Dissociation & Expulsion

Question 1

GP v. LP v. LLP

Answer 1

Rules for dissociation of a general partner in a general partnership are the same as the rules for dissociation of a general partner in a LLP.

Question 2

Partner’s Power to Dissociate (Withdraw)

Answer 2

A partner’s power to dissociate from a partnership is exercisable at any time; it is a non-waivable right of every partner (general or limited)

Question 3

Exercising the Power to Withdraw

Answer 3

For a partner to exercise this power, the partnership must have notice of the partner’s express will to withdraw from the partnership.

Question 4

Wrongful Dissociation

Answer 4

Although a partner always has the power to withdraw they do not have the right to do so (e.g. in violation of express provision of partnership agreement) and can be liable for damages if the dissociation is wrongful.

Question 5

When is Dissociation Wrongful?

Answer 5

• When it is a violation of an express provision of a partnership agreement; or
• when a partnership is for a definite term or undertaking and the partner dissociates before the completion of the term or undertaking; or
• when a partnership is for a definite term or undertaking and goes bankrupt

Question 6

Expulsion

Answer 6

A partner may be expelled from a partnership pursuant:

• a provision in a partnership agreement
• a unanimous vote of the other partners
• a judicial determination made upon application by another partner

Question 7

Dissociation from a LP

Answer 7

A limited partner has no right to dissociate before the termination of the limited partnership (any attempt to do so is wrongful).

Question 8

Consequences of Dissociation

Answer 8

• Terminates partner’s right to co-manage and conduct partnership business
• Terminates partner’s duty of loyalty and duty of care (except with respect to events or matters occurring before dissociation)
• A partner who has dissociated is permitted to compete with the partnership business
• However, a partner who dissociates does not discharge liability for partnership obligations incurred before the dissociation

Question 9

Dissociated Partner’s Power to Bind Partnership

Answer 9

For two years after a partner dissociates without resulting in a dissolution and winding up of the partnership business, the partnership is bound by an act of the dissociated partner that would have bound them if he was still a partner if:

• the other party reasonably believed that the dissociated partner was then a partner; and
• the other party did not have knowledge or notice of the dissociation.

Question 10

Dissociated Partner’s Liability to Partnership for Binding It

Answer 10

If the partnership becomes liable for any obligation that the dissociated partner incurs after dissociation, then the dissociated partner will be liable to the partnership for such damages.