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Roger
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Category: Business Law
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The Aztec Petroleum Corporation (Aztec) was the general partner

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The Aztec Petroleum Corporation (Aztec) was the general partner of a limited partnership. The partnership agreement provided that it could be amended by a vote of 70 percent of the limited partnership units. More than 70 percent of these units voted to amend the partnership agreement to provide that a vote of 70 percent of the limited partnership units could remove the general partner and replace it with another general partner. Prior to this amendment, there had been no provision for the removal and substitution of a general partner. Texas law requires unanimous approval of new partners unless the partnership agreement provides otherwise.
When a vote was held, more than 70 percent of the limited partnership units voted to remove Aztec as the general partner and replace it with the MHM Company. Aztec challenged its removal. Who wins? Aztec Petroleum Corporation v. MHM Company, 703 S.W.2d 290, Web 1985 Tex. App. Lexis 12879 (Court of Appeals of Texas)
Submitted: 4 years ago.
Category: Business Law
Expert:  Roger replied 4 years ago.

Hi -

 

By an amendment to a limited partnership agreement by a majority of the limited partners, Aztec (general partner) was replaced by MHM (current general partner), but Aztec refused to step aside.

 

The trial court granted summary judgment in favor of MHM which substituted MHM for Aztec. On appeal, the court affirmed, holding that neither the Texas Uniform Partnership Act, Tex. Rev. Civ. Stat. Ann. art. 6132(b) (1970 and Supp. 1985), nor the Texas Uniform Limited Partnership Act, Tex. Rev. Civ. Stat. Ann. art. 6132a (1970 and Supp. 1985) prohibited removal and substitution of a general partner in a limited partnership, even though the partnership agreement initially did not directly allow such action, if the partnership agreement provided a method for amendment and an amendment permitting substitution and removal of a general partner was adopted.

 

The court held that amendment of the agreement did not violate contract law or the agreement itself because the parties to the agreement agreed it could be amended by a certain procedure and that procedure was followed.

The court affirmed summary judgment in favor of MHM which substituted MHM for Aztec as general partner. Neither the Texas Uniform Partnership Act nor the Texas Uniform Limited Partnership Act prohibited substitution of a general partner in a limited partnership if the partnership agreement provided for amendment and an amendment permitting substitution of a general partner was adopted.

 

Thus, MHM wins.

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