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socrateaser
socrateaser, Attorney
Category: Business Law
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Experience:  Retired (mostly)
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ONY SOCRATEASER SHOULD ANSWER THIS QUESTION. IF YOU ARE NOT

Resolved Question:

ONY SOCRATEASER SHOULD ANSWER THIS QUESTION. IF YOU ARE NOT SOCRATEASER, YOUR ANSWER WILL NOT BE ACCEPTED.

I was a partner of a Nebraska limited partnership that began in 1954 and ended June 2007. If the partnership agreement contained no record-keeping requirements, what length of time would the books, records and materials regarding the partnership and its activities need to be retained by the general partner? If the partnership agreement did state a length of time for document retention, would that requirement persist beyond the end of the partnership? In other words if the partnership agreement specified a three-year document retention period, would the general partner be required to still maintain possession of the records today for a partnership that ended in June 2007? It is the 1993 Restated Partnership Agreement that I need a copy of. If the general partner has failed in his duty of record retention, what are the consequences? Can a court make a determination that this failure was intentional? If the successor LLC contains the language:


"WHEREAS, the Members (defined below) are all of the partners of a previously created Nebraska general partnership under the name M&M pursuant to a partnership agreement dated as of October 1, 1954 and a Restated Partnership Agreement dated as of December 22, 1993, and

WHEREAS, the Members desire to convert the Partnership into a Missouri limited liability company,

NOW, THEREFORE the Members agree as follows:"


referencing the Restated Partnership Agreement, would the Manager of that LLC be required to retain a copy of that restated Agreement for three years if the LLC Operating Agreement contained this language:


"5.5 COMPANY INFORMATION. Upon request, the Manager shall supply to any Member information regarding the Company or its activities. Each Member or his authorized representative shall have access to and may inspect and copy all books, records and material in the Manager's possession regarding the Company of its activities."


The language "all .. material(s) in the Manager's possession" makes it sound like he can avoid responsibility by discarding or simply claiming not to have any particular document. Can he do that? What, if anything, can be done about it?


Is there any way to compel the draftor of the Restated Partnership Agreement (a law firm) to produce the document, if they have it? Are they likely to be retaining a copy of an agreement they drafted in 1993? Can I make demand for a copy from them simply by having been a partner of M&M? My mailing address is the same today as it was in 1993. How would one locate that law firm if their identity was unknown? If I do know the identity of the law firm, and I believe I do, how should they be approached on the subject?

I believe I need the Restated Partnership Agreement to prove that the succeeding LLC agreement departed from the Restated Partnership Agreement in ways detrimental to me. I was entered into the LLC Agreement by my mother by exercise of a power of attorney. I would therefore like to maintain a cause of action against her for breach of loyalty and perhaps personal enrichment.
Submitted: 4 years ago.
Category: Business Law
Expert:  socrateaser replied 4 years ago.

Hey there. Thanks for asking for me. I need to cogitate on this. I may not get through it until morning. I hope that's okay with you.

 

 

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Customer: replied 4 years ago.
Absolutely. I look forward to it.
Expert:  socrateaser replied 4 years ago.

Q: I was a partner of a Nebraska limited partnership that began in 1954 and ended June 2007. If the partnership agreement contained no record-keeping requirements, what length of time would the books, records and materials regarding the partnership and its activities need to be retained by the general partner?

 

A: There's no statutory requirement in NE. However, the IRS would generally require any legal entity to maintain its records for at least seven years. So, the failure to do so, would be a breach of due care by the general partner. Which makes seven years the operative duration.

 

Q: If the partnership agreement did state a length of time for document retention, would that requirement persist beyond the end of the partnership?

 

A: Yes. Because the IRS could still come back and audit the organization.

 

Q: In other words if the partnership agreement specified a three-year document retention period, would the general partner be required to still maintain possession of the records today for a partnership that ended in June 2007?

 

A: Yes.

 

Q: It is the 1993 Restated Partnership Agreement that I need a copy of. If the general partner has failed in his duty of record retention, what are the consequences? Can a court make a determination that this failure was intentional?

 

A: You could sue for breach of due care, and yes, the court could find that the action was willful.

 

Q: If the successor LLC contains the language: "WHEREAS, the Members (defined below) are all of the partners of a previously created Nebraska general partnership under the name M&M pursuant to a partnership agreement dated as of October 1, 1954 and a Restated Partnership Agreement dated as of December 22, 1993, and WHEREAS, the Members desire to convert the Partnership into a Missouri limited liability company, NOW, THEREFORE the Members agree as follows:" referencing the Restated Partnership Agreement, would the Manager of that LLC be required to retain a copy of that restated Agreement for three years if the LLC Operating Agreement contained this language: "5.5 COMPANY INFORMATION. Upon request, the Manager shall supply to any Member information regarding the Company or its activities. Each Member or his authorized representative shall have access to and may inspect and copy all books, records and material in the Manager's possession regarding the Company of its activities." The language "all .. material(s) in the Manager's possession" makes it sound like he can avoid responsibility by discarding or simply claiming not to have any particular document. Can he do that?

 

A: He could, but he would appear pretty silly to a court, in my view.

 

Q: What, if anything, can be done about it?

 

A: Sue for breach of due care.

 

Q: Is there any way to compel the draftor of the Restated Partnership Agreement (a law firm) to produce the document, if they have it?

A: Yes. By subpoena. The attorney-client privilege begins and ends with communications between attorney and client. It does not extend to a document that was intended for third parties. But, if the document isn't signed, then there's no way to know if what the attorney has is actually the final draft used by the partnership.

 

Q: Are they likely to be retaining a copy of an agreement they drafted in 1993?

 

A: Yes, unless they turned over their file to the client - which is possible.

 

Q: Can I make demand for a copy from them simply by having been a partner of M&M?

 

A: You would have to sue the partnership or its former members. Then you could subpoena the document. Otherwise, the law firm doesn't have to comply with your request.

 

Q: My mailing address is the same today as it was in 1993. How would one locate that law firm if their identity was unknown?

 

A: Sue the partnership and its former members and then force disclosure of the law firm's identity.

 

Q: If I do know the identity of the law firm, and I believe I do, how should they be approached on the subject?

 

A: With a subpoena, after suing the former partners and the partnership. Otherwise, you'll be wasting your time.

Customer: replied 4 years ago.
A: There's no statutory requirement in NE. However, the IRS would generally require any legal entity to maintain its records for at least seven years.

Would the restated partnership agreement be one of the "records" that the IRS would require to be retained? Would a power of attorney used by one partner to vote in another's stead on partnership matters also be part of those "records?"

Short of suing or threatening to sue for breach of due care, how might I prompt the managing partner of the former general partnership to give me a copy of the restated partnership agreement, assuming he has one?

Expert:  socrateaser replied 4 years ago.

Q: Would the restated partnership agreement be one of the "records" that the IRS would require to be retained?

 

A: The IRS concerns itself with financial proof. If the partnership agreement would be reasonably necessary to demonstrate a right to a deduction, then it would have to be retained -- otherwise not. I can't think of a scenario off hand where the agreement would have to be retained for IRS purposes. For your purposes, the issue is whether or not the partnership management could have reasonably believed that you would have a claim against the partnership which would have necessitated reference to the agreement. If so, and the document was destroyed anyway, then that could show a breach of loyalty.

 

It's definitely a tough call. And, NE law re LLC's is very thin, so there's not much to rely on.

 

Q: Would a power of attorney used by one partner to vote in another's stead on partnership matters also be part of those "records?"

 

A: That would be something that both the LLC and the partner who used the POA to vote, would want to retain in order to prove that he/she had the right to vote. Again, the issue of how long to retain is not statutory -- it's more about knowing that there is a potential claim and a breach of loyalty in failing to maintain the records. Still very thin.

 

Q: Short of suing or threatening to sue for breach of due care, how might I prompt the managing partner of the former general partnership to give me a copy of the restated partnership agreement, assuming he has one?

 

A: Money.

 

This is an "all or nothing deal." The person must believe he/she is at some risk of legal action, where the outcome will be worse by not disclosing than the opposite. Otherwise, there's no good reason to disclose the document.

Customer: replied 4 years ago.
I'm sorry. I forgot to mention that although the original was a Nebraska general partnership, the successor was a Missouri LLC. Would that change any of your answers?
Expert:  socrateaser replied 4 years ago.
I'm in the midst of a storm today. I'll get back to ths tomorrow. Thanks for your understanding.
Customer: replied 4 years ago.
Not a problem.
Expert:  socrateaser replied 4 years ago.

Under RSMo 347.091 (1)(4), the LLC must maintain copies of any operating agreements for inspection by members during regular business hours. Financial records and tax returns must be retained for at least 5 years, but there is no express record retention requirement for the operating agreements.

 

Under RSMo 347.141(6), a claim against the LLC is barred after three years, unless the LLC was dissolved for the primary purpose of defrauding a member,creditor or other interested party.

 

You might be able to claim that the destruction of the operating agreements during the three years statute of limitations period is evidence of fraudulent intent. Regardless, if the instrument is no longer in existence from any source, then proof of its terms and condtions would have to be inferred from the conduct of the LLC. This would be a daunting and expensive bit of forensic analysis, and it would leave many holes.

 

Here's a link to RSMo Chapter 347 concerning LLCs.

Customer: replied 4 years ago.
Again, my apologies. It is the Nebraska general partnership agreement that I need a copy of. I already have a copy of the Missouri LLC operating agreement. Have you already addressed that fully? [Sue for breach of due care]
Expert:  socrateaser replied 4 years ago.

If the original partnership was purchased by the LLC, then the partnership agreement would arguably be a financial record of the LLC, because it represents the essence of what the LLC purchased. Which could get you to a violation of the three year retention period.

 

The original general partners would still have a fiduciary duty to each other, which reasonably means providing a copy of the articles of partnership. But, there's no retention period, so, I wouldn't hold out much hope on this angle of attack.

 

 

socrateaser, Attorney
Category: Business Law
Satisfied Customers: 33572
Experience: Retired (mostly)
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