SECTIONS 16701-16705 - California Statutes

CORPORATIONS CODE

SECTION 16701-16705

16701. Except as provided in Section 16701.5, all of the following
shall apply:
(a) If a partner is dissociated from a partnership, the
partnership shall cause the dissociated partner's interest in the
partnership to be purchased for a buyout price determined pursuant to
subdivision (b).
(b) The buyout price of a dissociated partner's interest is the
amount that would have been distributable to the dissociating partner
under subdivision (b) of Section 16807 if, on the date of
dissociation, the assets of the partnership were sold at a price
equal to the greater of the liquidation value or the value based on a
sale of the entire business as a going concern without the
dissociated partner and the partnership was wound up as of that date.
Interest shall be paid from the date of dissociation to the date of
payment.
(c) Damages for wrongful dissociation under Section 16602, and all
other amounts owing, whether or not presently due, from the
dissociated partner to the partnership, shall be offset against the
buyout price. Interest shall be paid from the date the amount owed
becomes due to the date of payment.
(d) A partnership shall indemnify a dissociated partner whose
interest is being purchased against all partnership liabilities,
whether incurred before or after the dissociation, except liabilities
incurred by an act of the dissociated partner under Section 16702.
(e) If no agreement for the purchase of a dissociated partner's
interest is reached within 120 days after a written demand for
payment, the partnership shall pay, or cause to be paid, in cash to
the dissociated partner the amount the partnership estimates to be
the buyout price and accrued interest, reduced by any offsets and
accrued interest under subdivision (c).
(f) If a deferred payment is authorized under subdivision (h), the
partnership may tender a written offer to pay the amount it
estimates to be the buyout price and accrued interest, reduced by any
offsets under subdivision (c), stating the time of payment, the
amount and type of security for payment, and the other terms and
conditions of the obligation.
(g) The payment or tender required by subdivision (e) or (f) shall
be accompanied by all of the following:
(1) A statement of partnership assets and liabilities as of the
date of dissociation.
(2) The latest available partnership balance sheet and income
statement, if any.
(3) An explanation of how the estimated amount of the payment was
calculated.
(4) Written notice that the payment is in full satisfaction of the
obligation to purchase unless, within 120 days after the written
notice, the dissociated partner commences an action to determine the
buyout price, any offsets under subdivision (c), or other terms of
the obligation to purchase.
(h) A partner who wrongfully dissociates before the expiration of
a definite term or the completion of a particular undertaking is not
entitled to payment of any portion of the buyout price until the
expiration of the term or completion of the undertaking, unless the
partner establishes to the satisfaction of the court that earlier
payment will not cause undue hardship to the business of the
partnership. A deferred payment shall be adequately secured and bear
interest.
(i) A dissociated partner may maintain an action against the
partnership, pursuant to subparagraph (B) of paragraph (2) of
subdivision (b) of Section 16405, to determine the buyout price of
that partner's interest, any offsets under subdivision (c), or other
terms of the obligation to purchase. The action shall be commenced
within 120 days after the partnership has tendered payment or an
offer to pay or within one year after written demand for payment if
no payment or offer to pay is tendered. The court shall determine the
buyout price of the dissociated partner's interest, any offset due
under subdivision (c), and accrued interest, and enter judgment for
any additional payment or refund. If deferred payment is authorized
under subdivision (h), the court shall also determine the security
for payment and other terms of the obligation to purchase. The court
may assess reasonable attorney's fees and the fees and expenses of
appraisers or other experts for a party to the action, in amounts the
court finds equitable, against a party that the court finds acted
arbitrarily, vexatiously, or not in good faith. The finding may be
based on the partnership's failure to tender payment or an offer to
pay or to comply with subdivision (g).

16701.5. (a) Section 16701 shall not apply to any dissociation that
occurs within 90 days prior to a dissolution under Section 16801.
(b) For dissociations occurring within 90 days prior to the
dissolution, both of the following shall apply:
(1) All partners who dissociated within 90 days prior to the
dissolution shall be treated as partners under Section 16807.
(2) Any damages for wrongful dissociation under Section 16602 and
all other amounts owed by the dissociated partner to the partnership,
whether or not presently due, shall be taken into account in
determining the amount distributable to the dissociated partner under
Section 16807.

16702. (a) For two years after a partner dissociates, the
partnership, including a surviving partnership under Article 9
(commencing with Section 16901), is bound by an act of the
dissociated partner that would have bound the partnership under
Section 16301 before dissociation only if at the time of entering
into the transaction all of the following apply to the other party:
(1) The other party reasonably believed that the dissociated
partner was then a partner.
(2) The other party did not have notice of the partner's
dissociation.
(3) The other party is not deemed to have had knowledge under
subdivision (e) of Section 16303 or notice under subdivision (c) of
Section 16704.
(b) A dissociated partner is liable to the partnership for any
damage caused to the partnership arising from an obligation incurred
by the dissociated partner after dissociation for which the
partnership is liable under subdivision (a).

16703. (a) A partner's dissociation does not of itself discharge
the partner's liability for a partnership obligation incurred before
dissociation. A dissociated partner is not liable for a partnership
obligation incurred after dissociation, except as otherwise provided
in subdivision (b).
(b) Except for registered limited liability partnerships and
foreign limited liability partnerships, a partner who dissociates is
liable as a partner to the other party in a transaction entered into
by the partnership, or a surviving partnership under Article 9
(commencing with Section 16901), within two years after the partner's
dissociation, only if at the time of entering into the transaction
all of the following apply to the other party:
(1) The other party reasonably believed that the dissociated
partner was then a partner.
(2) The other party did not have notice of the partner's
dissociation.
(3) The other party is not deemed to have had knowledge under
subdivision (e) of Section 16303 or notice under subdivision (c) of
Section 16704.
(c) By agreement with the partnership creditor and the partners
continuing the business, a dissociated partner may be released from
liability for a partnership obligation.
(d) A dissociated partner is released from liability for a
partnership obligation if a partnership creditor, with notice of the
partner's dissociation but without the partner's consent, agrees to a
material alteration in the nature or time of payment of a
partnership obligation.

16704. (a) A dissociated partner or the partnership may file a
statement of dissociation stating the name of the partnership as
filed with the Secretary of State, any identification number issued
by the Secretary of State, and that the partner is dissociated from
the partnership.
(b) A statement of dissociation is a limitation on the authority
of a dissociated partner for the purposes of subdivisions (d) and (e)
of Section 16303.
(c) For the purposes of paragraph (3) of subdivision (a) of
Section 16702 and paragraph (3) of subdivision (b) of Section 16703,
a person not a partner is deemed to have notice of the dissociation
90 days after the statement of dissociation is filed.

16705. Continued use of a partnership name, or a dissociated
partner's name as part thereof, by partners continuing the business
does not of itself make the dissociated partner liable for an
obligation of the partners or the partnership continuing the
business.