Dissolution

Question 1

What does dissolution trigger?

Answer 1

The wind up and termination of the P’ship.

But P’ship not immediately ended, and does not terminate until P’sihps affairs are completed.

Question 2

There are three main causes of dissolution:

Answer 2

1. Actions taken by the partners (e.g., disassociation, partners agree to certain causes for dissolution, etc.);
2. Operation of law (e.g., it becomes illegal to continue the business of the partnership);

OR

3. Court order (e.g., a court may grant a judicial dissolution if it is no longer reasonably practicable to continue operation of the partnership business).

Question 3

Under the UPA, any change in partner membership…

Answer 3

… automatically triggers dissolution of the partnership UNLESS there is an agreement to the contrary. T

hus, absent an agreement to the contrary, every partner generally has the power to dissolve the partnership at any time by withdrawing from the partnership.

However, if the dissolution is wrongful, the remaining partners may hold the dissolving partner liable for damages.

Question 4

The UPA says P disassociation triggers dissolution, but RUPA provides…

Answer 4

…a basis for continuing the partnership despite a partner’s withdrawal from the partnership where the remaining partners may buy out the withdrawn partner’s interest instead of winding up the partnership business. Under RUPA, absent an agreement to the contrary, the “disassociation” (occurs when a partner ceases his association with carrying on the partnership business) of a partner does NOT automatically trigger dissolution UNLESS either of the following exceptions apply:

1. At-Will Partnerships. Any member of an at-will partnership can disassociate at any time automatically triggering dissolution and liquidation.
2. Will of the Parties. A partnership will automatically dissolve upon the occurrence of an event that the partners specified would cause dissolution in the partnership agreement (e.g., a partnership created for a specific term or undertaking).

Question 5

What is a term P’ship?

Answer 5

A term partnership is a partnership that exists for a specified duration of time or until a specified event occurs.

Question 6

How is a term P’ship dissolved before its term ends under RUPA?

Answer 6

Under RUPA, a term partnership may be dissolved before its term expires if:

1. At least half of the partner’s express their will to wind up the business within 90 days after a partner’s disassociation by death, declaring bankruptcy, becoming incapacitated, or wrongful disassociation;

OR

2. ALL of the partners agree to amend the partnership agreement by expressly agreeing to dissolve the partnership.

Question 7

Partner withdrawal in an at-will partnership, unless agreed otherwise,
causes…

Answer 7

…the dissolution of the partnership and a right to cash payment for the pro rata share of the withdrawing partner’s interest, after satisfying any creditor claims.

Question 8

The withdrawal of a minority
shareholder in a closely held corporation results…

Answer 8

… neither in dissolution of the corporation nor in any right to pro rata payment of the corporation’s net assets. Instead, the minority shareholder remains entitled to dividends and other distributions only if and when the board of directors (majority shareholders) chooses to authorize such payments.