If a limited partnership admits new partners, may those new partners be required to sign a personal guaranty? That question was addressed in the recent case of Hughes v. Mainka, Superior Court of New Jersey, Appellate Division, Docket No. A-2721-11T# (June 14, 2013).
In that case, the dispute was over whether the existed limited partners – who had guaranteed a loan to the partnership – could require the new limited partners to do the same thing.
The Court determined that they could not. However, the holding was very fact-specific. It related to the fact that “neither the Original nor Amended Partnership Agreements required limited partners to personal guarantee a partnership loan.” Id at 17. The Court concluded that this reflected an intent not to make such a requirement a condition for new partners.
The Court held that the new partners were right in resisting the requirement. This case highlights the necessity to carefully review both the intent and plain language of a partnership agreement before entering into a limited partnership.