(This is Section 603 of the Uniform Partnership Act (1997).)

1. Section 603(a) is a "switching" provision. It provides that, after a partner's dissociation, the partner's interest in the partnership must be purchased pursuant to the buyout rules in Article 7 unless there is a dissolution and winding up of the partnership business under Article 8. Thus, a partner's dissociation will always result in either a buyout of the dissociated partner's interest or a dissolution and winding up of the business.

By contrast, under the UPA, every partner dissociation results in the dissolution of the partnership, most of which trigger a right to have the business wound up unless the partnership agreement provides otherwise. See UPA § 38. The only exception in which the remaining partners have a statutory right to continue the business is when a partner wrongfully dissolves the partnership in breach of the partnership agreement. See UPA § 38(2)(b).

2. Section 603(b) is new and deals with some of the internal effects of a partner's dissociation. Subsection (b)(1) makes it clear that one of the consequences of a partner's dissociation is the immediate loss of the right to participate in the management of the business, unless it results in a dissolution and winding up of the business. In that case, Section 804(a) provides that all of the partners who have not wrongfully dissociated may participate in winding up the business.

Subsection (b)(2) and (3) clarify a partner's fiduciary duties upon dissociation. No change from current law is intended. With respect to the duty of loyalty, the Section 404(b)(3) duty not to compete terminates upon dissociation, and the dissociated partner is free immediately to engage in a competitive business, without any further consent. With respect to the partner's remaining loyalty duties under Section 404(b) and duty of care under Section 404(c), a withdrawing partner has a continuing duty after dissociation, but it is limited to matters that arose or events that occurred before the partner dissociated. For example, a partner who leaves a brokerage firm may immediately compete with the firm for new clients, but must exercise care in completing on-going client transactions and must account to the firm for any fees received from the old clients on account of those transactions. As the last clause makes clear, there is no contraction of a dissociated partner's duties under subsection (b)(3) if the partner thereafter participates in the dissolution and winding up the partnership's business.