UNOFFICIAL COPY AS OF 11/02/1806 REG. SESS.06 RS HB 234/GA
AN ACT relating to business organizations.
Be it enacted by the General Assembly of the Commonwealth of Kentucky:
Page 1 of 322
HB023410.100-157GA
UNOFFICIAL COPY AS OF 11/02/1806 REG. SESS.06 RS HB 234/GA
SECTION 1. SUBCHAPTER 1 OF KRS CHAPTER 362 IS ESTABLISHED AND A NEW SECTION THEREOF IS CREATED TO READ AS FOLLOWS:
As used in this subchapter, unless the context otherwise requires:
(1)"Business" includes every trade, occupation, and profession;
(2)"Debtor in bankruptcy" means a person who is the subject of;
(a)An order for relief under Title 11 of the United States Code or a comparable order under a successor statute of general application; or
(b)A comparable order under federal, state, or foreign law governing insolvency;
(3)"Deliver" or "delivery" means any method of delivery used in conventional commercial practice, including delivery by hand, mail, commercial delivery, and electronic transmission;
(4)"Distribution" means a transfer of money or other property from a partnership to a partner in the partner's capacity as a partner or to the transferee of all or a part of a partner's transferable interest;
(5)"Electronic transmission" or "electronically transmitted" means any process of communication not directly involving the physical transfer of paper that is suitable for the retention, retrieval, and reproduction of information by the recipient;
(6)"Entity" means a corporation, foreign corporation, not-for-profit corporation, profit or not-for-profit unincorporated association, business or statutory trust, estate, partnership, limited partnership, trust, two (2) or more persons having a joint or common economic interest, and a state, national, or foreign government;
(7)"Foreign limited liability partnership" means a partnership that:
(a)Is formed under laws other than the laws of this Commonwealth; and
(b)Has the status of a limited liability partnership under those laws;
(8)"Limited liability partnership" means a partnership that has filed a statement of qualification under Section 69 of this Act and does not have a similar statement in effect in any other jurisdiction;
(9)"Name of record with the Secretary of State" means any real, fictitious, reserved, registered, or assumed name of an entity;
(10)"Partnership" means an association of two (2) or more persons to carry on as co-owners a business for profit formed under Section 25 of this Act, predecessor law, or comparable law of another jurisdiction;
(11)"Partnership agreement" means the agreement, whether written, oral, or implied, among the partners concerning the partnership, including amendments to the partnership agreement;
(12)"Partnership at will" means 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;
(13)"Partnership interest" or "partner's interest in the partnership" means all of a partner's interests in the partnership, including the partner's transferable interest and all management and other rights;
(14)"Person" means an individual, an entity or any other legal or commercial entity;
(15)"Professional partnership" means a partnership organized under this subchapter or the laws of another state or foreign country for purposes that include, but are not limited to, the providing of one (1) or more professional services. Except as otherwise expressly provided in this subchapter, all provisions of this subchapter governing partnerships shall be applicable to professional partnerships;
(16)"Professional services" mean the personal services rendered by physicians, osteopaths, optometrists, podiatrists, chiropractors, dentists, nurses, pharmacists, psychologists, occupational therapists, veterinarians, engineers, architects, landscape architects, certified public accountants, public accountants, physical therapists, and attorneys;
(17)"Property" means all property, real, personal, or mixed, tangible or intangible, or any interest therein;
(18)"Regulatory board" means the agency that is charged by law with the licensing and regulation of the practice of the profession which the professional partnership is organized to provide;
(19)"Sign" or "signature" includes any manual, facsimile, conformed or electronic signature;
(20)"State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or insular possession subject to the jurisdiction of the United States;
(21)"Statement" means a statement of partnership authority under Section 30 of this Act, a statement of denial under Section 31 of this Act, a statement of dissociation under Section 52 of this Act, a statement of dissolution under Section 58 of this Act, a statement of merger under Section 67 of this Act, a statement of qualification under Section 69 of this Act, a statement of foreign qualification under Section 72 of this Act, or an amendment or cancellation of any of the foregoing; and
(22)"Transfer" includes an assignment, conveyance, lease, mortgage, deed, and encumbrance.
SECTION 2. A NEW SECTION OF SUBCHAPTER 1 OF KRS CHAPTER 362 IS CREATED TO READ AS FOLLOWS:
(1)A person knows a fact if the person has actual knowledge of it.
(2)A person has notice of a fact if the person:
(a)Knows of it;
(b)Has received a notification of it;
(c)Has reason to know it exists from all of the facts known to the person at the time in question; or
(d)By reason of a filing or recording to the extent provided by and subject to the limitations set forth in subsection (4) or (5) of Section 30 of this Act, subsection (3) of Section 52 of this Act, or subsection (3) of Section 58 of this Act.
(3)A person notifies or gives a notification to another by taking steps reasonably calculated to inform the other person in ordinary course, whether or not the other person obtains knowledge of it.
(4)A person receives a notification when the notification:
(a)Comes to the person's attention; or
(b)Is duly delivered at the person's place of business or at any other place held out by the person as a place for receiving communications.
(5)Except as otherwise provided in subsection (6) of this section, a person other than an individual knows, has notice, or receives a notification of a fact for purposes of a particular transaction when the individual conducting the transaction knows, has notice, or receives a notification of the fact, or in any event when the fact would have been brought to the individual's attention if the person had exercised reasonable diligence. The person exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the individual conducting the transaction and there is reasonable compliance with the routines. Reasonable diligence does not require an individual acting for the person to communicate information unless the communication is part of the individual's regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.
(6)A partner's knowledge, notice, or receipt of a notification of a fact relating to the partnership is effective immediately as knowledge by, notice to, or receipt of a notification by the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner.
SECTION 3. A NEW SECTION OF SUBCHAPTER 1 OF KRS CHAPTER 362 IS CREATED TO READ AS FOLLOWS:
(1)Except as otherwise provided in subsection (2) of this section, relations among the partners and between the partners and the partnership are governed by the partnership agreement. To the extent the partnership agreement does not otherwise provide, this subchapter governs relations among the partners and between the partners and the partnership.
(2)The partnership agreement shall not:
(a)Vary the rights and duties under Section 5 of this Act except to eliminate the duty to provide copies of statements to all of the partners;
(b)Unreasonably restrict the right of access to books and records under subsection (2) of Section 38 of this Act or unreasonably restrict the right to information under subsection (3) of Section 38 of this Act;
(c)Eliminate the duty of loyalty under subsection (2) of Section 39 of this Act or subsection (2)(c) of Section 48 of this Act, but:
1.The partnership agreement may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable; or
2.All of the partners or a number or percentage specified in the partnership agreement may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty;
(d)Unreasonably reduce the duty of care under subsection (3) of Section 39 of this Act or subsection (2)(c) of Section 48 of this Act;
(e)Eliminate the obligation of good faith and fair dealing under Section 39 of this Act, but the partnership agreement may prescribe the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable;
(f)Vary the power to dissociate as a partner under subsection (1) of Section 47 of this Act, except to require the notice under subsection (1) of Section 46 of this Act to be in writing;
(g)Vary the right of a partner or the partnership to seek a partner's expulsion by judicial determination or vary the right of a court to expel a partner in the events specified in subsection (5) of Section 46 of this Act;
(h)Vary the requirement to wind up the partnership business in cases specified in subsection (4), (5), or (6) of Section 54 of this Act; or
(i)Vary the law applicable to a limited liability partnership under subsection (2) of Section 6 of this Act; or
(j)Vary the liabilities and remedies under Section 40 of this Act to a greater extent than variations are in fact made under this section in the substantive rights in the partnership agreement giving rise to the partner claims at issue.
(3)If a written partnership agreement contains a provision to the effect that any amendment to the partnership agreement must be in writing and adopted in accordance with the provisions of the partnership agreement, that provision shall be enforceable in accordance with its terms, and any agreement among the partners concerning the partnership which is not in writing and adopted in accordance with the provisions of the partnership agreement shall not be part of the partnership agreement.
SECTION 4. A NEW SECTION OF SUBCHAPTER 1 OF KRS CHAPTER 362 IS CREATED TO READ AS FOLLOWS:
(1)Unless displaced by particular provisions of this subchapter, the principles of law and equity supplement this subchapter.
(2)If an obligation to pay interest arises under this subchapter and the rate is not specified, then the rate is that specified in KRS 360.010.
(3)Subject to subsection (2) of Section 3 of this Act, it shall be the policy of the General Assembly through this subchapter to give maximum effect to the principles of freedom of contract and the enforceability of partnership agreements. Although this subchapter is in derogation of common law, the rules of construction that require strict construction of statutes that are in derogation of common law shall not apply to its provisions. Except as otherwise expressly provided herein, this subchapter shall not be construed to impair the obligation of any contract existing when this subchapter, or any amendment thereto, becomes effective, nor to affect any action or proceeding begun, or right accrued before this subchapter or any amendment thereto takes effect.
(4)A professional partnership shall be governed by the laws, whether statutory or common law, applicable to other partnerships. Except for the provisions of this subchapter concerning the personal liability of partners, employees, and agents of a partnership, nothing in this subchapter shall restrict, limit, or expand in any manner the authority and duty of any regulatory board to:
(a)License individual persons providing professional services; and
(b)Regulate the practice of persons providing professional services which are within the jurisdiction of the regulatory board, even though the persons are partners, employees, or agents of a professional partnership, or provide professional services through a professional partnership, including the establishment of regulations concerning:
1.The qualifications of partners of a professional partnership;
2.The transfer of partnership interests in a professional partnership; or
3.The provision of one (1) or more professional services through a professional partnership.
SECTION 5. A NEW SECTION OF SUBCHAPTER 1 OF KRS CHAPTER 362 IS CREATED TO READ AS FOLLOWS:
(1)A statement may be filed in the office of Secretary of State. A filed statement has the effect provided in this subchapter with respect to partnership property located in or transactions that occur in this Commonwealth.
(2)A certified copy of a statement that has been filed in the office of the Secretary of State may be filed with and recorded by any county clerk to which the statement is presented for filing and recording.
(3)A statement filed by a partnership shall be executed by at least two (2) partners. Other statements shall be executed by a partner or other person authorized by this subchapter.
(4)A person authorized by this subchapter to file a statement may amend or cancel the statement by filing an amendment or cancellation that names the partnership, identifies the statement, and states the substance of the amendment or cancellation. No amendment or cancellation shall be made with respect to a statement of merger or statement of dissolution after filing with the Secretary of State.
(5)A person authorized by this subchapter to file a statement may correct a filed statement if the statement contains information that was incorrect as of the time of the original filing or if the statement was defectively executed, attested, sealed, verified or acknowledged. A statement is corrected by filing with the Secretary of State a statement of correction that describes the original filing, specifies the information that was incorrect as of the original filing or the manner in which the execution was defective, corrects the incorrect information or the defective execution and is accompanied by a copy of the original defective statement, accompanied by the proper filing fee. A statement of correction shall be effective as of the effective date of the statement it corrects except as to persons relying on the uncorrected document adversely affected by the correction. As to those persons, the statement of correction shall be effective in the same manner as they were on notice of the original statement.
(6)A person who files a statement pursuant to this section shall promptly send a copy of the statement to every nonfiling partner and to any other person named as a partner in the statement. Failure to send a copy of a statement to a partner or other person does not limit the effectiveness of the statement as to a person not a partner.
(7)A person who executes a statement shall be deemed to have declared under penalty of perjury that to that person's knowledge the contents of the statement are accurate.
(8)It shall be unlawful for any person to sign a statement the person knows is false in any material respect with the intent that the statement be delivered to the Secretary of State for filing. Any person who violates this subsection shall be guilty of a Class B misdemeanor punishable by a fine not to exceed one hundred dollars ($100).
(9)The Secretary of State may collect a fee for filing or providing a certified copy of a statement. The county clerk may collect a fee of ten dollars ($10.00) for recording a statement.
(10)The Secretary of State may prescribe and furnish on request forms for:
(a)A statement of change of registered office or registered agent;
(b)An application to reserve a name;
(c)An application to cancel the reservation of a name;
(d)A resignation of a registered agent or registered office or both;
(e)An annual report; and
(f)An amendment to the annual report.
(11)The Secretary of State may mandate the use of the forms listed in subsection (10) of this section.
(12)The Secretary of State may prescribe and furnish on request forms for any other records required or permitted to be filed pursuant to this subchapter, but their use shall not be mandatory.
SECTION 6. A NEW SECTION OF SUBCHAPTER 1 OF KRS CHAPTER 362 IS CREATED TO READ AS FOLLOWS:
(1)Except as otherwise provided in subsection (2) of this section, the law of the jurisdiction in which a partnership has its chief executive office governs relations among the partners and between the partners and the partnership.
(2)The law of this Commonwealth governs relations among the partners and between the partners and the partnership and the liability of partners for an obligation of a limited liability partnership.
SECTION 7. A NEW SECTION OF SUBCHAPTER 1 OF KRS CHAPTER 362 IS CREATED TO READ AS FOLLOWS:
A partnership governed by this subchapter is subject to any amendment to or repeal of this subchapter.
SECTION 8. A NEW SECTION OF SUBCHAPTER 1 OF KRS CHAPTER 362 IS CREATED TO READ AS FOLLOWS:
(1)A statement shall satisfy the requirements of this section, and of any other section of this subchapter that adds to or varies these requirements, to be entitled to filing by the Secretary of State.
(2)A statement shall contain the information required by this subchapter. It may also contain other information.
(3)The statement shall be typewritten or printed or, if electronically transmitted, it shall be in a format that can be retrieved or reproduced in typewritten or printed form.
(4)The statement shall be in the English language. A partnership name may be in a language other than English if written in English letters or Arabic or Roman numerals. Any statement that may be filed by a foreign partnership that is duly authenticated by the official having custody of the applicable records in the state, country, or other jurisdiction under whose law the partnership is formed may be in a language other than English if accompanied by a reasonably authenticated English translation.
(5)The person or persons executing the statement shall sign it and state beneath or opposite the signature the name of the person and the capacity in which they sign.
(6)The person or persons executing the statement may do so as an attorney-in-fact. Powers of attorney relating to the execution of the statement shall not be required to be provided to or filed with the Secretary of State.
(7)If the Secretary of State has prescribed a mandatory form for a statement or other filing, then the statement or other filing shall be in or on the prescribed form.
(8)In order to be filed, a statement shall be delivered to the office of the Secretary of State. Delivery may be made by electronic transmission if and to the extent permitted by the Secretary of State. If it is filed in typewritten or printed form and not transmitted electronically, then the Secretary of State may require one (1) exact or conformed copy to be delivered with the statement.
(9)When the statement is delivered to the office of the Secretary of State for filing, the correct filing fee and any penalty required by this subchapter or other law to be collected by the office of the Secretary of State therewith shall be paid or provision for payment made in a manner permitted by the Secretary of State. The Secretary of State may accept payment of the correct amount due by credit card, debit card, charge card or similar method. However, if the amount due is tendered by any method other than cash, then the liability is not finally discharged until the Secretary of State receives final payment or credit of collectible funds.
SECTION 9. A NEW SECTION OF SUBCHAPTER 1 OF KRS CHAPTER 362 IS CREATED TO READ AS FOLLOWS:
(1)The Secretary of State shall collect the following fees when the statements described in this subsection are delivered for filing: