The Attorney General of Texas 

August 16, 1978 

JOHN L. HILL 

Attorney General 

Honorable Richard D. Latham 

Securities Commissioner 

State Securities Board 

709 Lyndon Baines Johnson Building 

Austin, Texas 787ll 

Opinion No. H- 12 2 9 

Re: Voting rights in limited 

partnerships. 

Dear Mr. Latham: 

YOU have asked a number of questions regarding the Texas Uniform 

Limited Partnership Act, article 6132a, V.T.C.S. You state that the North 

American Securities Administrators Association (hereinafter NASAA), of 

which the State Securities Board is a member, has promulgated guidelines for 

registration of certain securities. Recently, NASAA amended its guidelines 

for the registration of oil and gas programs to revise the voting rights 

accorded to limited partner participants in such programs. The amendment 

provides: 

Section VHF. Voting Rights of Limited Partners 

To the extent the law of the state of organization is 

not inconsistent, the limited partnership agreement 

must provide that holders of a majority of the then 

outstanding units may, without the necessity for 

concurrence by the general partner, vote to (a) amend 

the limited partnership agreement or charter document, (b) dissolve the program, (c) remove the general 

partner and elect a new general partner, (d) elect a 

new general partner if the general partner elects to 

withdraw from the program, (e) approve or disapprove 

the sale of all or substantially all of the assets of the 

program, and (f) cancel any contract for services with 

the sponsor or any affiliate without penalty upon sixty 

days notice. 

You first ask whether the grant or exercise of any of the six NASAA voting 

rights would, pursuant to article 6132a, subject a limited partner to liability in 

Texas as a general partner. We note initially that these six rights would bs 

subject to additional requirements of Texas law. See V.T.C.S. art. 6132a, S - 

26. 

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Honorable Richard D. Latham - Page 2 (H-1229) 

Section 8 of article 6132a provides: 

A limited partner shall not become liable as a general 

oartner unless. in addition to the exercise of his rilrhts and 

r ~-~ ~~~~ 

powers as a limited partner, he takes part in the cintrol of 

the business. 

(Emphasis added). Neither the Act itself nor the decisions construing it furnish 

much guidance as to the meaning of %ontrol.” See Crane & Bromberg, 

Partnerships 147 (1968). Since section 11 of article 6132zpecifically grants to a 

limited partner certain rights, it has been suggested that this listing is exclusive, 

and that any other act by a limited partner constitutes “control of the business.” 

Other portions of the statute, however, confer additional rights upon a limited 

partner, such as the right to transact business with the partnership (section 14), the 

right to assign his interest (section 201, and the right of approval of all amendments 

to the partnership certificate (section 26). 

The few relevant cases from other ‘jurisdictions which have adopted the 

Uniform Act demonstrate that the courts approach each particular fact situation 

on its merits, without attempting an all-inclusive definition of ??ontrol.” See 

W. E. Sell, An Examination of Articles 3, 4, and 9 of the Revised Uniform Limited 

Partnership Act, 9 St. Mary’s L.J. 459, 463 (1978). Two criteria have emerged from 

these decisions, however, which may be useful in addressing your inquiry. In the 

first place, courts in other jurisdictions seem to agree that a limited partner 

becomes liable as a general partner only when he actually “takes part in control of 

the business.” They conclude that the mere m of any right of control, no matter 

how broad, to a limited partner is not sufficient; exercise of a right of control is 

essential to the imposition of liability. Plasteel Products Corp. v. Helman, 271 F.2d 

354, 356 (1st Cir. 1959); Rathke v. Griffith, 218 P.2d 757 (Wash. 1950). 

Furthermore, in virtually every instance in which liability has been imposed upon a 

limited partner, that individual has been involved in the day-to-day management of 

the partnership. See, e.g., Weil v. Diversified Properties, 319 F. Supp. 778, 783 

(D.D.C. 1970); Holzman v. De Escamilla, 195 P.2d 833, 834 (Cal. Dist. Ct. App. 

1948); Trans-Am Builders, Inc. v. Woods Mills, Ltd., 210 S.E.2d 866 (Ga. Ct. App. 

1974); Gast v. Petsinger, 323 A.2d 371, 375 (Pa. Super. Ct. 1974). 

With respect, then, to each of the NASAA voting rights, the mere grant,of 

such right to a limited partner, without more, would probably not subject him to 

liability in Texas as a general partner. As to the exercise of those rights, our 

answer must depend largely upon whether those activities may be fairly said to 

involve the day-to-day management of the partnership. 

Section 26(a)(2) of article 8132a requires that any amendment to the 

partnership certificate “[ble signed and sworn to by all members. . . .‘I Since the 

Act itself thus provides that limited partners shall be participants in the amending 

process, it seems clear that such participation should not be deemed to constitute 

“control of the business.” We note, however, that a vote to amend by limited 

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partners holding “a majority of the . . . outstanding units,” and “without the 

necessity for concurrence by the general partner,” is itself, in the absence of a 

petition to a district court under section 26(c), contrary to the requirement of 

section 26(a)(2), that any amendment “lb] e signed and sworn to by all members.” 

Neither do we believe that dissolution or election of a new general partner 

are acts which may be characterized as %ontrol of the business,” since they are 

acts in which each limited partner must specifically acquiesce under sections 25(b) 

and 26(a)(2). Again, however, to the extent that the NASAA voting rights permit 

limited partners to act without the concurrence of the general partner, it is our 

view that they are inconsistent with the requirement of section 26(a)(2). 

As to the fifth NASAA voting right, we do not believe that the mere approval 

or disapproval of the sale of all or substantially all of the assets of a program 

constitutes “control of the business.” As one authority has noted, a right of 

initiation involves far more %ontrol” than does the bare right of approval. Crane & 

Bromberg, Partnerships 147-48 n.37. The right to approve the sale of most of a 

partnership’s assets is certainly no greater than the right to approve the dissolu ‘on 

of a partnership, which right is specifically conferred upon limited partners. P But 

again, the Texas Limited Partnership Act requires that the limited partners be 

unanimous in their action $ 

The sixth NASAA voting right, which permits limited partners controlling a 

majority of outstanding units to Wun?el any contract for services with the sponsor 

or any affiliate without penalty upon sixty days notice,” is one which, in our 

opinion, would result in interference in the day-to-day management of the 

partnership. In summary, it is our opinion that the mere gra& of any or all of the 

six NASAA voting rights would not subject a limited partner to liability in Texas as 

a general partner under article 6132a. The exercise of the first five of those rights 

would not as a rule impose such liability, but the exercise of the sixth right would 

probably subject the limited partner to liability as a general partner. Of course, 

your question requires that we address the issue generally, and we offer no opinion 

as to whether a particular fact situation relating to a specific partnership might 

produce a different result. 

You also ask whether the grant or exercise of any of the six NASAA voting 

rights would subject a limited partner to liability in Texas if the limited partnership 

has been formed under the limited partnership laws of another state. If the limited 

partnership has qualified to “transact business in Texas” pursuant to section 32(b) of 

article 6132a, the statute provides that the 

foreign limited partnership shall enjoy the same rights and 

privileges, and shall be subject to the same duties, 

restrictions, and liabilities, as a limited partnership formed 

under this Act, but its internal affairs and the liabilities of 

its limited partners shall be governed by the laws of the 

urisdiction of its formation. 

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Section 32(c). (Emphasis added). Thus, as to a limited partnership formed under 

the laws of another state but qualified to do business in Texas, the question of 

liability is totally dependent upon the law of the state in which the partnership was 

formed. 

If the limited partnership was formed under the laws of another state, but has 

not qualified to transact business in Texas under section 32(b), section 32(k) 

provides that section 32 

shall not give rise to an inference as to the law governing 

. . . (2) a foreign limited partnership . . . which does not 

qualify hereunder. 

This provision indicates that a failure of an out-ofstate limited partnership to 

comply with the qualification procedures of section 32 will not necessarily result in 

the imposition of general liability upon the limited partners. We believe that, in 

the case of a limited partnership which does not qualify under the statute, general 

choice-of-law rules must be held to prevail. Such rules indicate that liability 

should be determined by the local law of the state which, with respect to the 

oartioular transaction at issue. has the most significant relationship to the 

partnership and to the transaction. See Restatemen’i (Second) of Conflict of Laws 

ss 291-95 (1971). 

- 

Your final question inquires about the validity of a limited partnership formed 

under article 6132a and having a corporation as its sole general partner. Article 

6132a itself defines a limited partnership as one “formed by two (2) or more persons 

. . .‘I (emphasis added). The Texas Uniform Partnership Act, article 6132b, V.T.C.S., 

is applicable to limited partnerships except where its provisions are inconsistent 

with those of article 6132a. V.T.C.S. art. 61324 S 6(2). Article 6132b includes 

corporations in its definition of “person. ” Sec. 2. Furthermore, in 1973, the Texas 

Business Corporation Act was amended to provide that every corporation shall have 

the power “[tlo be an organizer, partner, member, associate or manager of any 

partnership. . . .‘I Bus. Corp. Act art. 2.02At18). From the language of the 

relevant statutes, then, it would appear that, at least since 1973, Texas law has 

recognized the validity of a limited partnership having a corporation as its sole 

general partner. 

ln 1945, however, the Supreme Court had declared it to be “against the public 

policy of this state” for a corporation to be a member of a limited partnership. 

Luling Oil & Gas Co. v. Humble Oil & Refining Co., 191 S.W.2d 718, 722-(Tex. 1945). 

In Port Arthur Trust Co. v. Muldrow, 291 S.W.2d 31: 

an exceotion to the Luhns rule 

2 (Tex. 19561, the Court created 

3 permit a corporation to serve as a limited 

oartner.‘ 291 S.W.2d at 1. On the basis of this decision. the Court of Civil 

-Appeals held, in a 2-l decision in Delaney v. Fidelity Lease Ltd., 517 S.W.2d 420 

(Tex. Civ. App. - El Paso 19741, that it is *‘permissible in this State to form a 

limited partnership where a corporation is the only general partner.” 517 S.W.2d at 

423. In rejecting this portion of the lower court’s opinion, the Supreme Court 

declared, in a unanimous decision: 

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The court had no point of error before it requiring such 

statement to be made. Its accuracy depends upon the scope 

of the corporate charter, Luling Oil & Gas Co. v. Humble Oil 

& Refining Co. . . . and upon whether we should extend our 

holding in Port Arthur Trust Co. v. Muldrow . . . to sanction 

corporations acting as general partners, in a statutory 

limited partnership. 

Delaney v. Fidelity Lease, Ltd., 526 S.W.2d 543, 546 (Tex. 1975). 

Professor Hamilton, in an article in the Southwestern Law Journal, strongly 

criticized the Supreme Court’s remarks in Delaney. Hamilton, Corporations, 30 

S.W.L.J. 153-159 (1976). He pointed out that the court did not regard the clear 

language of two statutes, the Texas Uniform Partnership Act and the Texas 

Business Corporation Act, as factors to be considered in determining whether a 

corporation may serve as the sole general partner in a limited partnership. We are 

not at liberty, however, to ignore the Supreme Court’s language, particularly within 

the context of a unanimous decision. In our view, that language implies that the 

court would be reluctant to extend further the exception created by the Muldrow 

decision. It is of course possible that the court, when presented with a properly 

preserved point of error, supported by briefs which emphasize the appropriate 

statutory language of the two relevant statutes, will follow the lower court’s 

majority opinion in Delaney. But such a possibility is speculative and, in our 

opinion, an insufficient basis for ignoring the court’s ruling in a, which remains 

the last expression of the Supreme Court on the question at issue. On the basis of 

the court’s language in Delaney, we do not believe that a corporation may, in Texas 

at this time, serve as the sole general partner of a limited partnership. 

SUMMARY 

The mere grant of any or all of the six “voting rights of 

limited partnerships” promulgated by the North American 

Securities Administrators Association would probably not 

subject a limited partner to liability in Texas as a general 

partner under article 6132a, V.T.C.S. The exercise of the 

first five of those rights would not as a rule impose such 

liability but the exercise of the sixth right would probably 

subject the limited partner to liability as a general partner, 

and the exercise of any of them without the consent of all 

partners would be contrary to the requirements of section 26 

of the Act. On the basis of the Supreme Court’s language in 

Delaney v. Fidelity Lease, Ltd., 526 S.W.2d 543 (Tex. 1975), 

a corporation may not, in Texas at this time, serve as the 

sole general partner of a limited partnership. 

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APPROVED: 

DAVID M. KENDALL, First Assistant 

Opinion Committee 

jsn 

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