Company’s claim against limited partner for agreed contributio

The above issue was once again considered by the Court of Appeal in Warsaw in a judgment under case no. V ACa 40/18. The case concerned the issue of whether a limited partner can set off his claim for payment against the company’s claim for an outstanding limited partnership contribution.

The defendant, who was a limited partner of the partnership, also served as one of the two members of the management board of the general partner (limited liability company). Pursuant to the limited partnership agreement, the general partner was entitled to remuneration for managing the affairs of the partnership, defined as a percentage of the limited partner’s contributions. As a result of an assignment agreement between the general partner represented by the management board’s attorney, the defendant acquired the general partner’s claim for payment of remuneration for managing the affairs of the partnership. Subsequently, the limited partnership, represented by the general partner’s board of directors, made a declaration to the defendant acknowledging the receivable that was the subject of the assignment, a declaration that the defendant had made a full cash contribution to the partnership as a result of the effective set-off of mutual receivables, and a declaration waiving any claims against the defendant in respect of the contribution.

Following a change in the composition of the general partner’s board of directors, the limited partnership brought a claim against the defendant for payment of an amount corresponding to the value of the contribution not made, plus interest. In the course of the case, the defendant raised the objection that the claim had been extinguished as a result of a set-off between the limited partnership’s claim for contribution and its claim for payment, which it had acquired through an assignment of claims from the general partner of the limited partnership.

The Regional Court in Warsaw dismissed the limited partnership’s claim, upholding the defendant’s arguments on the effectiveness of the set-off and the expiry of the partnership’s claims. As a result of the limited partnership’s appeal, the Court of Appeal in Warsaw amended the appealed judgment and allowed the claim in its entirety. In justification of the ruling, the court pointed to two important legal issues – the absolute invalidity of the debt assignment agreement concluded between the defendant (a member of the general partner’s management board) and the general partner’s management proxy (in the person of the other member of the management board) and the absolute invalidity of the agreement to release the limited partner from the obligation to make a contribution.

The invalidity of the assignment of the claim, although it escaped the attention of the Regional Court, cannot be doubted in view of the unambiguous wording of Article 210 of the Companies Act, which requires a proxy appointed by a resolution of the partners, and not a proxy of the management board of that company, for a contract between a limited liability company and a member of its management board.

However, the issue of the general partner’s representation was irrelevant in assessing the effectiveness of the limited partnership’s declaration that the defendant had effectively made the contribution and that the partnership had waived its claim under the contribution obligation. The waiver of a claim by a creditor requires the acceptance of the debtor in order to be effective, hence the partnership’s statement was treated as an agreement to release the debt. Moreover, the Court rightly pointed out that there are no grounds for the appropriate application of the regulations of Article 210 of the Companies Act directly to agreements of a general partner’s body with a limited partner, even if the limited partner is a member of that body.

On the facts of the present case, in view of the invalidity of the assignment of the claim and the absence of an effective set-off, the agreement to release the debt, which was the claim for contribution, was absolutely invalid as an act aimed at circumventing the law. The general partner’s declaration waiving the claim against the limited partner for the contribution constitutes a circumvention of Article 108 § 2 of the Code of Commercial Partnerships and Companies, according to which a provision of the partners releasing a limited partner from the obligation to make a contribution is invalid.