On March 30, 2016, Governor Walker signed the Wisconsin Revised Uniform Partnership Act (the Act), which restates Chapter 178 of the Wisconsin Statutes, the current Wisconsin Uniform Partnership Act (WUPA), and makes other related changes to the Wisconsin Statutes. The primary purpose of the Act is to update WUPA, which was based on the Uniform Partnership Act (1914) (UPA), in order to reflect the Revised Uniform Partnership Act (1997, last amended 2013) (RUPA). The Act is expected to be published in the near future.
In general, the Act follows the substantive lead of RUPA. However, there are a number of procedural provisions in the Act that vary from the corresponding RUPA language in order to better align the state's procedures for partnerships with those for other entities, and in particular those for corporations under Chapter 180. The intent is to provide consistency and to facilitate better integration with the Department of Financial Institutions' existing recording systems. These variations relate to a number of items, such as filing requirements, forms, effective dates and times, confirmations of status, administrative revocations, reservations of name, registered agent and registered office procedures, annual reports, and other matters.
In addition, although the current Wisconsin Statutes for limited partnerships (Chapter 179), business corporations (Chapter 180), nonstock corporations (Chapter 181), and limited liability companies (Chapter 183) already contain provisions dealing with mergers and conversions, including so-called “cross-species” transactions involving more than one type of entity, the current Wisconsin Statutes for general partnerships (including limited liability partnerships) do not. Therefore, the Act adopts and modifies the RUPA provisions to provide this flexibility for Wisconsin general partnerships, and also to authorize interest exchanges and domestications as well.
In most areas, the provisions of the Act are based upon the current RUPA language with a limited number of variations in order to avoid unnecessary disruption to Wisconsin law and practice and/or to accommodate specific statutory and policy concerns.
The Act's most significant changes from current Wisconsin partnership law include:
- Under the Act, a partnership is a distinct legal entity that may sue and be sued in its own name, not merely an aggregation of individual partners.
- The Act provides more specific guidance regarding the rights and duties of partners to each other and to the partnership (including fiduciary duties of loyalty and care and the contractual obligation of good faith and fair dealing), and more specific rules regarding the extent to which the partnership can modify or override contrary statutory provisions.
- The Act modifies the provisions for dissociation of partners and for dissolution and winding up of partnerships.
- The Act authorizes the filing of statements of authority to specify the authority of a person or position to bind the partnership with respect to persons other than partners.
- Current law makes partners jointly and severally liable for torts and jointly liable for other obligations, except that a partner in a limited liability partnership (an LLP) generally is not liable except for the partner's own actions or the actions of a person under the partner's supervision and control, and for debts, obligations and liabilities resulting from the partner's acts or conduct other than as a partner. The Act makes partners of a non-LLP liable jointly and severally for debts, obligations, and other liabilities of the partnership. A partner generally is not personally liable for a debt, obligation, or liability of an LLP solely by reason of being a partner, although an LLP can make an election that its partners will be liable for the partner's own negligence or wrongful acts and those of a person under the partner's supervision and control. This flexibility will be important for some professional LLPs, including law firms.
- The Act includes restrictions on an LLP making distributions to partners, or to transferees of partners, if after the distribution the LLP would be insolvent (unable to pay debts as they become due in the ordinary course of business or having assets less than liabilities).
- The Act authorizes mergers, interest exchanges, conversions, and domestications, including so-called “cross-species” transactions, while integrating these new provisions with the corresponding provisions for other Wisconsin business entities and minimizing any unnecessary disruptions in existing law or practice.
- The Act contains special protections for minority partners in connection with merger, interest exchange, conversion, and domestication transactions, which cannot be impaired in a partnership agreement.
- The Act repeals current section 73.14 of the Wisconsin Statutes, a provision requiring all acquired or converted entities engaging in merger and conversion transactions to file a separate report with the Wisconsin Department of Revenue listing all fee simple real estate ownership interests in Wisconsin.
The Act applies to a partnership formed on or after January 1, 2018, and generally applies on January 1, 2018 to a partnership formed before that date. However, a partnership formed before January 1, 2018 can elect to be governed by the Act earlier or to continue to be governed by prior law even after January 1, 2018.