A general partner shareholder agreement, also known as a limited partnership agreement, is a legal document that outlines the terms and conditions for a limited partnership between one or more general partners and one or more limited partners.
This agreement is crucial in a limited partnership as it sets the rules and regulations that both parties must follow. The general partners are responsible for managing the partnership and making decisions on behalf of the partnership. On the other hand, the limited partners are passive investors who do not have control over the management of the partnership.
The following are some of the critical provisions that must be included in a general partner shareholder agreement:
1. Capital Contributions
The agreement should outline the amount of capital that each partner is required to contribute to the partnership. The agreement should also specify how additional capital contributions will be requested and made.
2. Profit and Loss Distribution
The agreement should state how profits and losses will be distributed between the general partners and the limited partners. It should also specify any special allocations that will be made to specific partners.
3. Management and Control
The agreement should outline the powers and responsibilities of the general partners in managing the partnership. It should also specify the rights and limitations of the limited partners in terms of decision-making and management.
4. Transfer of Partnership Interests
The agreement should specify the restrictions on the transfer of partnership interests. This is particularly important in limiting the transfer of limited partnership interests to protect the partnership from unwanted third-party investors.
5. Dissolution of the Partnership
The agreement should state the circumstances under which the partnership will be dissolved, and how the assets of the partnership will be distributed.
In conclusion, a general partner shareholder agreement is an essential document for any limited partnership. It protects the rights of both the general and limited partners and sets the rules and regulations for the partnership. It is, therefore, essential to have an experienced attorney draft the agreement to ensure that it is legally binding and covers all the necessary provisions.