Court of Chancery Upholds Use of Merger to Change Partnership Governance
Twin Bridges Limited Partnership v. Draper, C.A. No. 2351-VCP (September 14, 2007).
This decision deals with how to change the governance structure of a limited partnership by using a merger to amend the partnership agreement. At the outset, the Court ruled that the doctrine of independent legal significance would not be applied to a two-step transaction involving an amendment to a limited partnership agreement to permit a merger and then the merger itself. Instead, the Court ruled that the two transactions were integrated and thus, considered as if they were a single event. This may mean that the corporate law concept of treating two transactions separately if they are authorized by two different sections of the corporate law will not apply in the context of a limited partnership that is based on contract law.
In addition, the Court held that using a merger to add an additional, tie-breaking general partner to the partnership governance structure was permissible absent a clear prohibition in the partnership agreement.