OG liquidation: Allocating a shortfall in partner credits

During the liquidation of an Austrian open partnership (OG), the closing balance sheet may show that the partnership assets do not cover the credits of individual partners. Section 155 UGB provides for an internal allocation between the partners in that situation. The relevant figures are the credits and liabilities arising from the partnership relationship and the participation shown in the closing balance sheet.

The review must keep three levels separate: payment of the partnership debts, distribution of the remaining partnership assets and the internal adjustment between the partners. Only then can the shortfall and the treatment of an uncollectible partner share be determined.

Closing balance sheet and remaining partnership assets

Section 155(1) UGB starts with the point at which the partnership debts have been taken into account. The liquidators distribute the partnership assets remaining after that step according to the partners’ participation. They must also include credits and liabilities arising from the partnership relationship, as shown by the closing balance sheet.

The closing balance sheet is therefore the common calculation basis for the liquidation. A partner account cannot be read in isolation. The review must establish whether an entry represents a credit or liability arising from the partnership relationship, how the closing balance sheet treats it and what amount actually remains after partnership debts have been paid or secured.

This rule concerns the liquidation process of the OG. The ordinary allocation of profits and losses during business operations requires a different review. The article on the loss allocation based on capital and personal contribution helps distinguish the two situations.

Interim distribution and the required reserve

Section 155(2) UGB permits the provisional distribution of money that is no longer needed during the liquidation. The liquidators must retain what is required to cover liabilities that are not yet due or remain disputed and to secure the amounts due to the partners at the final distribution.

The reconciliation should therefore show three distinct positions: partnership debts already paid, amounts still reserved and funds that are genuinely available for interim distribution. A payment to a partner does not follow from an account balance alone. The underlying credit, its maturity and any dispute must first be recorded.

Section 155(2) UGB also states that section 122(1) UGB does not apply during the liquidation. That statement belongs in the liquidation calculation and does not remove the need to review outstanding partnership debts.

A distribution dispute suspends implementation

If the partners dispute the distribution of the partnership assets, section 155(3) UGB requires the liquidators to suspend the distribution until the dispute has been decided. The provision creates a clear procedural consequence for the disputed distribution question.

The file should identify the subject of the dispute: the amount of a credit, the allocation of a liability, the participation ratio, a reserve or the calculation of the shortfall. A disagreement about another aspect of the partnership must be kept separate from a dispute about distribution.

Suspension does not decide the merits of the dispute. It prevents the disputed distribution from being implemented before the relevant decision is available. One-sided payments can make the later reconciliation and internal adjustment more difficult.

Internal adjustment where partner credits are not covered

If the partnership assets are insufficient to cover the credits of partners arising from the partnership relationship, section 155(4) UGB requires the other partners to make up the shortfall towards those partners. The amount is allocated in proportion to the other partners’ liabilities arising from the partnership relationship.

The statutory adjustment therefore follows the concrete liquidation and the closing balance sheet. First identify which partner credits remain uncovered. Then determine which liabilities arising from the partnership relationship govern the allocation among the partners required to contribute. The calculation should be set out in a table that another person can reproduce.

Section 155(4) UGB concerns the relationship between the partners. It is separate from payment of external partnership creditors and does not create a general funding obligation for ordinary business operations. The article on the OG continuation clause and asset allocation addresses a different OG transition scenario.

Allocating a partner’s uncollectible share

If the amount allocated to one partner cannot be collected from that partner, section 155(4) UGB distributes the shortfall among the other partners as a loss. This second step requires the original adjustment amount and the lack of collectability to be identified separately.

The reconciliation should therefore contain two tables. The first shows the original coverage shortfall and the obligations allocated to the partners. The second records the amount that cannot be collected from one partner and the further allocation of that amount among the remaining partners as a loss. The credit, maturity, payment requests and evidence concerning collectability should be kept with the calculation.

A delayed payment is not automatically an uncollectible amount. Before the second allocation step, the liquidation file should show the actual collectability and the steps already taken to obtain payment.

Building the final reconciliation file

A reliable review brings together the partnership agreement and amendments, the Companies Register position, the closing balance sheet, partner accounts and the list of partnership debts. Reserves, payment evidence, the distribution calculation, objections and liquidator minutes should be filed with them.

Each item should answer one of four questions: Is it a partnership debt, a partner credit, a liability arising from the partnership relationship or a reserve for the later liquidation? This classification prevents an external claim, an internal accounting entry and an actual payment from being merged into one account line.

For the overall agreement review, use the articles review overview. The compensation and exit checklist supports the document review. The basic term is explained in the glossary.

Distinguishing liquidation from ordinary operations

Section 155 UGB applies to the distribution of partnership assets in the liquidation. It explains how a coverage shortfall concerning partner credits is adjusted internally after the closing balance sheet and how an uncollectible partner share is allocated further.

The rule does not establish a general funding duty for the ordinary business. It also does not replace a review of the dissolution ground, the appointment of liquidators, the payment of external creditors or special contractual clauses. A concrete reconciliation requires the dissolution status, liquidation records and complete accounting to be reviewed together.

The official text of section 155 UGB is available in the Legal Information System of the Republic of Austria. The applicable statutory text and the current closing balance sheet are decisive for the assessment.

Frequently asked questions about partner credit shortfalls in an OG