

(1) Unless the context clearly indicates otherwise, this

chapter shall apply to and the words "business trust" in this

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chapter shall mean an association organized as a trust:

(i) [Hereafter established under the laws of this

Commonwealth.] Whose deed of trust or other organic

document has been filed in the department and is in

effect under this chapter.

(ii) Whose deed of trust or other organic document

states, by amendment or otherwise, that the trust exists

subject to the provisions of this chapter, in the case of

a business trust heretofore established under the laws of

this Commonwealth or heretofore or hereafter established

under the laws of any other jurisdiction.

(2) The words "business trust" in this chapter shall not

include:

(i) A trust contemplated by section 1768 (relating

to voting trusts and other agreements among shareholders)

or any similar provision of law.

(ii) A trust for creditors.

(iii) A mortgage, deed of trust or other indenture

or similar instrument or agreement under which debt

securities are outstanding or to be issued.

(iv) A trust for the benefit of one or more

investors with respect to a lease of real or personal

property, unless the instrument creating the trust is

filed under this chapter.

(b) No franchise.--This chapter shall not confer on a

business trust the power to engage in any activity that may be

undertaken only in corporate form.

(c) Effect on taxation.--This chapter is enacted to codify

and clarify certain common law principles applicable to business

trusts and is not intended to affect the liability of any

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business trust to any tax. A trust that is subject to this

chapter shall not be deemed to be organized or created by or

under this or any other statute or to have the benefit of any

state franchise for the purpose of existing law relating to

taxation.

(d) Multistate application.--It is the intent of the General

Assembly in enacting this chapter that the legal existence of

business trusts organized in this Commonwealth be recognized

outside the boundaries of this Commonwealth and that, subject to

any reasonable requirement of registration, a domestic business

trust transacting business outside this Commonwealth be granted

protection of full faith and credit under the Constitution of

the United States.

§ 9506. Liability of trustees and beneficiaries.

(a) General rule.--

(1) Except as otherwise provided in the instrument, the

beneficiaries of a business trust shall be entitled to the

same limitation of personal liability as is extended to

shareholders in a domestic business corporation.

(2) Except as otherwise provided in the instrument, the

trustees of a trust, as such, shall not be personally liable

to any person for any act or obligation of the trust or any

other trustee.

(3) An obligation of a trust based upon a writing may be

limited to a specific fund or other identified pool or group

of assets of the trust.

(b) Standards and immunities.--Except as otherwise provided

in the instrument governing the trust, the provisions of

Subchapters B (relating to fiduciary duty) and D (relating to

indemnification) of Chapter 17 shall be applicable to

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representatives of a business trust.

(c) Certain specifically authorized debt terms.--A business

trust shall be subject to section 1510 (relating to certain

specifically authorized debt terms) to the same extent as if it

were a business corporation.

(d) Professional relationship unaffected.--Subsection (a)

shall not afford trustees or beneficiaries of a business trust

providing professional services with greater immunity than is

available to the officers, shareholders, employees or agents of

a professional corporation. See section 2925 (relating to

professional relationship retained).

(e) Disciplinary jurisdiction unaffected.--A business trust

providing professional services shall be subject to the

applicable rules and regulations adopted by, and all the

disciplinary powers of, the court, department, board, commission

or other government unit regulating the profession in which the

business trust is engaged. The court, department, board or other

government unit may require that a business trust include in its

instrument provisions that conform to any rule or regulation

heretofore or hereafter promulgated for the purpose of enforcing

the ethics of a profession. This chapter shall not affect or

impair the disciplinary powers of the court, department, board,

commission or other government unit over licensed persons or any

law, rule or regulation pertaining to the standards for

professional conduct of licensed persons or to the professional

relationship between any licensed person rendering professional

services and the person receiving professional services.

(f) Permissible beneficiaries.--Except as otherwise provided

by a statute, rule or regulation applicable to a particular

profession, all of the ultimate beneficial owners of interests

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in a business trust that renders one or more restricted

professional services shall be licensed persons[. As used in

this subsection, the term "restricted professional services"

shall have the meaning specified in section 8903 (relating to

definitions and index of definitions).] in the profession the

trust practices if the trust renders any of the following

professional services: chiropractic, dentistry, law, medicine

and surgery, optometry, osteopathic medicine and surgery,

podiatric medicine, public accounting, psychology or veterinary

medicine.

(g) Conflict of laws.--The personal liability of a trustee

or beneficiary of a business trust to any person or in any

action or proceeding for the debts, obligations or liabilities

of the trust or for the acts or omissions of other trustees,

beneficiaries, employees or agents of the trust shall be

governed solely and exclusively by this chapter and the laws of

this Commonwealth. Whenever a conflict arises between the laws

of this Commonwealth and the laws of any other state with

respect to the liability of trustees or beneficiaries of a trust

organized and existing under this chapter for the debts,

obligations and liabilities of the trust or for the acts or

omissions of the other trustees, beneficiaries, employees or

agents of the trust, the laws of this Commonwealth shall govern

in determining such liability.

(h) Medical professional liability.--A business trust shall

be deemed to be a professional corporation for purposes of

section [811 of the act of October 15, 1975 (P.L.390, No.111),

known as the Health Care Services Malpractice Act.] 744 of the

act of March 20, 2002 (P.L.154, No.13), known as the Medical

Care Availability and Reduction of Error (Mcare) Act .

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(i) Failure to observe formalities.--The failure of a

business trust to observe formalities relating to the exercise

of its powers or management of its activities and affairs is not

a ground for imposing liability on a beneficiary or trustee of

the trust for a debt, obligation or other liability of the

trust.

Section 34. Section 501(a)(6) and (8) of Title 54, amended

October 22, 2014 (P.L.2640, No.172), are amended to read:

§ 501. Register established.

(a) General rule.--A register is established by this chapter

which shall consist of such of the following names as are not

deleted therefrom by operation of section 504 (relating to

effect of failure to make filings) or 506 (relating to voluntary

termination of registration by corporations and other

associations):

* * *

(6) In the case of a limited partnership or limited

liability company subject to 15 Pa.C.S. Ch. [85] 86 (relating

to limited partnerships) or [89] 88 (relating to limited

liability companies), the name of the partnership or company

as set forth in the certificate of limited partnership,

certificate of organization or statement of registration as a

[registered] foreign association.

(8) In the case of a [registered] limited liability

partnership subject to 15 Pa.C.S. Ch. 82 (relating to

[registered] limited liability partnerships and limited

liability limited partnerships) that is not also a limited

partnership, the name of the partnership as set forth in the

statement of registration as a [registered] foreign

association.

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* * *

Section 35. This act shall take effect in 90 days.

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