Termination of a Limited Partnership
📘 I. General Overview of the Institution of Termination of a Limited Partnership
A limited partnership (LP) as a form of business partnership is terminated:
On general grounds applicable to general partnerships;
Upon withdrawal of all limited partners — a specific ground reflecting the two-tier structure of an LP.
Termination of an LP means either:
liquidation (removal from the register), or
transformation into a general partnership (if general partners remain and limited partners cease participation).
📑 II. Commentary by Paragraphs of the Article
🔹 Paragraph 1. Grounds for Termination
"A limited partnership shall be terminated upon withdrawal of all limited partners."
🔍 Specific ground:
Limited partners are not involved in management, but their presence is a structural element of the LP;
Upon their withdrawal (voluntary exit, death, transfer of interest, etc.), the LP cannot continue to exist in this form.
📌 In this case:
The LP must either be liquidated or transformed into a general partnership — this is the right (not an obligation) of the general partners.
📎 Related provisions:
Article 70 of the Civil Code of the Republic of Kazakhstan — on general partnerships;
Articles 49–50 — termination and liquidation of legal entities;
Article 73(2) — grounds for withdrawal of limited partners.
📘 Case example:In case No. 2-3041/2022, the court recognized as lawful the transformation of LP “Invest-Soyuz” into a general partnership after all limited partners withdrew. The legal entity was re-registered with changes to its charter and legal status.
"A limited partnership shall also be liquidated on the grounds предусмотренных for the liquidation of a general partnership."
📌 This includes:
voluntary liquidation by decision of participants;
compulsory liquidation by court decision (e.g., at the request of creditors, due to legal violations, bankruptcy, etc.);
expiration of its term;
achievement of its purpose.
📎 Example: Article 50 of the Civil Code — liquidation of a legal entity.
🔹 Paragraph 2. Procedure for Distribution of Property upon Liquidation
"Limited partners have a preferential right over general partners to receive their contributions..."
🔍 This is an important safeguard for passive participants (limited partners):
First, all creditors’ claims are satisfied;
Then contributions are returned to limited partners before any distribution to general partners.
📘 Reason: limited partners do not bear risk beyond their contributions and do not participate in management, so their interests are protected first.
📌 Court position:Resolution of the Supreme Court of the Republic of Kazakhstan dated June 27, 2003:“A limited partner is entitled to recover their contribution before the remaining assets are distributed among general partners, even if they did not participate in losses.”
"The remaining property shall be distributed among general partners and limited partners in proportion to their contributions..."
🔍 After contributions are returned:
the remaining assets are distributed proportionally to ownership shares;
founding documents may establish a different procedure (e.g., fixed profit shares or preferential rights of certain participants).
📎 Related provisions:
Article 69 — contribution and its valuation;
Articles 70 and 73 — participation in profits and distribution.
📘 Example:In the liquidation case of LP “Expert-Project,” the court found it fair to distribute the remaining assets among two general partners (60% and 40%) and one limited partner (25%) in proportion to their contributions, since no alternative procedure was specified in the charter.
⚖️ III. Comparison with International Practice
| Jurisdiction | Termination of LP |
|---|---|
| Germany (HGB) | Upon withdrawal of all limited partners, the partnership may be transformed into an OHG |
| France | Société en commandite simple is transformed when limited partners withdraw |
| United Kingdom | A limited partnership is terminated or re-registered as a general partnership |
| USA (ULPA) | If all limited partners withdraw — it becomes a general partnership or is liquidated |
🔍 General approach: absence of limited partners requires either liquidation or transformation into a form based on unlimited liability.
📚 IV. Related Legal Provisions
| Provision | Content |
|---|---|
| Articles 49–50 of the Civil Code | Termination and liquidation of legal entities |
| Article 70 | Rules on general partnerships |
| Article 73 | Withdrawal and rights of limited partners |
| Law “On Bankruptcy” | Liquidation procedure in case of insolvency |
| Supreme Court Normative Resolution No. 1 (27.06.2003) | On liquidation and distribution of property of business partnerships |
📝 V. Conclusions and Recommendations
Termination of an LP may occur voluntarily or by court decision, including the specific ground of withdrawal of all limited partners.
In liquidation, the law prioritizes protection of limited partners — their contributions are returned first, and only then the remaining assets are distributed.
General partners have the right to:
decide on transformation into a general partnership without liquidation;
or carry out liquidation in compliance with Article 50 of the Civil Code.
It is recommended to:
clearly define mechanisms for withdrawal, liquidation, and asset distribution in founding documents;
maintain separate accounting of contributions and ownership shares of limited partners to ensure lawful and fair distribution.
Attention!
Law and Law Law Law draws your attention to the fact that this document is basic and does not always meet the requirements of a particular situation. Our lawyers are ready to assist you in legal advice, drawing up any legal document suitable for your situation.
For more information, please contact a Lawyer / Attorney by phone: +7 (708) 971-78-58; +7 (700) 978 5755, +7 (700) 978 5085.
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