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45-19 Partner's Dissociation When Business Not Wound Up

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CHAPTER 45-19PARTNER'S DISSOCIATION WHEN BUSINESS NOT WOUND UP45-19-01. (701) Purchase of dissociated partner's interest.1.If a partner is dissociated from a partnership without resulting in a dissolution and<br>winding up of the partnership business under section 45-20-01, the partnership shall<br>cause the dissociated partner's interest in the partnership to be purchased for a<br>buyout price determined pursuant to subsection 2.2.The buyout price of a dissociated partner's interest is the amount that would have<br>been distributable to the dissociating partner under subsection 2 of section 45-20-07<br>if, on the date of dissociation, the assets of the partnership were sold at a price equal<br>to the greater of the liquidation value or the value based on a sale of the entire<br>business as a going concern without the dissociated partner and the partnership<br>were wound up as of that date. Interest must be paid from the date of dissociation to<br>the date of payment.3.Damages for wrongful dissociation under subsection 2 of section 45-18-02, and all<br>other amounts owing, whether or not presently due, from the dissociated partner to<br>the partnership, must be offset against the buyout price. Interest must be paid from<br>the date the amount owed becomes due to the date of payment.4.A partnership shall indemnify a dissociated partner whose interest is being<br>purchased against all partnership liabilities, whether incurred before or after the<br>dissociation, except liabilities incurred by an act of the dissociated partner under<br>section 45-19-02.5.If no agreement for the purchase of a dissociated partner's interest is reached within<br>one hundred twenty days after a written demand for payment, the partnership shall<br>pay, or cause to be paid, in cash to the dissociated partner the amount the<br>partnership estimates to be the buyout price and accrued interest, reduced by any<br>offsets and accrued interest under subsection 3.6.If a deferred payment is authorized under subsection 8, the partnership may tender<br>a written offer to pay the amount it estimates to be the buyout price and accrued<br>interest, reduced by any offsets under subsection 3, stating the time of payment, the<br>amount and type of security for payment, and the other terms and conditions of the<br>obligation.7.The payment or tender required by subsection 5 or 6 must be accompanied by the<br>following:a.A statement of partnership assets and liabilities as of the date of dissociation;b.The latest available partnership balance sheet and income statement, if any;c.An explanation of how the estimated amount of the payment was calculated;<br>andd.Written notice that the payment is in full satisfaction of the obligation to<br>purchase unless, within one hundred twenty days after the written notice, the<br>dissociated partner commences an action to determine the buyout price, any<br>offsets under subsection 3, or other terms of the obligation to purchase.8.A partner who wrongfully dissociates before the expiration of a definite term or the<br>completion of a particular undertaking is not entitled to payment of any portion of the<br>buyout price until the expiration of the term or completion of the undertaking, unlessPage No. 1the partner establishes to the satisfaction of the court that earlier payment will not<br>cause undue hardship to the business of the partnership. A deferred payment must<br>be adequately secured and bear interest.9.A dissociated partner may maintain an action against the partnership, pursuant to<br>paragraph 2 of subdivision b of subsection 2 of section 45-16-05, to determine the<br>buyout price of that partner's interest, any offsets under subsection 3, or other terms<br>of the obligation to purchase. The action must be commenced within one hundred<br>twenty days after the partnership has tendered payment or an offer to pay or within<br>one year after written demand for payment if no payment or offer to pay is tendered.<br>The court shall determine the buyout price of the dissociated partner's interest, any<br>offset due under subsection 3, and accrued interest, and enter judgment for any<br>additional payment or refund. If deferred payment is authorized under subsection 8,<br>the court shall also determine the security for payment and other terms of the<br>obligation to purchase. The court may assess reasonable attorney's fees and the<br>fees and expenses of appraisers or other experts for a party to the action, in<br>amounts the court finds equitable, against a party that the court finds acted<br>arbitrarily, vexatiously, or not in good faith.The finding may be based on thepartnership's failure to tender payment or an offer to pay or to comply with<br>subsection 7.45-19-02. (702) Dissociated partner's power to bind and liability to partnership.1.For two years after a partner dissociates without resulting in a dissolution and<br>winding up of the partnership business, the partnership, including a surviving<br>partnership under chapter 45-21, is bound by an act of the dissociated partner which<br>would have bound the partnership under section 45-15-01 before dissociation only if<br>at the time of entering into the transaction the other party:a.Reasonably believed that the dissociated partner was then a partner;b.Did not have notice of the partner's dissociation; andc.Is not deemed to have had knowledge under subsection 4 of section 45-15-03<br>or notice under subsection 3 of section 45-19-04.2.A dissociated partner is liable to the partnership for any damage caused to the<br>partnership arising from an obligation incurred by the dissociated partner after<br>dissociation for which the partnership is liable under subsection 1.45-19-03. (703) Dissociated partner's liability to other persons.1.A partner's dissociation does not of itself discharge the partner's liability for a<br>partnership obligation incurred before dissociation.A dissociated partner is notliable for a partnership obligation incurred after dissociation, except as otherwise<br>provided in subsection 2.2.A partner who dissociates without resulting in a dissolution and winding up of the<br>partnership business is liable as a partner to the other party in a transaction entered<br>into by the partnership, or a surviving partnership under chapter 45-21, within two<br>years after the partner's dissociation, only if at the time of entering into the<br>transaction the other party:a.Reasonably believed that the dissociated partner was then a partner;b.Did not have notice of the partner's dissociation; andc.Is not deemed to have had knowledge under subsection 4 of section 45-15-03<br>or notice under subsection 3 of section 45-19-04.Page No. 23.By agreement with the partnership creditor and the partners continuing the business,<br>a dissociated partner may be released from liability for a partnership obligation.4.A dissociated partner is released from liability for a partnership obligation if a<br>partnership creditor, with notice of the partner's dissociation but without the partner's<br>consent, agrees to a material alteration in the nature or time of payment of a<br>partnership obligation.45-19-04. (704) Statement of dissociation.1.A dissociated partner or the partnership may file with the secretary of state, along<br>with the fees provided in section 45-13-05, a statement of dissociation stating the<br>name of the partnership and that the partner is dissociated from the partnership.2.A statement of dissociation is a limitation on the authority of a dissociated partner for<br>the purposes of subsections 3 and 4 of section 45-15-03.3.For the purposes of subdivision c of subsection 1 of section 45-19-02 and<br>subdivision c of subsection 2 of section 45-19-03, a person not a partner is deemed<br>to have notice of the dissociation ninety days after the statement of dissociation is<br>filed.45-19-05. (705) Continued use of partnership name. Continued use of a partnershipname, or a dissociated partner's name as part thereof, by partners continuing the business does<br>not of itself make the dissociated partner liable for an obligation of the partners or the partnership<br>continuing the business.Page No. 3Document Outlinechapter 45-19 partner's dissociation when business not wound up