Dissociation and Dissolution Flashcards
What is dissociation?
When a partner leaves the partnership
What causes dissociation?
(1) Partner’s express will to withdraw
(2) Occurrence of an event described in the partnership agreement
(3) Unanimous vote of the partners or judicial decree
(4) Partner becoming a debtor in bankruptcy, signing an assignment for a creditor, have a trustee or receiver appointed
(5) Death or incapacity
(6) Termination of the partnership
(7) Merger in which the partnership is not the surviving entity
(8) Partnership’s dissolution and completion of its winding up
Does a partner’s transferring their interest dissociate them?
No
When is dissociation of an unlimited term partnership wrongful?
Only if it breaches an express provision of the partnership agreement
When is dissociation from a definite term or particular undertaking partnership wrongful?
(1) Partner withdraws by express will, unless within 90 days after another partner’s dissociation
(2) Expulsion by judicial determination
(3) Dissociation by becoming a debtor in bankruptcy
(4) In the case of a partner who is an entity, the partner is expelled because it willfully dissolved or terminated
(5) When the partnership agreement says so
What are the two possible effects of dissociation?
(1) Dissolution
(2) Continuation of the partnership with a mandatory buyout of the partner
When is dissolution triggered upon dissociation?
(1) Partnership is at-will
(2) Express vote of at least half of the remaining partners within 90 days
What is the price for a mandatory buyout upon dissociation?
Amount that would be distributable to a partner if the partnership assets were sold at a price equal to the greater of (1) the liquidation value or (2) their value based on the sale of the entire partnership business
When is a partnership’s value assessed for a mandatory buyout?
The date of dissociation
When does a dissociated partner have the ability to bind the partnership?
Within two years:
(1) Third party has no notice of dissociation; and
(2) Reasonably believes the partner is still associated
What events cause dissolution in a general partnership?
(1) At-will and partner withdraws by express will
(2) Occurrence of a dissolution triggering event in the partnership agreement
(3) 90 consecutive days without at least two partners
How may a partnership rescind dissolution?
Affirmative vote or consent of all its partners, including the vote of any rightfully dissociating partner
What are the steps of ending a partnership?
(1) Dissolution - (2) Winding up - (3) Termination
What is winding up?
After dissolution, the partnership continues for the sole purpose of selling off partnership assets, paying the partnership’s debts, and distributing remaining assets to the partners
When does termination occur?
At the end of winding up
