Nevada § 87A.425 - Limitations on distribution

§ 87A.425. Limitations on distribution

1. A limited partnership may not make a distribution in violation of the partnership

agreement. 2. A limited partnership may not make a distribution if after the distribution: (a) The limited partnership would not be able to pay its debts as they become due

in the ordinary course of the limited partnership's activities; or (b) The limited partnership's total assets would be less than the sum of its total

liabilities plus the amount that would be needed, if the limited partnership were

to be dissolved, wound up and terminated at the time of the distribution, to satisfy

the preferential rights upon dissolution, winding up and termination of partners whose

preferential rights are superior to those of persons receiving the distribution. 3. A limited partnership may base a determination that a distribution is not prohibited

under subsection 2 on financial statements prepared on the basis of accounting practices

and principles that are reasonable in the circumstances or on a fair valuation or

other method that is reasonable in the circumstances. 4. Except as otherwise provided in subsection 7, the effect of a distribution under

subsection 2 is measured: (a) In the case of distribution by purchase, redemption or other acquisition of a

transferable interest in the limited partnership, as of the date money or other property

is transferred or debt incurred by the limited partnership; and (b) In all other cases, as of the date: (1) The distribution is authorized, if the payment occurs within 120 days after that

date; or (2) The payment is made, if payment occurs more than 120 days after the distribution

is authorized. 5. A limited partnership's indebtedness to a partner incurred by reason of a distribution

made in accordance with this section is at parity with the limited partnership's indebtedness

to its general, unsecured creditors. 6. A limited partnership's indebtedness, including indebtedness issued in connection

with or as part of a distribution, is not considered a liability for purposes of subsection

2 if the terms of the indebtedness provide that payment of principal and interest

are made only to the extent that a distribution could then be made to partners under

this section. 7. If indebtedness is issued as a distribution, each payment of principal or interest

on the indebtedness is treated as a distribution, the effect of which is measured

on the date the payment is made.