KRS 362.2-508: Limitations on distribution.

(1) A limited partnership shall not make a distribution in violation of the partnership

agreement.

(2) A limited partnership shall not make a distribution if after the distribution:

(a) The limited partnership would not be able to pay its debts as they become due

in the ordinary course of the limited partnership's activities; or

(b) The limited partnership's total assets would be less than the sum of its total

liabilities plus the amount that would be needed, if the limited partnership

were to be dissolved, wound up, and terminated at the time of the distribution,

to satisfy the preferential rights upon dissolution, winding up, and termination

of partners whose preferential rights are superior to those of persons receiving

the distribution.

(3) A limited partnership may base a determination that a distribution is not prohibited

under subsection (2) of this section on financial statements prepared on the basis of

accounting practices and principles that are reasonable in the circumstances or on a

fair valuation or other method that is reasonable in the circumstances.

(4) Except as otherwise provided in subsection (7) of this section, the effect of a

distribution under subsection (2) of this section is measured:

(a) In the case of distribution by purchase, redemptio n, or other acquisition of a

transferable interest in the limited partnership, as of the date money or other

property is transferred or debt incurred by the limited partnership; and

(b) In all other cases, as of the date:

1. The distribution is authorized, if the payment occurs within one hundred

twenty (120) days after that date; or

2. The payment is made, if payment occurs more than one hundred twenty

(120) days after that date.

(5) A limited partnership's indebtedness to a partner incurred by reason of a distribution

made in accordance with this section is at parity with the limited partnership's

indebtedness to its general, unsecured creditors.

(6) A limited partnership's indebtedness, including indebtedness issued in connection

with or as part of a dist ribution, is not considered a liability for purposes of

determinations under subsection (2) of this section if the terms of the indebtedness

provide that payment of principal and interest are made only to the extent that a

distribution could then be made to partners under this section.

(7) If indebtedness is issued as a distribution, each payment of principal or interest on

the indebtedness is treated as a distribution, the effect of which is measured on the

date the payment is made.

(8) For purposes of this section, the term "distribution" shall not include amounts

constituting reasonable compensation for present or past services or reasonable

payments made in the ordinary course of business pursuant to a bona fide retirement

plan or other benefits program.