California Code of Regulations
Title 10 - Investment
Chapter 3 - Commissioner of Financial Protection and Innovation
Subchapter 2 - Corporate Securities
Article 4 - Standards for the Exercise of the Commissioner's Authority
Subarticle 10 - Real Estate Programs
Requirements of Sponsors
Section 260.140.111.6 - Terminated General Partner
Upon the occurrence of a terminating event, the partnership may be required to pay to the terminated general partner all amounts then accrued and owing to the terminated general partner. Additionally, the partnership may terminate the general partner's interest in partnership income, losses, distributions, and capital by payment of an amount equal to the then present fair market value of the terminated general partner's interest in said items determined by agreement of the terminated general partner and the partnership, or, if they cannot agree, by arbitration in accordance with the then current rules of the American Arbitration Association. The expense of arbitration shall be borne equally by the terminated general partner and the partnership. The fair market value of the terminated general partner's interest shall be the amount the terminated general partner would receive upon dissolution and termination of the partnership assuming that such dissolution or termination occurred on the date of the terminating event and the assets of the partnership were sold for their then fair market value without any compulsion on the part of the partnership to sell such assets.
The method of payment to the terminated general partner must be fair, and must protect the solvency and liquidity of the partnership. Where the termination is voluntary, the method of payment will be deemed presumptively fair where it provides for a non-interest bearing unsecured promissory note with principal payable, if at all, from distributions which the terminated general partner otherwise would have received under the partnership agreement had the general partner not terminated. Where the termination is involuntary, the method of payment will be deemed presumptively fair where it provides for an interest bearing promissory note coming due in no less than 5 years with equal installments each year.
1. New section filed 1-27-84; effective thirtieth day thereafter (Register 84, No. 4).
Note: Authority cited: Section 25610, Corporations Code. Reference: Section 25140, Corporations Code.
