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Limited Partnerships Act 2008

General - Distributions to partners

45: Defence of partial solvency

You could also call this:

"When a partnership has some money, but not enough, you might not have to pay as much if you can prove it could have survived with a smaller payment."

Illustration for Limited Partnerships Act 2008

If you are a general partner and someone takes you to court under section 43, or if you are a partner and someone takes you to court under section 44, the Court will look at whether the limited partnership has enough money. You might be able to argue that the partnership could have made a smaller payment and still had enough money. The Court can then decide to let you keep some of the money, or not make you pay as much, if you could have made a smaller payment.

The Court's decision is based on how much the partnership could have paid out and still had enough money. You can be allowed to keep an amount equal to what the partnership could have properly paid out. This means you might not have to pay as much, or you might be able to keep some of the money, if the partnership could have made a smaller payment and still been okay.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1139195.

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Part 2General
Distributions to partners

45Defence of partial solvency

  1. This section applies if, in an action brought against a general partner under section 43 or a partner under section 44, the Court is satisfied that the limited partnership could, by making a distribution of a lesser amount, have satisfied the solvency test.

  2. The Court may permit the partner to retain, or relieve the general partner from liability in respect of, an amount equal to the value of any distribution that could properly have been made.