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in favor of dissolution within 90 days after the dissociation.1 | | This reactive dissolution of a term partnership protects the | | remaining partners where the dissociating partner is crucial to the | | successful continuation of the business. The corresponding UPA | | Section 38(2)(b) rule requires unanimous consent of the remaining | | partners to continue the business, thus giving each partner an | | absolute right to a reactive liquidation. Under UPA 1994, if the | | partnership is continued by the majority, any dissenting partner | | who wants to withdraw may do so rightfully under the exception to | | Section 602(b)(2)(i), in which case his interest in the partnership | | will be bought out under Article 7. By itself, however, a | | partner's vote not to continue the business is not necessarily an | | expression of the partner's will to withdraw, and a dissenting | | partner may still elect to remain a partner and continue in the | | business. |
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| | | The Section 601 dissociations giving rise to a reactive | | dissolution are: (6) a partner's bankruptcy or similar financial | | impairment; (7) a partner's death or incapacity; (8) the | | distribution by a trust-partner of its entire partnership | | interest; (9) the distribution by an estate-partner of its entire | | partnership interest; and (10) the termination of an entity- | | partner. Any dissociation during the term of the partnership | | that is wrongful under Section 602(b), including a partner's | | voluntary withdrawal, expulsion or bankruptcy, also gives rise to | | a reactive dissolution. Those statutory grounds may be varied by | | agreement or the reactive dissolution may be abolished entirely. |
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| | | Under Section 601(6)(i), a partner is dissociated upon | | becoming a debtor in bankruptcy. The bankruptcy of a partner or | | of the partnership is not, however, an event of dissolution under | | Section 801. That is a change from UPA Section 31(5). A | | partner's bankruptcy does, however, cause dissolution of a term | | partnership under Section 801(2)(i), unless a majority in | | interest of the remaining partners thereafter agree to continue | | the partnership. Affording the other partners the option of | | buying out the bankrupt partner's interest avoids the necessity | | of winding up a term partnership every time a partner becomes a | | debtor in bankruptcy. |
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| | | Similarly, under Section 801(2)(i), the death of any partner | | will result in the dissolution of a term partnership, only if at | | least half of the remaining partners express their will to wind | | up the partnership's business. If dissolution does occur, the | | deceased partner's transferable interest in the partnership | | passes to his estate and must be bought out under Article 7. See | | Comment 8 to Section 601. |
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| | | (ii) Section 801(2)(ii) provides that a term partnership may | | be dissolved and wound up at any time by the express will of |
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