October 18, 2021

Volume XI, Number 291

Advertisement
Advertisement

October 18, 2021

Subscribe to Latest Legal News and Analysis
Advertisement

In Some Cases, A Dissociated Partner May Remain Liable As A Partner

The anomalously named California Uniform Partnership Act of 1994 specifies when a partner in a general partnership "dissociates".  Cal. Corp. Code § 16601.  Upon dissociation, a general partner loses the right to participate in the management and conduct of the partnership business.  Cal. Corp. Code § 16603(1).   One would expect that the dissociated partner would also cease to be liable for a partnership obligation incurred after dissociation and that is what the act indeed provides in Subdivision (a) of Section 16703.  There is a significant exception, however,

Section 16703(b) provides that except for registered limited liability partnerships and foreign limited liability partnerships, a dissociated partner is liable as a partner to the other party in a transaction entered into by the partnership within two years after the partner's dissociation if at the time the transaction is entered into all of the following apply:

  • The other party reasonably believed that the dissociated partner was then a partner;

  • The other party did not have notice of the partner’s dissociation; and

  • The other party is not deemed to have had knowledge under subdivision (e) of Section 16303 or notice under subdivision (c) of Section 16704.

Section 16303(e) deems a person who is not a partner to know of a limitation on the authority of a partner to transfer real property held in the partnership's name if a certified copy of a Statement of Denial containing the limitation is of record.   See this post regarding Statements of Denial.  Section 16704(c) provides that a person who is not a partner is deemed to have notice of the dissociation 90 days after a Statement of Dissociation is filed.

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 273
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

949-851-5428
Advertisement
Advertisement
Advertisement