[WSBARP] Q re Amendment provision

[Jennifer Y. Sohn]

I am helping a partnership with revising the buy-sell provisions of its partnership agreement. The partnership is owned by 3 partners – an s-corp who owns 70%, and 2 individuals, each owning 25% and 5%. They own a commercial real estate in CA as tenants-in-common, and have a partnership agreement to govern how they will manage their business relationship. The partnership agreement (which was drafted over 20 years ago) allows for any amendments to be made by partner owning 50% or more interest. We are now doing an amendment to the buy-sell provisions in the partnership agreement. The partners owning 95% want to leave the amendment provision the same (i.e., allowing partner with 50% or more interest to made amendments), and the 5% owner is insisting that amendment shouldn’t be allowed without a unanimous consent. 

 

The partnership agreement doesn’t have a governing law section, but the s-corp partner and the 25% guy are in WA, but the 5% partner and the commercial real estate that the partners own are in CA. The atty in CA who represents the 5% partner told me that, under CA statute, the amendment provision in the partnership agreement as written will not hold up in court. This is not true for WA – in WA, most of the default partnership rules can be contracted around. 

 

1. I wanted to know whether that CA atty’s statement is true (i.e., a partnership agreement that allows for amendments with vote of partner owning more than 50% interest rather than by unanimous vote). 

2.  And, for buy-sell agreements, do you always require unanimous consent to make amendments? Personally, I have seen plenty of partnership and LLC agreements that contain buy-sell provisions that do not require unanimous consent to amend.

3.  In this situation, if the 5% partner decides not to sign the amendment, can the amendment still be enforceable against him?

 

If you have any insights on this, I would really appreciate it.

 

 

 

Best regards,

 

Jennifer Y. Sohn

Attorney at Law 

(Licensed in CA and WA)

Sohn Law PLLC

10900 NE 4th Street, Suite 1850

Bellevue, WA 98004

Tel: 206.617.7874

Fax: 425.732.9748 

Email:  <mailto:jennifer at sohn-law.com> jennifer at sohn-law.com

 <http://www.sohn-law.com/> http://www.sohn-law.com

 

Confidential. This electronic mail transmission and any accompanying documents contain information belonging to the sender which may be confidential and legally privileged. This information is intended only for the use of the individual or entity to whom this electronic mail transmission was sent as indicated above. If you are not the intended recipient, any disclosure, copying, distribution, or action taken in reliance on the contents of the information contained in this transmission is strictly prohibited. If you have received this transmission in error, please delete the message. Thank you.

 

Circular 230 Disclaimer. Any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the internal revenue code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

 

 

 

 

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbarp/attachments/20150204/9e50b311/attachment.html>