The California Uniform Partnership Act of 1994 defines a "partnership" to mean "an association of two or more persons to carry on as coowners a business for profit formed under [Cal. Corp. Code] Section 16202, predecessor law, or comparable law of another jurisdiction . . .". Cal. Corp. Code § 16101(9). The California act does not define "foreign partnership", but I use the term in this post for convenience to refer to a partnership formed under another jurisdiction's comparable law.
Based on Section 16101(9), a foreign partnership is included whenever the term "partnership" is used in the California act. Thus, it would seem that the provisions of the act governing relations among the partners and between the partners and the partnership apply equally to foreign partnerships because they are partnerships too. Section 16106(a), however, provides, with the exceptions of registered limited liability partnerships and foreign limited liability partnerships, the law of the jurisdiction in which a partnership has its chief executive office governs relations among the partners and between the partners and the partnership.
As the name suggests, California's act is based on the Uniform Partnership Act. Section 16106(a) is based on Section 106 of the Uniform Partnership Act. The comment to Section 106 explains the statute as follows:
RUPA looks to the jurisdiction in which a partnership’s chief executive office is located to provide the law governing the internal relations among the partners and between the partners and the partnership. The concept of the partnership’s “chief executive office” is drawn from UCC Section 9-103(3)(d). It was chosen in lieu of the State of organization because no filing is necessary to form a general partnership, and thus the situs of its organization is not always clear, unlike a limited partnership, which is organized in the State where its certificate is filed.
What I find surprising about this statute is that it makes no allowance for a choice of law provision in a partnership agreement. Nonetheless, the drafters of Section 106 clearly believed that parties could include a choice-of-law provision in the partnership agreement:
The choice-of-law rule provided by subsection (a) is only a default rule, and the partners may by agreement select the law of another State to govern their internal affairs, subject to generally applicable conflict of laws requirements. For example, where the partners may not resolve a particular issue by an explicit provision of the partnership agreement, such as the rights and duties set forth in Section 103(b), the law chosen will not be applied if the partners or the partnership have no substantial relationship to the chosen State or other reasonable basis for their choice or if application of the law of the chosen State would be contrary to a fundamental policy of a State that has a materially greater interest than the chosen State. See Restatement (Second) of Conflict of Laws § 187(2) (1971). The partners must, however, select only one State to govern their internal relations. They cannot select one State for some aspects of their internal relations and another State for others.
Wow, the drafters of RUPA certainly left a lot unsaid. If they had intended to permit the parties to choose one (and only one) governing law, why not put that in the statute? Delaware, in contrast, expressly looks to the law of the jurisdiction governing the partnership agreement:
The law of the jurisdiction governing a partnership agreement governs relations among the partners and between the partners and the partnership.
Del. Code tit. 6, § 15-106(a). Delaware goes even further by mandating Delaware law if (i) the partnership agreement provides for the application of Delaware law, and (ii) the partnership files with the Secretary of State a statement of partnership existence or a statement of qualification. Del. Code tit. 6, § 15-106(c).
