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House Co-Sponsorship Memoranda

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House of Representatives
Session of 2015 - 2016 Regular Session


Posted: June 2, 2015 10:01 AM
From: Representative Adam Harris and Rep. W. Curtis Thomas
To: All House members
Subject: Co-Sponsorship - Business Entity Law
In the near future, we will be introducing legislation to modernize Pennsylvania law on partnerships and limited liability companies. Based on legislation drafted by the Title 15 Committee of the Pennsylvania Bar Association, our bill will replace existing Pennsylvania law on general partnerships, limited partnerships and limited liability companies with the most recent revisions of three acts promulgated by the Uniform Law Commission (ULC): the Uniform Partnership Act (UPA), the Uniform Limited Partnership Act (ULPA) and the Uniform Limited Liability Act (ULLA).

General Partnerships and Limited Liability Partnerships

Pennsylvania general partnerships currently are operating under the 1914 version of the Uniform Partnership Act. The UPA was substantially revised in 1997 and last amended in 2013. Our legislation will replace the 1914 version with the new UPA to:
  • make it easier for transfers of property to and from partnerships by clarifying that a general partnership is an “entity”
  • clarify that the agreement among the partners governs and that the rules of the UPA are, for the most part, default rules
  • allow a partnership to file a “certificate of authority” with the Department of State to give third parties notice of the authority of a partner to conduct business on the partnership’s behalf
  • articulate duties of loyalty and care to address suits by partners for breach of fiduciary responsibilities
  • address limited liability partnerships, which first were authorized in Pennsylvania in 1994
Limited Partnerships

Pennsylvania limited partnerships currently are operating under the 1985 version of the Uniform Limited Partnership Act. The new ULPA was substantially revised by the ULC in 2001 and last amended in 2013. Our bill will replace the 1985 version with the new ULPA, which improves the capacity of these entities to do business and serve the best interests of partners and third parties conducting business with them by:
  • de-linking rules governing limited partnerships from rules governing general partnerships
  • eliminating the right of a limited partner to dissociate from the partnership prior to termination of the partnership except as permitted by partnership agreement or new ULPA
  • modernizing current written consent requirements for dissolution

Limited Liability Companies

Pennsylvania limited liability companies currently are operating under a 1994 law. Our legislation will replace that with the Uniform Limited Liability Company Act, which was promulgated in 2006 by the ULC and last amended in 2013. In light of the fact that the Limited Liability Company (“LLC”) has become the entity of choice for organizing privately owned businesses, it is time to update Pennsylvania’s law with the ULLCA to:
  • adopt the approach of the new UPA and new ULPA in making clear that the operating agreement governs the rights and obligations of the members
  • allow for transfers of any right to distributions that a member has under the operating agreement, which may impose restrictions on the right to transfer
  • provide that a member is not an agent of a limited liability company solely by reason of being a member (statutory apparent authority)
  • permit a member to seek a court order to dissolve the company in cases where the manager or controlling members have acted in a manner that is directly harmful to the member
  • include modernizing provisions addressing derivative litigation
We hope you will join us in co-sponsoring this important legislation which is supported by the Corporation Bureau Advisory Committee of the Pennsylvania Department of State and will serve to eliminate existing obstacles to the growth of Pennsylvania businesses.

Introduced as HB1398