Ontario Superior Court rules limited partners cannot cause partnership to make cash distributions

Parties contemplating the formation of a limited partnership in Ontario should consider the implications of a recent decision by the Ontario Superior Court of Justice in Anthony v. Binscarth Holdings GP Inc., [2024] O.J. No. 1580. The court in Anthony considered limited partners’ entitlement to annual cash distributions, and specifically, their ability to cause the general partner to pay such distributions. The court’s analysis provides the following key insights which prospective limited partners and general partners alike should consider when negotiating limited partnership agreements:

1. Limited partners should be cognizant that they are not entitled under the Limited Partnerships Act to cash distributions of the partnership’s profit, absent a contractual term to that effect.
2. In a similar vein, general partners should be cognizant that there is no requirement under the Act to provide cash distributions to limited partners. So long as the partnership credits the limited partners’ capital accounts with each limited partners’ proportionate share of profits, the absence of cash distributions is not a violation of the Act.

Read the full article by Robins Appleby‘s Jonathan ZeppMatthew McGuigan here