## Facts

- CAP Partnership, LP (CAP) was a limited partnership.
- CAP’s general partners were NESK Corporation (NESK) and Asian Oceanic Corporation (AOC).
- CAP’s limited partners were Competrol Real Estate Limited (CREL), NESK, and Asian Yard Partners (AYP).
- CAP’s limited partnership agreement prohibited any direct or indirect transfer of any partner’s interest in CAP without the prior written consent of all other partners.
- AOC held a 1% general-partner interest in CAP.
- AYP owned 100% of AOC’s stock, giving AYP indirect control over AOC and AOC’s general-partner interest in CAP.
- CAP filed for Chapter 11 bankruptcy.
- During the bankruptcy process, AYP moved to transfer 100% of its ownership interest in AOC’s stock without obtaining written consent from the other CAP partners.
- CREL objected, arguing the proposed transfer violated the partnership agreement’s anti-transfer provision because it operated as an indirect transfer affecting a partner’s interest in CAP.
- The matter came before the United States Bankruptcy Court for the District of Delaware.

## Issues

1. Whether AYP’s proposed transfer of 100% of the stock of AOC constituted a prohibited “direct or indirect transfer” under CAP’s partnership agreement absent the prior written consent of all other partners.
2. Whether the bankruptcy court should authorize the proposed stock transfer in the Chapter 11 case given the partnership agreement’s consent requirement.

## Decision

- The bankruptcy court addressed CREL’s objection to AYP’s requested transfer of AOC stock based on the partnership agreement’s restriction on direct or indirect transfers without unanimous written consent.
- Publicly accessible summaries of *In re Asian Yard Partners*, 1995 WL 1781675 (Bankr. D. Del. 1995), do not disclose the court’s final disposition of AYP’s motion and CREL’s objection.

## Legal Principles

- A partnership agreement may restrict transfers of partnership interests, including by using language aimed at transactions that function as indirect transfers.
- Whether an upstream equity transfer (such as the sale of stock in a corporate partner) falls within an “indirect transfer” restriction turns on the contract’s text and the transaction’s effect on ownership and control of partnership rights.
- In bankruptcy, parties’ state-law and contract rights in and to partnership governance and transfer consent may remain relevant when the requested relief would alter who controls a partner entity.
- Objections to a proposed transfer may be litigated as a contested matter within a Chapter 11 case when the transfer is alleged to violate governing organizational documents.
- When a transaction is structured as a stock sale but is challenged as an indirect transfer of partnership rights, the analysis focuses on what the agreement restricts and what legally changes hands.

## Conclusion

*In re Asian Yard Partners*, 1995 WL 1781675 (Bankr. D. Del. 1995), arises from CAP’s Chapter 11 case and concerns AYP’s attempt to transfer all of its stock in AOC—an entity holding a 1% general-partner interest in CAP—without obtaining the written consent required by CAP’s partnership agreement for any direct or indirect transfer of a partner’s interest; CREL objected on the ground that the stock transfer was an impermissible indirect transfer, and the bankruptcy court considered that objection in ruling on the requested authority.


In re Asian Yard Partners, 1995 WL 1781675 (1995)