10. Dissociation & Dissolution Of Partnerships

Question 1

What is required for dissociation?

Answer 1

Notice of desire to withdraw

Expelled/dead/bankrupt after end of term

Agreed event

Question 2

What is required for wrongful dissociation?

Answer 2

Expelled/dead/bankrupt before end of term
Breach of express term

Dissociating partner is liable

Question 3

What types of partnerships are there? When would dissolution occur?

Answer 3

Term partnership

• Definite term
• Majority vote (90 days)
• Wrongful dissociation
• Death/Bankruptcy

At-will partnership

• NOT definite term
• By express will

Question 4

What are the consequences of dissociation?

Answer 4

Dissolution/Winding-up

Continuation + Buyout
- Unanimous vote (Dissociated Partners (NOT wrongfully acting Partners) + Remaining Partners)

Question 5

What is the liability of dissociated partners?

Answer 5

Pre-dissociation

• Partnership obligations before dissociation
• UNLESS creditor agrees to release

Post-dissociation

• Partnership obligations incurred within 2 years after dissociation
• UNLESS notice to creditors/public statement of dissociation
• UNLESS NOT appropriate

Question 6

What is the liability of partnerships for dissociated partners?

Answer 6

Apparent authority may bind partnership
2 years after dissociation

UNLESS notice to Creditors/public statement of dissociation
UNLESS NOT appropriate

Question 7

What is required for dissolution?

Answer 7

Event in agreement
Illegal business
Judicial decree issuance
Unanimous consent (term partnership)
Expiration (term partnership)

Question 8

How are partnership liabilities discharged during dissolution?

Answer 8

Apply partnership assets

• Not sufficient assets => Partners to contribute (according to their loss shares)
• Over sufficient assets => Partners to receive distributed assets (according to their profit shares)

Question 9

How is distribution of assets prioritised?

Answer 9

1. Creditors (Inside/Outside)
2. Capital contributions
3. Profits/Losses
4. (Any deficiencies => Partners to contribute)

Question 10

When may partners participate in winding-up?

Answer 10

NOT wrongfully dissociated