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Limited Partnerships Act 2008

General - Distributions to partners

41: Distribution must not be authorised unless limited partnership solvent

You could also call this:

"Don't pay partners if the business can't afford to pay its debts."

Illustration for Limited Partnerships Act 2008

When you are a general partner in a limited partnership, you must make sure the partnership can pay its debts before you give money to the partners. You need to have good reasons to believe the partnership will still be able to pay its debts after the money is given out. If you are not sure about this, you must not give the money to the partners. You have to sign a document saying you think the partnership will be able to pay its debts after the money is given out, and why you think that. If you do not sign this document, you can get in trouble with the law and have to pay a fine of up to $5,000.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1139190.

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40: Distribution must be authorised, or

"Partners must agree in writing before giving out money or assets."

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42: Solvency test, or

"Checking if a limited partnership has enough money to pay its debts"

Part 2General
Distributions to partners

41Distribution must not be authorised unless limited partnership solvent

  1. A general partner must not authorise a distribution unless that person is satisfied on reasonable grounds that, immediately after the distribution is made, the limited partnership will be solvent.

  2. A general partner is deemed to have breached subsection (1) if, before the distribution is made, the general partner ceases to be satisfied on reasonable grounds that, immediately after the distribution is made, the limited partnership will be solvent.

  3. Each general partner who authorises a distribution must sign a certificate stating that, in that person’s opinion, the limited partnership will, immediately after the distribution, be solvent and the grounds for that opinion.

  4. A general partner who fails to comply with subsection (3) commits an offence and is liable on conviction to a fine not exceeding $5,000.

Notes
  • Section 41(4): amended, on , by section 413 of the Criminal Procedure Act 2011 (2011 No 81).