Partner’s Dissociation - Uniform Partnership Act Of - Corporations - CA

Section § 16601

This section outlines the circumstances under which a partner can leave or be removed from a partnership. A partner may choose to withdraw, or it might be agreed upon in advance. Partners can also be expelled based on the partnership agreement, unanimously by other partners for specific legal or business reasons, or by a court due to wrongful behavior. Other events like bankruptcy, the partner's death, or legal incapacitation also count. For partners that are trusts or estates, distribution of their entire interest causes dissociation. For other organizations that are not individuals or traditional business entities, their termination will result in leaving the partnership.

A partner is dissociated from a partnership upon the occurrence of any of the following events:

(1) The partnership’s having notice of the partner’s express will to withdraw as a partner or on a later date specified by the partner.

(2) An event agreed to in the partnership agreement as causing the partner’s dissociation.

(3) The partner’s expulsion pursuant to the partnership agreement.

(4) The partner’s expulsion by the unanimous vote of the other partners if any of the following apply:

(A) It is unlawful to carry on the partnership business with that partner.

(B) There has been a transfer of all or substantially all of that partner’s transferable interest in the partnership, other than a transfer for security purposes, or a court order charging the partner’s interest, that has not been foreclosed.

(C) Within 90 days after the partnership notifies a corporate partner that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, there is no revocation of the certificate of dissolution or no reinstatement of its charter or its right to conduct business.

(D) A partnership, limited partnership, or limited liability company that is a partner has been dissolved and its business is being wound up.

(5) On application by the partnership or another partner, the partner’s expulsion by judicial determination because of any of the following:

(A) The partner engaged in wrongful conduct that adversely and materially affected the partnership business.

(B) The partner willfully or persistently committed a material breach of the partnership agreement or of a duty owed to the partnership or the other partners under Section 16404.

(C) The partner engaged in conduct relating to the partnership business that makes it not reasonably practicable to carry on the business in partnership with the partner.

(6) The partner’s act or failure to act in any of the following instances:

(A) By becoming a debtor in bankruptcy.

(B) By executing an assignment for the benefit of creditors.

(C) By seeking, consenting to, or acquiescing in the appointment of a trustee, receiver, or liquidator of that partner or of all or substantially all of that partner’s property.

(D) By failing, within 90 days after the appointment, to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the partner or of all or substantially all of the partner’s property obtained without the partner’s consent or acquiescence, or failing within 90 days after the expiration of a stay to have the appointment vacated.

(7) In the case of a partner who is an individual, by any of the following:

(A) The partner’s death.

(B) The appointment of a guardian or general conservator for the partner.

(C) A judicial determination that the partner has otherwise become incapable of performing the partner’s duties under the partnership agreement.

(8) In the case of a partner that is a trust or is acting as a partner by virtue of being a trustee of a trust, distribution of the trust’s entire transferable interest in the partnership, but not merely by reason of the substitution of a successor trustee.

(9) In the case of a partner that is an estate or is acting as a partner by virtue of being a personal representative of an estate, distribution of the estate’s entire transferable interest in the partnership, but not merely by reason of the substitution of a successor personal representative.

(10) Termination of a partner who is not an individual, partnership, corporation, trust, or estate.

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Section § 16602

If you’re part of a business partnership, you can choose to leave the partnership anytime you want, but how you leave matters. It's considered wrong to leave if it breaks the rules you all agreed on, or if you leave before a set time or project is finished––unless some specific situations happen. These could include another partner’s death, a court expelling you, going bankrupt, or if your company is dissolved. If you leave wrongfully, you're responsible for any harm or loss this causes to the business or your partners, on top of any other obligations you have to them.

(a) A partner has the power to dissociate at any time, rightfully or wrongfully, by express will pursuant to paragraph (1) of Section 16601.

(b) A partner’s dissociation is wrongful only if any of the following apply:

(1) It is in breach of an express provision of the partnership agreement.

(2) In the case of a partnership for a definite term or particular undertaking, before the expiration of the term or the completion of the undertaking if any of the following apply:

(A) The partner withdraws by express will, unless the withdrawal follows within 90 days after another partner’s dissociation by death or otherwise under paragraphs (6) to (10), inclusive, of Section 16601 or wrongful dissociation under this subdivision.

(B) The partner is expelled by judicial determination under paragraph (5) of Section 16601.

(D) In the case of a partner who is not an individual, trust other than a business trust, or estate, the partner is expelled or otherwise dissociated because it willfully dissolved or terminated.

(c) A partner who wrongfully dissociates is liable to the partnership and to the other partners for damages caused by the dissociation. The liability is in addition to any other obligation of the partner to the partnership or to the other partners.

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Section § 16603

When a partner leaves a partnership, they lose the right to help manage the business. Their duty to be loyal to the partnership also ends, except for issues related to what happened before they left. In other words, they must still be responsible for actions taken or events that occurred while they were still a partner.

Upon a partner’s dissociation, all of the following apply:

(1) The partner’s right to participate in the management and conduct of the partnership business terminates.

(2) The partner’s duty of loyalty under paragraph (3) of subdivision (b) of Section 16404 terminates.

(3) The partner’s duty of loyalty under paragraphs (1) and (2) of subdivision (b) of Section 16404 and duty of care under subdivision (c) of Section 16404 continue only with regard to matters arising and events occurring before the partner’s dissociation.

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