Q&As

When a limited partner makes loans to a limited partnership, can it take security for that loan over the assets held by the general partner?

read titleRead full title
Published on LexisPSL on 07/08/2019

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • When a limited partner makes loans to a limited partnership, can it take security for that loan over the assets held by the general partner?
  • Limited partnerships—general information
  • Limited partnerships—granting security
  • Distribution on insolvency or dissolution

Limited partnerships—general information

For information on limited partnerships generally, see Practice Note: The nature of a limited partnership and its legal framework.

Limited partnerships—granting security

For information on dealing with limited partnerships in finance transactions generally, see Practice Note: Dealing with a limited partnership in a finance transaction—investigating capacity and authority.

When taking security from a limited partnership, the limited partnership agreement should be reviewed to check the powers of the general partner (GP) to borrow and grant security. Provided it is permitted under the terms of the limited partnership agreement, we are not aware of any law which would specifically prevent the granting of security for a loan from a limited partner.

You may find the following Q&A useful, which looks at how a GP creates security on behalf of a limited partnership: When a corporate general partner for an English limited partnership creates security over the partnerships assets, do they do so as a trustee? In particular, it is worth noting that ‘a GP is essentially in the same position as a partner in an ordinary partnership and unless designated as a trustee of any specific assets will hold them subject only to the rights and obligations contained in the partnership agreement.’ As discussed in the Q&A, the GP is, however, likely to be a trustee in relation to any land that constitutes a partnership asset.

You may

Related documents:

Popular documents