Bài giảng Business Law (13th edition) - Chapter 39: Partners’ dissociation and partnerships’ dissolution and winding up

Partnerships9McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Introduction to Forms of Business and Formation of PartnershipsOperation of PartnershipsDissolution & Winding UpLimited Liability Companies & Limited PartnershipsPARTNERS’ DISSOCIATION AND PARTNERSHIPS’ DISSOLUTION AND WINDING UPPAETRHC39“Change is inevitable, but it is in us to control its content and directions.”Indira Ghandhi , Indian Prime Minister, speech (Jan. 8, 1967)Learning ObjectivesDissociationDissolution and winding up the partnership business When the business is continuedPartners joining an existing partnership39 - *Revised Uniform Partnership Act (RUPA) defines dissociation as a change in the relation of partners caused by any partner ceasing to be associated in carrying on the business:Partner’s retirement, death, or expulsionBankruptcy filingDissociation starts process of dissolution, winding up (liquidation), and terminationDissociation39 - *A partner has power – but not necessarily a right – to dissociate from partnership any time (e.g., withdrawing)Nonwrongful dissociation does not violate a partnership agreement and includes death of a partner and partner’s withdrawal in accordance with partnership agreementWrongful dissociation takes many formsDissociation39 - *Withdrawal of partner that breaches express provision of partnership agreementWithdrawal of partner before end of term for partnership or completion of the venturePartner filing a bankruptcy petition or being a debtor in bankruptcyJudicial expulsion of partner by request of partnership or another partner based on expelled partner’s misconductWrongful Dissociation39 - *Partners may limit or expand definition of dissociation and wrongful eventsDissolution may be next step after partner’s dissociation, but RUPA allows partnership business to continue Dissolution not automaticThe Agreement39 - *RUPA provides a list of events that force a partnership to be dissolved and wound upList may be altered by agreementDissolution begins winding up process:Orderly liquidation of the partnership assets and the distribution of the proceeds to those having claims against the partnershipDissolution39 - *Winding up partners have implied authority to act to wind up partnership business and apparent authority to conduct business as before dissolution To eliminate apparent authority to conduct business in ordinary way, partnership should notify third parties or file Statement of Dissolution with secretary of stateSee Paciaroni v. CraneDissolution & Apparent Authority39 - *After partnership assets sold during winding up, proceeds distributed to those with claims against partnershipRemaining proceeds from sale of assets distributed to partners according to net amounts in their capital accounts Once assets distributed, termination of partnership occurs automaticallyDistribution & Termination39 - *Partners may choose not to seek dissolution and winding up after dissociationWhen partnership continues, partnership must purchase dissociated partner’s partnership interest New partners may be admitted according to partnership agreement or RUPAIf Business Continued39 - *Test Your KnowledgeTrue=A, False = BDissociation is the orderly liquidation of the partnership assets and the distribution of the proceeds to those having claims against the partnership.When a partner dissociates, dissolution is the required next step.Winding up is a change in the relation of partners caused by any partner ceasing to be associated in the carrying on of the business.39 - *Test Your KnowledgeTrue=A, False = BIn winding up, remaining proceeds from the sale of assets will be distributed to partners according to the net amounts in their capital accountsWinding up partners have apparent authority to conduct business as before dissolution.When a partnership continues, partnership must purchase the dissociated partner’s partnership interest39 - *Test Your KnowledgeMultiple ChoiceJames was a partner in a three-person law partnership without a partnership agreement. Medical bills forced James to file for personal bankruptcy. James has: (a) Engaged in wrongful dissociation(b) Engaged in nonwrongful dissociation (c) Engaged in wrongful dissolution (d) Engaged in nonwrongful dissolution39 - *Test Your KnowledgeMultiple ChoiceGreg, Pat, and Oprah were partners in a music store. Greg transferred his transferable partnership interest to his nephew. Greg: (a) Engaged in wrongful dissociation(b) Has exercised a partnership right(c) Engaged in nonwrongful dissociation(d) None of the above39 - *Thought QuestionsHow would you deal with a partner who was mismanaging the firm or committed malpractice? How would you deal with a partner who had a substance abuse problem?39 - *