Opinion ID: 2344727
Heading Depth: 3
Heading Rank: 1

Heading: Conversions under KRS 275.370

Text: KRS 275.370 provides, in pertinent part: (1) A partnership or limited partnership may be converted to a limited liability company pursuant to this section. (2) The terms and conditions of a conversion of a partnership or limited partnership to a limited liability company shall, in the case of a partnership, be approved by all the partners or by a number or percentage specified for conversion in the partnership agreement or, in the case of a limited partnership, by all the partners, notwithstanding any provision to the contrary in the limited partnership agreement. While conceding that the statute, in this instance, requires the approval of all the limited partners before a limited partnership can be converted into a limited liability company, the Appellees argue that the transformation constituted a reorganization, not a conversion as envisioned under KRS 275.370(1). Thus, KRS 275.370(2), requiring the consent of all the limited partners, was not applicable. The Appellees illustrate their distinction of the word conversion, by pointing out that the statute envisions a limited partnership redesignating itself as a limited liability company, whereas, in this instance, the limited liability company was created separately and existed concurrently with the Partnership (albeit without any assets). Thus, the fact that the LLC acquired all the assets of the Partnership and the Partnership then dissolved is simply immaterial. Appellant on the other hand, points to Mr. Miller's statement in his deposition, that there was a conversion from the partnership to an LLC, and to the statement of their counsel, who in his letter of June 11, 2002, responding to an inquiry by Appellant's counsel, acknowledged, the general partners determined that a conversion to a Limited Liability Company (LLC) was in the best interest of the partnership. The reconstructing has been accomplished. We must, however, analyze a transaction for what it is, not what someone says it is. In resolving the dispute, we must follow common rules of statutory construction. Thus, [a]ll statutes of this state shall be liberally construed with a view to promote their objects and carry out the intent of the legislature. . . . KRS 446.080(1). Moreover, [a]ll words and phrases shall be construed according to the common and approved usage of language, but technical words and phrases, and such others as may have acquired a peculiar and appropriate meaning in the law, shall be construed according to such meaning. KRS 446.080(4). It is a well-known rule for the interpretation of statutes that the court should ascertain from their terms, as contained in the entire enactment, the intent and purpose of the Legislature, and to administer that intent and purpose. Furthermore . . . words will be given their ordinary and usually understood meaning, unless a different or technical meaning, as gathered from the entire contents, was intended. Seaboard Oil Co. v. Commonwealth, 193 Ky. 629, 237 S.W. 48, 49 (1922). Moreover, [i]f a thing contained in a subsequent statute be within the reason of a former statute it shall be taken to be within meaning of that statute, and, if it can be gathered from a subsequent statute in pari materia what meaning the Legislature attached to words of a former statute, this will amount to a legislative declaration of its meaning and will govern construction of first statute. Miller v. Kirksey, 265 Ky. 106, 95 S.W.2d 1059, 1061 (1936). KRS 275.375(1) acknowledges that [a] partnership or limited partnership that has been converted pursuant to this chapter shall be for all purposes the same entity that existed before the conversion. KRS 275.375(2) recognizes that the property  shall remain vested in the converted [business entity] . . . [and][a]ll obligations of the converting . . . limited partnership shall continue as obligations of the converted [business entity]. (Emphasis added) All of which seem to confirm Appellant's argument that a conversion involves only one entity changing its legal form pursuant to statutory authorizations, rather than through interaction between two entities. Looking at subsequent statutes for what light they cast on the question, we note that the Kentucky Legislature adopted the new Kentucky Uniform Limited Partnership Act in 2006. KRS 362.2-102, et. seq. This Act was adopted, with some changes, from the Uniform Limited Partnership Act (2001). Unif. Limited Partnership Act § 1102-1105, 6A U.L.A. 106-109 (2006). The Act specifically provides [i]n applying and construing this uniform act, consideration shall be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it. KRS 362.2-1201. When the need for uniformity is acknowledged, courts may consider the Official Comments to a Uniform Act, even where they have not been officially adopted. Cf., White v. Winchester Land Dev. Corp., 584 S.W.2d 56, 60 (Ky.App. 1979). Looking at the Official Comments to § 1102 of the Uniform Limited Partnership Act, which, with changes, corresponds to KRS 362.2-1102, the Comment acknowledges, [i]n contrast to a merger, which involves at least two entities, a conversion involves only one. The converting and converted organizations are the same entity. Unif. Limited Partnership Act § 1102-1105, GA U.L.A. 107 (2006). Having thus considered the statutory scheme, its particular language, the subsequent statute and Official Comments, we answer the question that was presented to us  that the restructuring of the business form of the Partnership, to that of the LLC, in this instance, was not a conversion under, or subject to, KRS 275.370, for reasons that a conversion deals only with one entity. We have not been asked, nor have we considered, whether the restructuring of the Partnership into the LLC constituted a merger, pursuant to KRS 362.531.