Limited Partnership Interests as Uncertificated Securities
| Publication year | 1984 |
| Pages | 1194 |
| Citation | Vol. 13 No. 7 Pg. 1194 |
1984, July, Pg. 1194. Limited Partnership Interests as Uncertificated Securities
On July 1, 1981, Colorado incorporated into CRS § 4-8-101 et seq. most of the proposed 1977 uniform revisions to Article 8 of the Uniform Commercial Code ("UCC").(fn1) These revisions created a new category of collateral---the uncertificated security.(fn2) They also made the new Article 8 system for creating and perfecting security interests in investment securities exclusive as to both uncertificated and certificated securities.(fn3)
The cases which have been decided under the 1977 revisions have not dealt with the question of whether a limited partner's interest in a limited partnership ("limited partnership interest") is an uncertificated security. However, a plausible argument can be made that the definition of uncertificated securities is broad enough to cover limited partnership interests.
If this is the case, as to these interests, the 1977 uniform revisions replace the public and multiple filing system of Article 9 with a system in which registration with the issuer is the principal means of creating and perfecting a security interest, with only one registered security interest permitted at any one time. There is no serious doubt that a general partner's interest in a limited partnership is not subject to Article 8.
Because Colorado omitted several of the proposed revisions to Article 8 and did not adopt the proposed companion revisions to Article 9, UCC Articles 8 and 9 as currently enacted in Colorado do not conform to the 1977 uniform revisions. As a result, it is possible that no method exists for perfecting a security interest in limited partnership interests under Articles 8 or 9.
This article discusses creating and perfecting a security interest in uncertificated securities under the current Colorado statutes and under the 1977 uniform revisions.(fn4)
If limited partnership interests come within the definition of uncertificated securities under the revised Article 8, security interests in limited partnership interests can no longer be perfected as interests in general intangibles under Article 9.(fn5) Whether the new Article 8 definition of uncertificated securities extends to limited partnership interests is unclear. The statute provides:
An "uncertificated security" is a share, participation or other interest in property or an enterprise of the issuer or an obligation of the issuer which is:
(i) not represented by an instrument and the transfer of which is registered upon books maintained for that purpose by or on behalf of the issuer;
(ii) of a type commonly dealt in on securities exchanges or markets; and
(iii) either one of a class or series or by its terms divisible into a class or series of shares, participations, interests or obligations.(fn6)
A limited partnership interest is a share, participation or other interest in property or an enterprise of the issuer, not represented by an instrument, which is one of a class or series of shares, participations, interests or obligations.
Whether a limited partnership interest meets the second test of sub-paragraph (i) will depend on how courts construe the language "books maintained for that purpose." Must the transfer literally be registered in books or is the test met if the transfer is registered in the records of the issuer? If the transfer is registered in books, must the books be maintained solely for that purpose? Is the test met if the books are maintained for an entirely different purpose and the recordation therein is only incidental? Neither the statute nor the reporters' comments provide guidance on the intended interpretation of this language.
Whether a limited partnership interest is "of a type commonly dealt in on securities exchanges or markets" and, therefore, within the test of sub-paragraph (ii) will also depend on how the courts construe the words "exchanges," "markets" and "of a type." This language is also included in the definition of certificated securities.
In cases decided under the 1977 uniform revisions with regard to both certificated and uncertificated securities...
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