The economic structure of an MLP is unique compared to other publicly traded companies. Indeed, the entire economic structure of an MLP revolves around cash flow. This is because MLPs are traded on the basis of a multiple of cash flows, not net income. Here too, cash is king. As a result, an MLP is required (and as an incentive) to distribute all of its “available money” to its unitholders. This obligation to distribute all available funds is a concept that appears in the MLP partnership agreement. This is not a tax liability (unlike a RSP legally required to distribute its income) or a securities law requirement. Most partnership agreements require the distribution of all available cash funds, but this decision is made after the supplement has created discretionary reserves. Specifically, “available cash” is generally defined as all cash available during a quarter, net of (a) the reserves built up by the supplement to ensure the proper functioning of the transaction; (b) liquidity to meet debt obligations, (c) reserves for distributions for one of the next four quarters, and (d) rolling loans after the end of one quarter. Under the MLP`s partnership agreement, the family doctor has exclusive management powers over the affairs and affairs of mlPs. Although the Sponsor generally controls the MLP, the Sponsor does not have the legal right to directly exploit or control the MLP or its assets. Sponsor`s only legal rights with respect to MLP governance are (i) the right to choose, through its ownership of the GP, the members of the GP Board of Directors, who in turn elect the senior executives of the GP, and (ii) the right to choose its joint and subordinate entities for all matters that, in accordance with the partnership contract of the MLP, require the agreement of the shareholder.
With respect to the board of directors, unlike a public-law entity that must have a majority of independent directors, an MLP must have only three independent directors qualified to serve on the audit committee of the board of directors. . . .