Section 304. Right of Limited Partner
and Former Limited Partner to Information

(a) On 10 days’ demand, made in a record received by the limited partnership, a limited partner may inspect and copy required information during regular business hours in the limited partnership’s designated office. The limited partner need not have any particular purpose for seeking the information.

(b) During regular business hours and at a reasonable location specified by the limited partnership, a limited partner may obtain from the limited partnership and inspect and copy true and full information regarding the state of the activities and financial condition of the limited partnership and other information regarding the activities of the limited partnership as is just and reasonable if:

(1) the limited partner seeks the information for a purpose reasonably related to the partner’s interest as a limited partner;

(2) the limited partner makes a demand in a record received by the limited partnership, describing with reasonable particularity the information sought and the purpose for seeking the information; and

(3) the information sought is directly connected to the limited partner’s purpose.

(c) Within 10 days after receiving a demand pursuant to subsection (b), the limited partnership in a record shall inform the limited partner that made the demand:

(1) what information the limited partnership will provide in response to the demand;

(2) when and where the limited partnership will provide the information; and

(3) if the limited partnership declines to provide any demanded information, the limited partnership’s reasons for declining.

(d) Subject to subsection (f), a person dissociated as a limited partner may inspect and copy required information during regular business hours in the limited partnership’s designated office if:

(1) the information pertains to the period during which the person was a limited partner;

(2) the person seeks the information in good faith; and

(3) the person meets the requirements of subsection (b).

(e) The limited partnership shall respond to a demand made pursuant to subsection (d) in the same manner as provided in subsection (c).

(f) If a limited partner dies, Section 704 applies.

(g) The limited partnership may impose reasonable restrictions on the use of information obtained under this section. In a dispute concerning the reasonableness of a restriction under this subsection, the limited partnership has the burden of proving reasonableness.

(h) A limited partnership may charge a person that makes a demand under this section reasonable costs of copying, limited to the costs of labor and material.

(i) Whenever this [Act] or a partnership agreement provides for a limited partner to give or withhold consent to a matter, before the consent is given or withheld, the limited partnership shall, without demand, provide the limited partner with all information material to the limited partner’s decision that the limited partnership knows.

(j) A limited partner or person dissociated as a limited partner may exercise the rights under this section through an attorney or other agent. Any restriction imposed under subsection (g) or by the partnership agreement applies both to the attorney or other agent and to the limited partner or person dissociated as a limited partner.

(k) The rights stated in this section do not extend to a person as transferee, but may be exercised by the legal representative of an individual under legal disability who is a limited partner or person dissociated as a limited partner.

Comment

This section balances two countervailing concerns relating to information: the need of limited partners and former limited partners for access versus the limited partnership’s need to protect confidential business data and other intellectual property. The balance must be understood in the context of fiduciary duties. The general partners are obliged through their duties of care and loyalty to protect information whose confidentiality is important to the limited partnership or otherwise inappropriate for dissemination. See Section 408 (general standards of general partner conduct). A limited partner, in contrast, “does not have any fiduciary duty to the limited partnership or to any other partner solely by reason of being a limited partner.” Section 305(a). (Both general partners and limited partners are subject to a duty of good faith and fair dealing. Section 305(b) and 408(d).)

Like predecessor law, this Act divides limited partner access rights into two categories – required information and other information. However, this Act builds on predecessor law by:

• expanding slightly the category of required information and stating explicitly that a limited partner may have access to that information without having to show cause

• specifying a procedure for limited partners to follow when demanding access to other information

• specifying how a limited partnership must respond to such a demand and setting a time limit for the response

• retaining predecessor law’s “just and reasonable” standard for determining a limited partner’s right to other information, while recognizing that, to be “just and reasonable,” a limited partner’s demand for other information must meet at minimum standards of relatedness and particularity

• expressly requiring the limited partnership to volunteer known, material information when seeking or obtaining consent from limited partners

• codifying (while limiting) the power of the partnership agreement to vary limited partner access rights

• permitting the limited partnership to establish other reasonable limits on access

• providing access rights for former limited partners.

The access rights stated in this section are personal to each limited partner and are enforceable through a direct action under Section 1001(a). These access rights are in addition to whatever discovery rights a party has in a civil suit.

Subsection (a) – The phrase “required information” is a defined term. See Sections 102(18) and 111. This subsection’s broad right of access is subject not only to reasonable limitations in the partnership agreement, Section 110(b)(4), but also to the power of the limited partnership to impose reasonable limitations on use. Unless the partnership agreement provides otherwise, it will be the general partner or partners that have the authority to use that power. See Section 406(a).

Subsection (b) – The language describing the information to be provided comes essentially verbatim from RULPA Section 305(a)(2)(i) and (iii). The procedural requirements derive from RMBCA Section 16.02(c). This subsection does not impose a requirement of good faith, because Section 305(b) contains a generally applicable obligation of good faith and fair dealing for limited partners.

Subsection (d) – The notion that former owners should have information rights comes from RUPA Section 403(b) and ULLCA Section 408(a). The access is limited to the required information and is subject to certain conditions.

Example: A person dissociated as a limited partner seeks data which the limited partnership has compiled, which relates to the period when the person was a limited partner, but which is beyond the scope of the information required by Section 111. No matter how reasonable the person’s purpose and how well drafted the person’s demand, the limited partnership is not obliged to provide the data.

Example: A person dissociated as a limited partner seeks access to required information pertaining to the period during which the person was a limited partner. The person makes a bald demand, merely stating a desire to review the required information at the limited partnership’s designated office. In particular, the demand does not describe “with reasonable particularity the information sought and the purpose for seeking the information.” See subsection (b)(2). The limited partnership is not obliged to allow access. The person must first comply with subsection (d), which incorporates by reference the requirements of subsection (b).

Subsection (f) and Section 704 provide greater access rights for the estate of a deceased limited partner.

Subsection (d)(2) – A duty of good faith is needed here, because a person claiming access under this subsection is no longer a limited partner and is no longer subject to Section 305(b). See Section 602(a)(2) (dissociation as a limited partner terminates duty of good faith as to subsequent events).

Subsection (g) – This subsection permits the limited partnership – as distinguished from the partnership agreement – to impose use limitations. Contrast Section 110(b)(4). Under Section 406(a), it will be the general partner or partners that decide whether the limited partnership will impose use restrictions.

The limited partnership bears the burden of proving the reasonableness of any restriction imposed under this subsection. In determining whether a restriction is reasonable, a court might consider: (i) the danger or other problem the restriction seeks to avoid; (ii) the purpose for which the information is sought; and (iii) whether, in light of both the problem and the purpose, the restriction is reasonably tailored. Restricting use of the names and addresses of limited partners is not per se unreasonable.

The following table compares the limitations available through the partnership agreement with those available under this subsection.

Subsection (h) – Source: RUPA Section 403(b) and ULLCA Section 408(a).

Subsection (i) – Source: ULLCA Section 408(b).

The duty stated in this subsection is at the core of the duties owed the limited partners by a limited partnership and its general partners. This subsection imposes an affirmative duty to volunteer information, but that obligation is limited to information which is both material and known by the limited partnership. The duty applies to known, material information, even if the limited partnership does not know that the information is material.

A limited partnership will “know” what its general partners know. Section 103(h). A limited partnership may also know information known by the “individual conducting the transaction for the [limited partnership].” Section 103(g).

A limited partner’s right to information under this subsection is enforceable through the full panoply of “legal or equitable relief” provided by Section 1001(a), including in appropriate circumstances the withdrawal or invalidation of improperly obtained consent and the invalidation or recision of action taken pursuant to that consent.

Subsection (k) – Section 304 provides no information rights to a transferee as transferee. Transferee status brings only the very limited information rights stated in Section 702(c).

It is nonetheless possible for a person that happens to be a transferee to have rights under this section. For example, under Section 602(a)(3) a person dissociated as a limited partner becomes a “mere transferee” of its own transferable interest. While that status provides the person no rights under this section, the status of person dissociated as a limited partner triggers rights under subsection (d).