Section 408. General Standards
of General Partner's Conduct

(a) The only fiduciary duties that a general partner has to the limited partnership and the other partners are the duties of loyalty and care under subsections (b) and (c).

(b) A general partner’s duty of loyalty to the limited partnership and the other partners is limited to the following:

(1) to account to the limited partnership and hold as trustee for it any property, profit, or benefit derived by the general partner in the conduct and winding up of the limited partnership’s activities or derived from a use by the general partner of limited partnership property, including the appropriation of a limited partnership opportunity;

(2) to refrain from dealing with the limited partnership in the conduct or winding up of the limited partnership’s activities as or on behalf of a party having an interest adverse to the limited partnership; and

(3) to refrain from competing with the limited partnership in the conduct or winding up of the limited partnership’s activities.

(c) A general partner’s duty of care to the limited partnership and the other partners in the conduct and winding up of the limited partnership’s activities is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

(d) A general partner shall discharge the duties to the partnership and the other partners under this [Act] or under the partnership agreement and exercise any rights consistently with the obligation of good faith and fair dealing.

(e) A general partner does not violate a duty or obligation under this [Act] or under the partnership agreement merely because the general partner’s conduct furthers the general partner’s own interest.

Comment

Source – RUPA Section 404.

This section does not prevent a general partner from delegating one or more duties, but delegation does not discharge the duty. For further discussion, see the Comment to Section 406(a).

If the partnership agreement removes a particular responsibility from a general partner, that general partner’s fiduciary duty must be judged according to the rights and powers the general partner retains. For example, if the partnership agreement denies a general partner the right to act in a particular matter, the general partner’s compliance with the partnership agreement cannot be a breach of fiduciary duty. However, the general partner may still have a duty to provide advice with regard to the matter. That duty could arise from the fiduciary duty of care under Section 408(c) and the duty to provide information under Sections 304(i) and 407(b).

For the partnership agreement’s power directly to circumscribe a general partner’s fiduciary duty, see Section 110(b)(5) and (6).

Subsection (a) – The reference to “the other partners” does not affect the distinction between direct and derivative claims. See Section 1001(b) (prerequisites for a partner bringing a direct claim).

Subsection (b) – A general partner’s duty under this subsection continues through winding up, since the limited partners’ dependence on the general partner does not end at dissolution. See Comment to Section 406(f) (explaining why this Act provides no remuneration for a general partner’s winding up efforts).

Subsection (d) – This provision is identical to Section 305(b) and the Comment to Section 305(b) is applicable here.