Dissolution and Winding Up

Question 1

What are the causes of dissolution that apply to all partnerships ?

Answer 1

(1) it becomes illegal to carry on the partnership’s business

(2) upon occurrence of an event specified in the PA

(3) Partner filed an application to dissolve partnership

(4) Application to dissolve by a transferee of a partnership interest on the ground that equity demands the partnership be wound up

Question 2

When will a application to dissolve the partnership filed by a parter be granted?

Answer 2

(1) economic purpose of the partnership is likely to be unreasonably frustrated,

(2) Carrying on the business in conformity with the PA isn’t reasonably practicable,

OR

(3) Carrying on the business with that particular partner is no longer reasonably practicable because of that partner’s conduct

Question 3

When can a transferee of a partnership interest file a application to dissolve?

Answer 3

At will partnership- anytime

Partnership for term or certain undertaking- only after completion

Question 4

Cause of dissolution only applicable to at-will partnerships

Answer 4

Dissolution occurs if one partner gives the partnership notice of his express will to withdraw

Question 5

Cause of dissolution only applicable to Term/ or Particular Undertaking partnerships

Answer 5

When a partner properly withdraws, the withdrawing partner may force
termination of the partnership

If a partner wrongfully dissociates, automatic dissolution in 90 days unless a majority of partners vote to continue the partnership

Partnership also dissolves upon the expiration of the term, completion of the undertaking, or unanimous consent of all partners

Question 6

Dissolution of an LP

Answer 6

(1) Sole general partner dissociates then automatic dissolution in 90 days unless a majority of limited partners vote to continue the business and a general partner is admitted

(2) One of multiple general partners dissociates then no automatic dissolution unless the majority of all partners (general and limited) vote to dissolve the LP

(3) Sole limited partner dissociates then automatic dissolution unless a limited partner is admitted within 90 days

(4) happening of event in PA

(5) consent of all general partners and majority of limited partners

(6) a court order granting the application of a partner that it is not reasonably practicable to carry on the business in conformity with the PA

Question 7

What is the consequence of dissolution?

Answer 7

Partnership continues to exist for winding up the business (paying debts and distributing assets)

Partnership terminates after winding-up process

Question 8

Rules for partners who withdraws from the partnership

Answer 8

A partner who properly withdraws may participate in winding up

A partner who wrongfully withdraws from the partnership may not participate in the winding up of the partnership.

Question 9

What duties to partners participating in winding up have?

Answer 9

Participating partners continue to have a duty of loyalty, care, and disclosure

Question 10

Partnership’s liability on post-dissolution contracts:

Answer 10

liable if the transaction would have bound the partnership before dissolution and the other party did not have notice of the dissolution

Question 11

How are partnership debts incurred during the winding up phase handled?

Answer 11

Shared by all partners, even dissociating partners

Question 12

In winding up how are the partnership’s assets distributed

Answer 12

First, to pay creditors (includes partners who are creditors)

Second, reimburse partners for capital contributions

Third, pay the balance, if any, to partners in accordance with profits.