REPORT TITLE:
Uniform Partnership Act


DESCRIPTION:
Adopts uniform partnership act.  Repeals current partnership law.
(SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE UNIFORM PARTNERSHIP ACT.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 425, Hawaii Revised Statutes, is amended
 
 2 by adding a new part IV, to read as follows:
 
 3                "PART IV.  UNIFORM PARTNERSHIP ACT
 
 4                        GENERAL PROVISIONS
 
 5      425-101  Definition.  As used in this part, unless the
 
 6 context otherwise requires:
 
 7      "Business" includes every trade, occupation, and profession.
 
 8      "Debtor in bankruptcy" means a person who is the subject of:
 
 9      (1)  An order for relief under Title 11 of the United States
 
10           Code or a comparable order under a successor statute of
 
11           general application; or
 
12      (2)  A comparable order under federal, state, or foreign law
 
13           governing insolvency.
 
14      "Director" means the director of commerce and consumer
 
15 affairs.
 
16      "Distribution" means a transfer of money or other property
 
17 from a partnership to a partner in the partner's capacity as a
 
18 partner or to the partner's transferee.
 
19      "Foreign limited liability partnership" means a partnership
 

 
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 1 that:
 
 2      (1)  Is formed under laws other than the laws of this State;
 
 3           and
 
 4      (2)  Has the status of a limited liability partnership under
 
 5           those laws.
 
 6      "Limited liability partnership" means a partnership that has
 
 7 filed a certificate of limited liability partnership under
 
 8 section 425-153 and does not have a similar statement in effect
 
 9 in any other jurisdiction.
 
10      "Partnership" means an association of two or more persons to
 
11 carry on as co-owners a business for profit formed under section
 
12 425-109, a predecessor law, or comparable law of another
 
13 jurisdiction.
 
14      "Partnership agreement" means the agreement, whether
 
15 written, oral, or implied, among the partners concerning the
 
16 partnership, including amendments to the partnership agreement.
 
17      "Partnership at will" means a partnership in which the
 
18 partners have not agreed to remain partners until the expiration
 
19 of a definite term or the completion of a particular undertaking.
 
20      "Partnership interest" or "partner's interest in the
 
21 partnership" means all of a partner's interests in the
 
22 partnership, including the partner's transferable interest and
 
23 all management and other rights.
 

 
 
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 1      "Person" means an individual, corporation, business trust,
 
 2 estate, trust, partnership, association, joint venture,
 
 3 government, governmental subdivision, agency, or instrumentality,
 
 4 or any other legal or commercial entity.
 
 5      "Property" means all property, real, personal, or mixed,
 
 6 tangible or intangible, or any interest therein.
 
 7      "State" means a state of the United States, the District of
 
 8 Columbia, the Commonwealth of Puerto Rico, or any territory or
 
 9 insular possession subject to the jurisdiction of the United
 
10 States.
 
11      "Statement" means a registration or annual statement filed
 
12 under section 425-1, a statement of correction filed under
 
13 section 425-1.7, a statement of change filed under section 425-7,
 
14 a statement of dissolution filed under section 425-9, a statement
 
15 of denial filed under section 425-115, a statement of
 
16 dissociation filed under section 425-136, an amendment, or any
 
17 other document filed under this chapter.
 
18      "Transfer" includes an assignment, conveyance, lease,
 
19 mortgage, deed, and encumbrance.
 
20      425-102  Knowledge and notice.(a)  A person knows a fact
 
21 if the person has actual knowledge of it.
 
22      (b)  A person has notice of a fact if the person:
 
23      (1)  Knows of it;
 

 
 
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 1      (2)  Has received a notification of it; or
 
 2      (3)  Has reason to know it exists from all of the facts
 
 3           known to the person at the time in question.
 
 4      (c)  A person notifies or gives a notification to another by
 
 5 taking steps reasonably required to inform the other person in
 
 6 ordinary course, whether or not the other person learns of it.
 
 7      (d)  A person receives a notification when the notification:
 
 8      (1)  Comes to the person's attention; or
 
 9      (2)  Is duly delivered at the person's place of business or
 
10           at any other place held out by the person as a place
 
11           for receiving communications.
 
12      (e)  Except as otherwise provided in subsection (f), a
 
13 person other than an individual knows, has notice, or receives a
 
14 notification of a fact for purposes of a particular transaction
 
15 when the individual conducting the transaction knows, has notice,
 
16 or receives a notification of the fact, or in any event when the
 
17 fact would have been brought to the individual's attention if the
 
18 person had exercised reasonable diligence.  A person exercises
 
19 reasonable diligence if the person maintains reasonable routines
 
20 for communicating significant information to the individual
 
21 conducting the transaction and there is reasonable compliance
 
22 with the routines.  Reasonable diligence does not require an
 
23 individual acting for the person to communicate information
 

 
 
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 1 unless the communication is part of the individual's regular
 
 2 duties or the individual has reason to know of the transaction
 
 3 and that the transaction would be materially affected by the
 
 4 information.
 
 5      (f)  A partner's knowledge, notice, or receipt of a
 
 6 notification of a fact relating to the partnership is effective
 
 7 immediately as knowledge by, notice to, or receipt of a
 
 8 notification by the partnership, except in the case of a fraud on
 
 9 the partnership committed by or with the consent of that partner.
 
10      425-103  Effect of partnership agreement; nonwaivable
 
11 provisions.(a)  Except as otherwise provided in subsection (b),
 
12 relations among the partners and between the partners and the
 
13 partnership are governed by the partnership agreement.  To the
 
14 extent the partnership agreement does not otherwise provide, this
 
15 part governs relations among the partners and between the
 
16 partners and the partnership.
 
17      (b)  The partnership agreement shall not:
 
18      (1)  Vary the rights and duties under section 425-105 except
 
19           to eliminate the duty to provided copies of statements
 
20           to all of the partners;
 
21      (2)  Unreasonably restrict the right of access to books and
 
22           records under section 425-122(b);
 
23      (3)  Eliminate the duty of loyalty under section 425-123(b)
 

 
 
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 1           or 425-132(b)(3), but:
 
 2           (A)  The partnership agreement may identify specific
 
 3                types or categories of activities that do not
 
 4                violate the duty of loyalty, if not manifestly
 
 5                unreasonable; or
 
 6           (B)  All of the partners or a number or percentage
 
 7                specified in the partnership agreement may
 
 8                authorize or ratify, after full disclosure of all
 
 9                material facts, a specific act or transaction that
 
10                otherwise would violate the duty of loyalty;
 
11      (4)  Unreasonably reduce the duty of care under section
 
12           425-123(c) or 425-132(b)(3);
 
13      (5)  Eliminate the obligation of good faith and fair dealing
 
14           under section 425-123(d), but the partnership agreement
 
15           may prescribe the standards by which the performance of
 
16           the obligation is to be measured, if the standards are
 
17           not manifestly unreasonable;
 
18      (6)  Vary the power to dissociate as a partner under section
 
19           425-131(a), except to require the notice under section
 
20           425-130(1) to be in writing;
 
21      (7)  Vary the right of a court to expel a partner in the
 
22           events specified in section 425-130(5);
 
23      (8)  Vary the requirement to wind up the partnership
 

 
 
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 1           business in cases specified in section 425-138(4), (5),
 
 2           or (6);
 
 3      (9)  Vary the law applicable to a limited liability
 
 4           partnership under section 425-161; or
 
 5     (10)  Restrict rights of third parties under this part.
 
 6      425-104  Supplemental principles of law.(a)  Unless
 
 7 displaced by particular provisions of this part, the principles
 
 8 of law and equity supplement this part.
 
 9      (b)  If an obligation to pay interest arises under this part
 
10 and the rate is not specified, the rate is that specified in
 
11 section 478-2.
 
12      425-105  Recording and notification of statements.(a)  A
 
13 certified copy of a statement that has been filed in the office
 
14 of the director and recorded in the bureau of conveyances has the
 
15 effect provided for recorded statements in this part.  A recorded
 
16 statement that is not a certified copy of a statement filed in
 
17 the office of the director does not have the effect provided for
 
18 recorded statements in this part.
 
19      (b)  A person who files a statement pursuant to this section
 
20 shall promptly send a copy of the statement to every nonfiling
 
21 partner and to any other person named as a partner in the
 
22 statement.  Failure to send a copy of a statement to a partner or
 
23 other person does not limit the effectiveness of the statement as
 

 
 
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 1 to a person not a partner.
 
 2      425-106  Governing law.  Except as otherwise provided in
 
 3 section 425-161, the law of the jurisdiction in which a
 
 4 partnership has its chief executive office governs relations
 
 5 among the partners and between the partners and the partnership.
 
 6      425-107  Partnership subject to amendment or repeal of
 
 7 chapter.  A partnership governed by this part is subject to any
 
 8 amendment to or repeal of this part.
 
 9                       NATURE OF PARTNERSHIP
 
10      425-108  Partnership as entity.(a)  A partnership is an
 
11 entity distinct from its partners.
 
12      (b)  A limited liability partnership continues to be the
 
13 same entity that existed before the filing of a certificate of
 
14 limited liability partnership under section 425-153.
 
15      425-109  Formation of partnership.(a)  Except as
 
16 otherwise provided in subsection (b), the association of two or
 
17 more persons to carry on as co-owners a business for profit forms
 
18 a partnership, whether or not the persons intend to form a
 
19 partnership.
 
20      (b)  An association formed under a statute other than this
 
21 part, a predecessor statute, or a comparable statute of another
 
22 jurisdiction is not a partnership under this part.
 
23      (c)  In determining whether a partnership is formed, the
 

 
 
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 1 following rules apply:
 
 2      (1)  Joint tenancy, tenancy in common, tenancy by the
 
 3           entireties, joint property, common property, or part
 
 4           ownership does not by itself establish a partnership,
 
 5           even if the co-owners share profits made by the use of
 
 6           the property.
 
 7      (2)  The sharing of gross returns does not by itself
 
 8           establish a partnership, even if the persons sharing
 
 9           them have a joint or common right or interest in
 
10           property from which the returns are derived.
 
11      (3)  A person who receives a share of the profits of a
 
12           business is presumed to be a partner in the business,
 
13           unless the profits were received in payment:
 
14           (A)  Of a debt by installments or otherwise;
 
15           (B)  For services as an independent contractor or of
 
16                wages or other compensation to an employee;
 
17           (C)  Of rent;
 
18           (D)  Of an annuity or other retirement or health
 
19                benefit to a beneficiary, representative, or
 
20                designee of a deceased or retired partner;
 
21           (E)  Of interest or other charge on a loan, even if the
 
22                amount of payment varies with the profits of the
 
23                business, including a direct or indirect present
 

 
 
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 1                or future ownership of the collateral, or rights
 
 2                to income, proceeds, or increase in value derived
 
 3                from the collateral; or
 
 4           (F)  For the sale of the goodwill of a business or
 
 5                other property by installments or otherwise.
 
 6      425-110  Partnership property.  Property acquired by a
 
 7 partnership is property of the partnership and not of the
 
 8 partners individually.
 
 9      425-111  When property is partnership property.(a)
 
10 Property is partnership property if acquired in the name of:
 
11      (1)  The partnership; or
 
12      (2)  One or more partners with an indication in the
 
13           instrument transferring title to the property of the
 
14           person's capacity as a partner or of the existence of a
 
15           partnership but without an indication of the name of
 
16           the partnership.
 
17      (b)  Property is acquired in the name of the partnership by
 
18 a transfer to:
 
19      (1)  The partnership in its name; or
 
20      (2)  One or more partners in their capacity as partners in
 
21           the partnership, if the name of the partnership is
 
22           indicated in the instrument transferring title to the
 
23           property.
 

 
 
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 1      (c)  Property is presumed to be partnership property if
 
 2 purchased with partnership assets, even if not acquired in the
 
 3 name of the partnership or of one or more partners with an
 
 4 indication in the instrument transferring title to the property
 
 5 of the person's capacity as a partner or of the existence of a
 
 6 partnership.
 
 7      (d)  Property acquired in the name of one or more of the
 
 8 partners, without an indication in the instrument transferring
 
 9 title to the property of the person's capacity as a partner or of
 
10 the existence of a partnership and without use of partnership
 
11 assets, is presumed to be separate property, even if used for
 
12 partnership purposes.
 
13                     RELATIONS OF PARTNERS TO
 
14                 PERSONS DEALING WITH PARTNERSHIP
 
15      425-112  Partner agent of partnership.  Subject to the
 
16 effect of a partnership registration statement under section
 
17 425-1:
 
18      (1)  Each partner is an agent of the partnership for the
 
19           purpose of its business.  An act of a partner,
 
20           including the execution of an instrument in the
 
21           partnership name, for apparently carrying on in the
 
22           ordinary course the partnership business or business of
 
23           the kind carried on by the partnership binds the
 

 
 
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 1           partnership, unless the partner had no authority to act
 
 2           for the partnership in the particular matter and the
 
 3           person with whom the partner was dealing knew or had
 
 4           received a notification that the partner lacked
 
 5           authority.
 
 6      (2)  An act of a partner which is not apparently for
 
 7           carrying on in the ordinary course the partnership
 
 8           business or business of the kind carried on by the
 
 9           partnership binds the partnership only if the act was
 
10           authorized by the other partners.
 
11      425-113  Transfer of partnership property.(a)
 
12 Partnership property may be transferred as follows:
 
13      (1)  Subject to the effect of a partnership registration
 
14           statement filed under section 425-1, partnership
 
15           property held in the name of the partnership may be
 
16           transferred by an instrument of transfer executed by a
 
17           partner in the partnership name.
 
18      (2)  Partnership property held in the name of one or more
 
19           partners with an indication in the instrument
 
20           transferring the property to them of their capacity as
 
21           partners or of the existence of a partnership, but
 
22           without an indication of the name of the partnership,
 
23           may be transferred by an instrument of transfer
 

 
 
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 1           executed by the persons in whose name the property is
 
 2           held.
 
 3      (3)  Partnership property held in the name of one or more
 
 4           persons other than the partnership, without an
 
 5           indication in the instrument transferring the property
 
 6           to them of their capacity as partners or of the
 
 7           existence of a partnership, may be transferred by an
 
 8           instrument of transfer executed by the persons in whose
 
 9           name the property is held.
 
10      (b)  A partnership may recover partnership property from a
 
11 transferee only if it proves that execution of the instrument of
 
12 initial transfer did not bind the partnership under section
 
13 425-112 and:
 
14      (1)  As to a subsequent transferee who gave value for
 
15           property transferred under subsection (a)(1) and (2),
 
16           proves that the subsequent transferee knew or had
 
17           received a notification that the person who executed
 
18           the instrument of initial transfer lacked authority to
 
19           bind the partnership; or
 
20      (2)  As to a transferee who gave value for property
 
21           transferred under subsection (a)(3), proves that the
 
22           transferee knew or had received a notification that the
 
23           property was partnership property and that the person
 

 
 
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 1           who executed the instrument of initial transfer lacked
 
 2           authority to bind the partnership.
 
 3      (c)  A partnership may not recover partnership property from
 
 4 a subsequent transferee if the partnership would not have been
 
 5 entitled to recover the property, under subsection (b), from any
 
 6 earlier transferee of the property.
 
 7      (d)  If a person holds all of the partners' interests in the
 
 8 partnership, all of the partnership property vests in that
 
 9 person.  The person may execute a document in the name of the
 
10 partnership to evidence vesting of the property in that person
 
11 and may file or record the document.
 
12      425-114  Partnership registration statement.(a)  A filed
 
13 registration statement supplements the authority of a partner to
 
14 enter into transactions on behalf of the partnership as follows:
 
15      (1)  Except for transfers of real property, a grant of
 
16           authority contained in a filed registration statement
 
17           is conclusive in favor of a person who gives value
 
18           without knowledge to the contrary, so long as and to
 
19           the extent that a limitation on that authority is not
 
20           then contained in the filed registration statement.  A
 
21           filed cancellation of a limitation on authority revives
 
22           the previous grant of authority.
 
23      (2)  A grant of authority to transfer real property held in
 

 
 
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 1           the name of the partnership contained in a certified
 
 2           copy of a filed registration statement recorded in the
 
 3           office for recording transfers of that real property is
 
 4           conclusive in favor of a person who gives value without
 
 5           knowledge to the contrary, so long as and to the extent
 
 6           that a certified copy of a filed statement containing a
 
 7           limitation on that authority is not then of record in
 
 8           the office for recording transfers of that real
 
 9           property.  The recording in the bureau of conveyances
 
10           of a certified copy of a filed cancellation of a
 
11           limitation on authority revives the previous grant of
 
12           authority.
 
13      (b)  A person not a partner is deemed to know of a
 
14 limitation on the authority of a partner to transfer real
 
15 property held in the name of the partnership if a certified copy
 
16 of the filed registration statement containing the limitation on
 
17 authority is of record in the bureau of conveyances.
 
18      (c)  Except as otherwise provided in subsections (a) and (b)
 
19 and sections 425-136 and 425-142, a person not a partner is not
 
20 deemed to know of a limitation on the authority of a partner
 
21 merely because the limitation is contained in a filed
 
22 registration statement.
 
23      425-115  Statement of denial.  A partner or other person
 

 
 
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 1 named as a partner in a filed statement of partnership authority
 
 2 may file a statement of denial stating the name of the
 
 3 partnership and the fact that is being denied, which may include
 
 4 denial of a person's authority or status as a partner.  A
 
 5 statement of denial is a limitation on authority as provided in
 
 6 section 425-114(a) and (b).
 
 7      425-116  Partnership liable for partner's actionable
 
 8 conduct.(a)  A partnership is liable for loss or injury caused
 
 9 to a person, or for a penalty incurred, as a result of a wrongful
 
10 act or omission, or other actionable conduct, of a partner acting
 
11 in the ordinary course of business of the partnership or with
 
12 authority of the partnership.
 
13      (b)  If, in the course of the partnership's business or
 
14 while acting with authority of the partnership, a partner
 
15 receives or causes the partnership to receive money or property
 
16 of a person not a partner, and the money or property is
 
17 misapplied by a partner, the partnership is liable for the loss.
 
18      425-117  Partner's liability.(a)  Except as otherwise
 
19 provided in subsections (b) and (c), all partners are liable
 
20 jointly and severally for all obligations of the partnership
 
21 unless otherwise agreed by the claimant or provided by law.
 
22      (b)  A person admitted as a partner into an existing
 
23 partnership is not personally liable for any partnership
 

 
 
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 1 obligation incurred before the person's admission as a partner.
 
 2      (c)  An obligation of a partnership incurred while the
 
 3 partnership is a limited liability partnership, whether arising
 
 4 in contract, tort, or otherwise, is solely the obligation of the
 
 5 partnership.  A partner is not personally liable, directly or
 
 6 indirectly, by way of contribution or otherwise, for such an
 
 7 obligation solely by reason of being or so acting as a partner.
 
 8 This subsection applies notwithstanding anything inconsistent in
 
 9 the partnership agreement that existed immediately before the
 
10 vote required to become a limited liability partnership.
 
11      425-118  Actions by and against partnership and partners.
 
12 (a)  A partnership may sue and be sued in the name of the
 
13 partnership.
 
14      (b)  An action may be brought against the partnership and,
 
15 to the extent not inconsistent with section 425-117, any or all
 
16 of the partners in the same action or in separate actions.
 
17      (c)  A judgment against a partnership is not by itself a
 
18 judgment against a partner.  A judgment against a partnership
 
19 shall not be satisfied from a partner's assets unless there is
 
20 also a judgment against the partner.
 
21      (d)  A judgment creditor of a partner shall not levy
 
22 execution against the assets of the partner to satisfy a judgment
 
23 based on a claim against the partnership unless the partner is
 

 
 
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 1 personally liable for the claim under section 425-117 and:
 
 2      (1)  A judgment based on the same claim has been obtained
 
 3           against the partnership and a writ of execution on the
 
 4           judgment has been returned unsatisfied in whole or in
 
 5           part;
 
 6      (2)  The partnership is a debtor in bankruptcy;
 
 7      (3)  The partner has agreed that the creditor need not
 
 8           exhaust partnership assets;
 
 9      (4)  A court grants permission to the judgment creditor to
 
10           levy execution against the assets of a partner based on
 
11           a finding that partnership assets subject to execution
 
12           are clearly insufficient to satisfy the judgment, that
 
13           exhaustion of partnership assets is excessively
 
14           burdensome, or that the grant of permission is an
 
15           appropriate exercise of the court's equitable powers;
 
16           or
 
17      (5)  Liability is imposed on the partner by law or contract
 
18           independent of the existence of the partnership.
 
19      (e)  This section applies to any partnership liability or
 
20 obligation resulting from a representation by a partner or
 
21 purported partner under section 425-119.
 
22      425-119  Liability of purported partner.(a)  If a person,
 
23 by word or conduct, purports to be a partner, or consents to
 

 
 
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 1 being represented by another as a partner, in a partnership or
 
 2 with one or more persons not partners, the purported partner is
 
 3 liable to a person to whom the representation is made, if that
 
 4 person, relying on the representation, enters into a transaction
 
 5 with the actual or purported partnership.  If the representation,
 
 6 either by the purported partner or by a person with the purported
 
 7 partner's consent, is made in a public manner, the purported
 
 8 partner is liable to a person who relies upon the purported
 
 9 partnership even if the purported partner is not aware of being
 
10 held out as a partner to the claimant.  If partnership liability
 
11 results, the purported partner is liable with respect to that
 
12 liability as if the purported partner were a partner.  If no
 
13 partnership liability results, the purported partner is liable
 
14 with respect to that liability jointly and severally with any
 
15 other person consenting to the representation.
 
16      (b)  If a person is thus represented to be a partner in an
 
17 existing partnership, or with one or more persons not partners,
 
18 the purported partner is an agent of persons consenting to the
 
19 representation to bind them to the same extent and in the same
 
20 manner as if the purported partner were a partner, with respect
 
21 to persons who enter into transactions in reliance upon the
 
22 representation.  If all of the partners of the existing
 
23 partnership consent to the representation, a partnership act or
 

 
 
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 1 obligation results.  If fewer than all of the partners of the
 
 2 existing partnership consent to the representation, the person
 
 3 acting and the partners consenting to the representation are
 
 4 jointly and severally liable.
 
 5      (c)  Except as otherwise provided in subsections (a) and
 
 6 (b), persons who are not partners as to each other are not liable
 
 7 as partners to other persons.
 
 8                RELATIONS OF PARTNERS TO EACH OTHER
 
 9                        AND TO PARTNERSHIP
 
10      425-120  Partner's rights and duties.(a)  Each partner is
 
11 deemed to have an account that is:
 
12      (1)  Credited with an amount equal to the money plus the
 
13           value of any other property, net of the amount of any
 
14           liabilities, the partner contributes to the partnership
 
15           and the partner's share of the partnership profits; and
 
16      (2)  Charged with an amount equal to the money plus the
 
17           value of any other property, net of the amount of any
 
18           liabilities, distributed by the partnership to the
 
19           partner and the partner's share of the partnership
 
20           losses.
 
21      (b)  Each partner is entitled to an equal share of the
 
22 partnership profits and is chargeable with a share of the
 
23 partnership losses in proportion to the partner's share of the
 

 
 
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 1 profits.
 
 2      (c)  A partnership shall reimburse a partner for payments
 
 3 made and indemnify a partner for liabilities incurred by the
 
 4 partner in the ordinary course of the business of the partnership
 
 5 or for the preservation of its business or property.
 
 6      (d)  A partnership shall reimburse a partner for an advance
 
 7 to the partnership beyond the amount of capital the partner
 
 8 agreed to contribute.
 
 9      (e)  A payment or advance made by a partner which gives rise
 
10 to a partnership obligation under subsection (c) or (d)
 
11 constitutes a loan to the partnership which accrues interest from
 
12 the date of the payment or advance.
 
13      (f)  Each partner has equal rights in the management and
 
14 conduct of the partnership business.
 
15      (g)  A partner may use or possess partnership property only
 
16 on behalf of the partnership.
 
17      (h)  A partner is not entitled to remuneration for services
 
18 performed for the partnership, except for reasonable compensation
 
19 for services rendered in winding up the business of the
 
20 partnership.
 
21      (i)  A person may become a partner only with the consent of
 
22 all of the partners.
 
23      (j)  A difference arising as to a matter in the ordinary
 

 
 
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 1 course of business of a partnership may be decided by a majority
 
 2 of the partners.  An act outside the ordinary course of business
 
 3 of a partnership and an amendment to the partnership agreement
 
 4 may be undertaken only with the consent of all of the partners.
 
 5      (k)  This section does not affect the obligations of a
 
 6 partnership to other persons under section 425-112.
 
 7      425-121  Distributions in kind.  A partner has no right to
 
 8 receive, and shall not be required to accept, a distribution in
 
 9 kind.
 
10      425-122  Partner's rights and duties with respect to
 
11 information.(a)  A partnership shall keep its books and
 
12 records, if any, at its chief executive office.
 
13      (b)  A partnership shall provide partners and their agents
 
14 and attorneys access to its books and records.  It shall provide
 
15 former partners and their agents and attorneys access to books
 
16 and records pertaining to the period during which they were
 
17 partners.  The right of access provides the opportunity to
 
18 inspect and copy books and records during ordinary business
 
19 hours.  A partnership may impose a reasonable charge, covering
 
20 the costs of labor and material, for copies of documents
 
21 furnished.
 
22      (c)  Each partner and the partnership shall furnish to a
 
23 partner, and to the legal representative of a deceased partner or
 

 
 
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 1 partner under legal disability:
 
 2      (1)  Without demand, any information concerning the
 
 3           partnership's business and affairs reasonably required
 
 4           for the proper exercise of the partner's rights and
 
 5           duties under the partnership agreement or this part;
 
 6           and
 
 7      (2)  On demand, any other information concerning the
 
 8           partnership's business and affairs, except to the
 
 9           extent the demand or the information demanded is
 
10           unreasonable or otherwise improper under the
 
11           circumstances.
 
12      425-123  General standards of partner's conduct.(a)  The
 
13 only fiduciary duties a partner owes to the partnership and the
 
14 other partners are the duty of loyalty and the duty of care set
 
15 forth in subsections (b) and (c).
 
16      (b)  A partner's duty of loyalty to the partnership and the
 
17 other partners is limited to the following:
 
18      (1)  To account to the partnership and hold as trustee for
 
19           it any property, profit, or benefit derived by the
 
20           partner in the conduct and winding up of the
 
21           partnership business or derived from a use by the
 
22           partner of partnership property, including the
 
23           appropriation of a partnership opportunity;
 

 
 
Page 24                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1      (2)  To refrain from dealing with the partnership in the
 
 2           conduct or winding up of the partnership business as or
 
 3           on behalf of a party having an interest adverse to the
 
 4           partnership; and
 
 5      (3)  To refrain from competing with the partnership in the
 
 6           conduct of the partnership business before the
 
 7           dissolution of the partnership.
 
 8      (c)  A partner's duty of care to the partnership and the
 
 9 other partners in the conduct and winding up of the partnership
 
10 business is limited to refraining from engaging in grossly
 
11 negligent or reckless conduct, intentional misconduct, or a
 
12 knowing violation of law.
 
13      (d)  A partner shall discharge the duties to the partnership
 
14 and the other partners under this part or under the partnership
 
15 agreement and exercise any rights consistently with the
 
16 obligation of good faith and fair dealing.
 
17      (e)  A partner does not violate a duty or obligation under
 
18 this part or under the partnership agreement merely because the
 
19 partner's conduct furthers the partner's own interest.
 
20      (f)  A partner may lend money to and transact other business
 
21 with the partnership, and as to each loan or transaction the
 
22 rights and obligations of the partner are the same as those of a
 
23 person who is not a partner, subject to other applicable law.
 

 
 
Page 25                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1      (g)  This section applies to a person winding up the
 
 2 partnership business as the personal or legal representative of
 
 3 the last surviving partner as if the person were a partner.
 
 4      425-124  Actions by partnership and partners.(a)  A
 
 5 partnership may maintain an action against a partner for a breach
 
 6 of the partnership agreement, or for the violation of a duty to
 
 7 the partnership, causing harm to the partnership.
 
 8      (b)  A partner may maintain an action against the
 
 9 partnership or another partner for legal or equitable relief,
 
10 with or without an accounting as to partnership business, to:
 
11      (1)  Enforce the partner's rights under the partnership
 
12           agreement;
 
13      (2)  Enforce the partner's rights under this part,
 
14           including:
 
15           (A)  The partner's rights under section 425-120,
 
16                425-122, or 425-123;
 
17           (B)  The partner's right on dissociation to have the
 
18                partner's interest in the partnership purchased
 
19                pursuant to section 425-133 or enforce any other
 
20                right under sections 425-130 to 425-132 or
 
21                sections 425-133 to 425-137; or
 
22           (C)  The partner's right to compel a dissolution and
 
23                winding up of the partnership business or enforce
 

 
 
Page 26                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1                any other right under sections 425-138 to 425-144;
 
 2                or
 
 3      (3)  Enforce the rights and otherwise protect the interests
 
 4           of the partner, including rights and interests arising
 
 5           independently of the partnership relationship.
 
 6      (c)  The accrual of, and any time limitation on, a right of
 
 7 action for a remedy under this section is governed by other law.
 
 8 A right to an accounting upon a dissolution and winding up does
 
 9 not revive a claim barred by law.
 
10      425-125  Continuation of partnership beyond definite term
 
11 or particular undertaking.(a)  If a partnership for a definite
 
12 term or particular undertaking is continued, without an express
 
13 agreement, after the expiration of the term or completion of the
 
14 undertaking, the rights and duties of the partners remain the
 
15 same as they were at the expiration or completion, so far as is
 
16 consistent with a partnership at will.
 
17      (b)  If the partners, or those of them who habitually acted
 
18 in the business during the term or undertaking, continue the
 
19 business without any settlement or liquidation of the
 
20 partnership, they are presumed to have agreed that the
 
21 partnership will continue.
 
22               TRANSFEREES AND CREDITORS OF PARTNER
 
23      425-126  Partner not co-owner of partnership property.  A
 

 
 
Page 27                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1 partner is not a co-owner of partnership property and has no
 
 2 interest in partnership property which can be transferred, either
 
 3 voluntarily or involuntarily.
 
 4      425-127  Partner's transferable interest in partnership.
 
 5 The only transferable interest of a partner in the partnership is
 
 6 the partner's share of the profits and losses of the partnership
 
 7 and the partner's right to receive distributions.  The interest
 
 8 is personal property.
 
 9      425-128  Transfer of partner's transferable interest.
 
10 (a)  A transfer, in whole or in part, of a partner's transferable
 
11 interest in the partnership:
 
12      (1)  Is permissible;
 
13      (2)  Does not by itself cause the partner's dissociation or
 
14           a dissolution and winding up of the partnership
 
15           business; and
 
16      (3)  Does not, as against the other partners or the
 
17           partnership, entitle the transferee, during the
 
18           continuance of the partnership, to participate in the
 
19           management or conduct of the partnership business, to
 
20           require access to information concerning partnership
 
21           transactions, or to inspect or copy the partnership
 
22           books or records.
 
23      (b)  A transferee of a partner's transferable interest in
 

 
 
Page 28                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1 the partnership has a right:
 
 2      (1)  To receive, in accordance with the transfer,
 
 3           distributions to which the transferor would otherwise
 
 4           be entitled;
 
 5      (2)  To receive upon the dissolution and winding up of the
 
 6           partnership business, in accordance with the transfer,
 
 7           the net amount otherwise distributable to the
 
 8           transferor; and
 
 9      (3)  To seek under section 425-138 a judicial determination
 
10           that it is equitable to wind up the partnership
 
11           business.
 
12      (c)  In a dissolution and winding up, a transferee is
 
13 entitled to an account of partnership transactions only from the
 
14 date of the latest account agreed to by all of the partners.
 
15      (d)  Upon transfer, the transferor retains the rights and
 
16 duties of a partner other than the interest in distributions
 
17 transferred.
 
18      (e)  A partnership need not give effect to a transferee's
 
19 rights under this section until it has notice of the transfer.
 
20      (f)  A transfer of a partner's transferable interest in the
 
21 partnership in violation of a restriction on transfer contained
 
22 in the partnership agreement is ineffective as to a person having
 
23 notice of the restriction at the time of transfer.
 

 
 
Page 29                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1      425-129  Partner's transferable interest subject to
 
 2 charging order.(a)  On application by a judgment creditor of a
 
 3 partner or of a partner's transferee, a court having jurisdiction
 
 4 may charge the transferable interest of the judgment debtor to
 
 5 satisfy the judgment.  The court may appoint a receiver of the
 
 6 share of the distributions due or to become due to the judgment
 
 7 debtor in respect of the partnership and make all other orders,
 
 8 directions, accounts, and inquiries the judgment debtor might
 
 9 have made or which the circumstances of the case may require.
 
10      (b)  A charging order constitutes a lien on the judgment
 
11 debtor's transferable interest in the partnership.  The court may
 
12 order a foreclosure of the interest subject to the charging order
 
13 at any time.  The purchaser at the foreclosure sale has the
 
14 rights of a transferee.
 
15      (c)  At any time before foreclosure, an interest charged may
 
16 be redeemed:
 
17      (1)  By the judgment debtor;
 
18      (2)  With property other than partnership property, by
 
19           one or more of the other partners; or
 
20      (3)  With partnership property, by one or more of the other
 
21           partners with the consent of all of the partners whose
 
22           interests are not so charged.
 
23      (d)  This part does not deprive a partner of a right under
 

 
 
Page 30                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1 exemption laws with respect to the partner's interest in the
 
 2 partnership.
 
 3      (e)  This section provides the exclusive remedy by which a
 
 4 judgment creditor of a partner or partner's transferee may
 
 5 satisfy a judgment out of the judgment debtor's transferable
 
 6 interest in the partnership.
 
 7                      PARTNER'S DISSOCIATION
 
 8      425-130  Events causing partner's dissociation.  A partner
 
 9 is dissociated from a partnership upon the occurrence of any of
 
10 the following events:
 
11      (1)  The partnership's receipt of notice of the partner's
 
12           express will to withdraw as a partner or on a later
 
13           date specified by the partner;
 
14      (2)  An event agreed to in the partnership agreement as
 
15           causing the partner's dissociation;
 
16      (3)  The partner's expulsion pursuant to the partnership
 
17           agreement;
 
18      (4)  The partner's expulsion by the unanimous vote of the
 
19           other partners if:
 
20           (A)  It is unlawful to carry on the partnership
 
21                business with that partner;
 
22           (B)  There has been a transfer of all or substantially
 
23                all of that partner's transferable interest in the
 

 
 
Page 31                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1                partnership, other than a transfer for security
 
 2                purposes, or a court order charging the partner's
 
 3                interest, which has not been foreclosed;
 
 4           (C)  Within ninety days after the partnership notifies
 
 5                a corporate partner that it will be expelled
 
 6                because it has filed articles of dissolution or
 
 7                the equivalent, its charter has been revoked, or
 
 8                its right to conduct business has been suspended
 
 9                by the jurisdiction of its incorporation, there is
 
10                no revocation of the articles of dissolution or no
 
11                reinstatement of its charter or its right to
 
12                conduct business; or
 
13           (D)  A partnership that is a partner has been dissolved
 
14                and its business is being wound up;
 
15      (5)  On application by the partnership or another partner,
 
16           the partner's expulsion by judicial determination
 
17           because:
 
18           (A)  The partner engaged in wrongful conduct that
 
19                adversely and materially affected the partnership
 
20                business;
 
21           (B)  The partner wilfully or persistently committed a
 
22                material breach of the partnership agreement or of
 
23                a duty owed to the partnership or the other
 

 
 
Page 32                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1                partners under section 425-123; or
 
 2           (C)  The partner engaged in conduct relating to the
 
 3                partnership business which makes it not reasonably
 
 4                practicable to carry on the business in
 
 5                partnership with the partner;
 
 6      (6)  The partner's:
 
 7           (A)  Becoming a debtor in bankruptcy;
 
 8           (B)  Executing an assignment for the benefit of
 
 9                creditors;
 
10           (C)  Seeking, consenting to, or acquiescing in the
 
11                appointment of a trustee, receiver, or liquidator
 
12                of that partner or of all or substantially all of
 
13                that partner's property; or
 
14           (D)  Failing, within ninety days after the appointment,
 
15                to have vacated or stayed the appointment of a
 
16                trustee, receiver, or liquidator of the partner or
 
17                of all or substantially all of the partner's
 
18                property obtained without the partner's consent or
 
19                acquiescence, or failing within ninety days after
 
20                the expiration of a stay to have the appointment
 
21                vacated;
 
22      (7)  In the case of a partner who is an individual:
 
23           (A)  The partner's death;
 

 
 
Page 33                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1           (B)  The appointment of a guardian or general
 
 2                conservator for the partner; or
 
 3           (C)  A judicial determination that the partner has
 
 4                otherwise become incapable of performing the
 
 5                partner's duties under the partnership agreement;
 
 6      (8)  In the case of a partner that is a trust or is acting
 
 7           as a partner by virtue of being a trustee of a trust,
 
 8           distribution of the trust's entire transferable
 
 9           interest in the partnership, but not merely by reason
 
10           of the substitution of a successor trustee;
 
11      (9)  In the case of a partner that is an estate or is acting
 
12           as a partner by virtue of being a personal
 
13           representative of an estate, distribution of the
 
14           estate's entire transferable interest in the
 
15           partnership, but not merely by reason of the
 
16           substitution of a successor personal representative; or
 
17     (10)  Termination of a partner who is not an individual,
 
18           partnership, corporation, trust, or estate.
 
19      425-131  Partner's power to dissociate; wrongful
 
20 dissociation.(a)  A partner has the power to dissociate at any
 
21 time, rightfully or wrongfully, by express will pursuant to
 
22 section 425-130(1).
 
23      (b)  A partner's dissociation is wrongful only if:
 

 
 
Page 34                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1      (1)  It is in breach of an express provision of the
 
 2           partnership agreement; or
 
 3      (2)  In the case of a partnership for a definite term or
 
 4           particular undertaking, before the expiration of the
 
 5           term or the completion of the undertaking:
 
 6           (A)  The partner withdraws by express will, unless the
 
 7                withdrawal follows within ninety days after
 
 8                another partner's dissociation by death or
 
 9                otherwise under section 425-130(6) to (10) or
 
10                wrongful dissociation under this subsection;
 
11           (B)  The partner is expelled by judicial determination
 
12                under section 425-130(5);
 
13           (C)  The partner is dissociated by becoming a debtor
 
14                in bankruptcy; or
 
15           (D)  In the case of a partner who is not an individual,
 
16                trust other than a business trust, or estate, the
 
17                partner is expelled or otherwise dissociated
 
18                because it wilfully dissolved or terminated.
 
19      (c)  A partner who wrongfully dissociates is liable to the
 
20 partnership and to the other partners for damages caused by the
 
21 dissociation.  The liability is in addition to any other
 
22 obligation of the partner to the partnership or to the other
 
23 partners.
 

 
 
Page 35                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1      425-132  Effect of partner's dissociation.(a)  If a
 
 2 partner's dissociation results in a dissolution and winding up of
 
 3 the partnership business, sections 425-138 to 425-144 apply;
 
 4 otherwise, sections 425-133 to 425-137 apply.
 
 5      (b)  Upon a partner's dissociation:
 
 6      (1)  The partner's right to participate in the management
 
 7           and conduct of the partnership business terminates,
 
 8           except as otherwise provided in section 425-140;
 
 9      (2)  The partner's duty of loyalty under section
 
10           425-123(b)(3) terminates; and
 
11      (3)  The partner's duty of loyalty under section
 
12           425-123(b)(1) and (2) and duty of care under section
 
13           425-123(c) continue only with regard to matters arising
 
14           and events occurring before the partner's dissociation,
 
15           unless the partner participates in winding up the
 
16           partnership's business pursuant to section 425-140.
 
17                    PARTNER'S DISSOCIATION WHEN
 
18                       BUSINESS NOT WOUND UP
 
19      425-133  Purchase of dissociated partner's interest.(a)
 
20 If a partner is dissociated from a partnership without resulting
 
21 in a dissolution and winding up of the partnership business under
 
22 section 425-138, the partnership shall cause the dissociated
 
23 partner's interest in the partnership to be purchased for a
 

 
 
Page 36                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1 buyout price determined pursuant to subsection (b).
 
 2      (b)  The buyout price of a dissociated partner's interest is
 
 3 the amount that would have been distributable to the dissociating
 
 4 partner under section 425-144(b) if, on the date of dissociation,
 
 5 the assets of the partnership were sold at a price equal to the
 
 6 greater of the liquidation value or the value based on a sale of
 
 7 the entire business as a going concern without the dissociated
 
 8 partner and the partnership were wound up as of that date.
 
 9 Interest shall be paid from the date of dissociation to the date
 
10 of payment.
 
11      (c)  Damages for wrongful dissociation under section
 
12 425-131(b), and all other amounts owing, whether or not presently
 
13 due, from the dissociated partner to the partnership, shall be
 
14 offset against the buyout price.  Interest shall be paid from the
 
15 date the amount owed becomes due to the date of payment.
 
16      (d)  A partnership shall indemnify a dissociated partner
 
17 whose interest is being purchased against all partnership
 
18 liabilities, whether incurred before or after the dissociation,
 
19 except liabilities incurred by an act of the dissociated partner
 
20 under section 425-134.
 
21      (e)  If no agreement for the purchase of a dissociated
 
22 partner's interest is reached within one hundred twenty days
 
23 after a written demand for payment, the partnership shall pay, or
 

 
 
Page 37                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1 cause to be paid, in cash to the dissociated partner the amount
 
 2 the partnership estimates to be the buyout price and accrued
 
 3 interest, reduced by any offsets and accrued interest under
 
 4 subsection (c).
 
 5      (f)  If a deferred payment is authorized under subsection
 
 6 (h), the partnership may tender a written offer to pay the amount
 
 7 it estimates to be the buyout price and accrued interest, reduced
 
 8 by any offsets under subsection (c), stating the time of payment,
 
 9 the amount and type of security for payment, and the other terms
 
10 and conditions of the obligation.
 
11      (g)  The payment or tender required by subsection (e) or (f)
 
12 shall be accompanied by the following:
 
13      (1)  A statement of partnership assets and liabilities as of
 
14           the date of dissociation;
 
15      (2)  The latest available partnership balance sheet and
 
16           income statement, if any;
 
17      (3)  An explanation of how the estimated amount of the
 
18           payment was calculated; and
 
19      (4)  Written notice that the payment is in full satisfaction
 
20           of the obligation to purchase unless, within one
 
21           hundred twenty days after the written notice, the
 
22           dissociated partner commences an action to determine
 
23           the buyout price, any offsets under subsection (c), or
 

 
 
Page 38                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1           other terms of the obligation to purchase.
 
 2      (h)  A partner who wrongfully dissociates before the
 
 3 expiration of a definite term or the completion of a particular
 
 4 undertaking is not entitled to payment of any portion of the
 
 5 buyout price until the expiration of the term or completion of
 
 6 the undertaking, unless the partner establishes to the
 
 7 satisfaction of the court that earlier payment will not cause
 
 8 undue hardship to the business of the partnership.  A deferred
 
 9 payment must be adequately secured and bear interest.
 
10      (i)  A dissociated partner may maintain an action against
 
11 the partnership, pursuant to section 425-124(b)(2), to determine
 
12 the buyout price of that partner's interest, any offsets under
 
13 subsection (c), or other terms of the obligation to purchase.
 
14 The action must be commenced within one hundred twenty days after
 
15 the partnership has tendered payment or an offer to pay or within
 
16 one year after written demand for payment if no payment or offer
 
17 to pay is tendered.  The court shall determine the buyout price
 
18 of the dissociated partner's interest, any offset due under
 
19 subsection (c), and accrued interest, and enter judgment for any
 
20 additional payment or refund.  If deferred payment is authorized
 
21 under subsection (h), the court shall also determine the security
 
22 for payment and other terms of the obligation to purchase.  The
 
23 court may assess reasonable attorney's fees and the fees and
 

 
 
Page 39                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1 expenses of appraisers or other experts for a party to the
 
 2 action, in amounts the court finds equitable, against a party
 
 3 that the court finds acted arbitrarily, vexatiously, or not in
 
 4 good faith.  The finding may be based on the partnership's
 
 5 failure to tender payment or an offer to pay or to comply with
 
 6 subsection (g).
 
 7      425-134  Dissociated partner's power to bind and liability
 
 8 to partnership.(a)  For two years after a partner dissociates
 
 9 without resulting in a dissolution and winding up of the
 
10 partnership business, the partnership is bound by an act of the
 
11 dissociated partner which would have bound the partnership under
 
12 section 425-112 before dissociation only if at the time of
 
13 entering into the transaction the other party:
 
14      (1)  Reasonably believed that the dissociated partner was
 
15           then a partner;
 
16      (2)  Did not have notice of the partner's dissociation; and
 
17      (3)  Is not deemed to have had knowledge under section
 
18           425-114(b) or notice under section 425-136(c).
 
19      (b)  A dissociated partner is liable to the partnership for
 
20 any damage caused to the partnership arising from an obligation
 
21 incurred by the dissociated partner after dissociation for which
 
22 the partnership is liable under subsection (a).
 
23      425-135  Dissociated partner's liability to other persons.
 

 
 
Page 40                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1 (a)  A partner's dissociation does not of itself discharge the
 
 2 partner's liability for a partnership obligation incurred before
 
 3 dissociation.  A dissociated partner is not liable for a
 
 4 partnership obligation incurred after dissociation, except as
 
 5 otherwise provided in subsection (b).
 
 6      (b)  A partner who dissociates without resulting in a
 
 7 dissolution and winding up of the partnership business is liable
 
 8 as a partner to the other party in a transaction entered into by
 
 9 the partnership within two years after the partner's
 
10 dissociation, only if the partner is liable for the obligation
 
11 under section 425-117 and at the time of entering into the
 
12 transaction the other party:
 
13      (1)  Reasonably believed that the dissociated partner was
 
14           then a partner;
 
15      (2)  Did not have notice of the partner's dissociation; and
 
16      (3)  Is not deemed to have had knowledge under section
 
17           425-114(b) or notice under section 425-136(c).
 
18      (c)  By agreement with the partnership creditor and the
 
19 partners continuing the business, a dissociated partner may be
 
20 released from liability for a partnership obligation.
 
21      (d)  A dissociated partner is released from liability for a
 
22 partnership obligation if a partnership creditor, with notice of
 
23 the partner's dissociation but without the partner's consent,
 

 
 
Page 41                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1 agrees to a material alteration in the nature or time of payment
 
 2 of a partnership obligation.
 
 3      425-136  Statement of dissociation.(a)  A dissociated
 
 4 partner or the partnership may file a statement of dissociation
 
 5 stating the name of the partnership and that the partner is
 
 6 dissociated from the partnership.
 
 7      (b)  A statement of dissociation is a limitation on the
 
 8 authority of a dissociated partner for the purposes of section
 
 9 425-114(a) and (b).
 
10      (c)  For the purposes of sections 425-134(a)(3) and
 
11 425-135(b)(3), a person not a partner is deemed to have notice of
 
12 the dissociation ninety days after the statement of dissociation
 
13 is filed.
 
14      425-137  Continued use of partnership name.  Continued use
 
15 of a partnership name, or a dissociated partner's name as part
 
16 thereof, by partners continuing the business does not of itself
 
17 make the dissociated partner liable for an obligation of the
 
18 partners or the partnership continuing the business.
 
19                  WINDING UP PARTNERSHIP BUSINESS
 
20      425-138  Events causing dissolution and winding up of
 
21 partnership business.  A partnership is dissolved, and its
 
22 business shall be wound up, only upon the occurrence of any of
 
23 the following events:
 

 
 
Page 42                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1      (1)  In a partnership at will, the partnership's having
 
 2           notice from a partner, other than a partner who is
 
 3           dissociated under section 425-130(2) to (10), of that
 
 4           partner's express will to withdraw as a partner, or on
 
 5           a later date specified by the partner;
 
 6      (2)  In a partnership for a definite term or particular
 
 7           undertaking:
 
 8           (A)  Within ninety days after a partner's dissociation
 
 9                by death or otherwise under section 425-130(6) to
 
10                (10) or wrongful dissociation under section 425-
 
11                131(b), the express will of at least half of the
 
12                remaining partners to wind up the partnership
 
13                business, for which purpose a partner's rightful
 
14                dissociation pursuant to section 425-131(b)(2)
 
15                constitutes the expression of that partner's will
 
16                to wind up the partnership business;
 
17           (B)  The express will of all of the partners to wind up
 
18                the partnership business; or
 
19           (C)  The expiration of the term or the completion of
 
20                the undertaking;
 
21      (3)  An event agreed to in the partnership agreement
 
22           resulting in the winding up of the partnership
 
23           business;
 

 
 
Page 43                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1      (4)  An event that makes it unlawful for all or
 
 2           substantially all of the business of the partnership to
 
 3           be continued, but a cure of illegality within ninety
 
 4           days after notice to the partnership of the event is
 
 5           effective retroactively to the date of the event for
 
 6           purposes of this section;
 
 7      (5)  On application by a partner, a judicial determination
 
 8           that:
 
 9           (A)  The economic purpose of the partnership is likely
 
10                to be unreasonably frustrated;
 
11           (B)  Another partner has engaged in conduct relating to
 
12                the partnership business which makes it not
 
13                reasonably practicable to carry on the business in
 
14                partnership with that partner; or
 
15           (C)  It is not otherwise reasonably practicable to
 
16                carry on the partnership business in conformity
 
17                with the partnership agreement; or
 
18      (6)  On application by a transferee of a partner's
 
19           transferable interest, a judicial determination that it
 
20           is equitable to wind up the partnership business:
 
21           (A)  After the expiration of the term or completion of
 
22                the undertaking, if the partnership was for a
 
23                definite term or particular undertaking at the
 

 
 
Page 44                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1                time of the transfer or entry of the charging
 
 2                order that gave rise to the transfer; or
 
 3           (B)  At any time, if the partnership was a partnership
 
 4                at will at the time of the transfer or entry of
 
 5                the charging order that gave rise to the transfer.
 
 6      425-139  Partnership continues after dissolution.(a)
 
 7 Subject to subsection (b), a partnership continues after
 
 8 dissolution only for the purpose of winding up its business.  The
 
 9 partnership is terminated when the winding up of its business is
 
10 completed.
 
11      (b)  At any time after the dissolution of a partnership and
 
12 before the winding up of its business is completed, all of the
 
13 partners, including any dissociating partner other than a
 
14 wrongfully dissociating partner, may waive the right to have the
 
15 partnership's business wound up and the partnership terminated.
 
16 In that event:
 
17      (1)  The partnership resumes carrying on its business as if
 
18           dissolution had never occurred, and any liability
 
19           incurred by the partnership or a partner after the
 
20           dissolution and before the waiver is determined as if
 
21           dissolution had never occurred; and
 
22      (2)  The rights of a third party accruing under section
 
23           425-141(1) or arising out of conduct in reliance on the
 

 
 
Page 45                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1           dissolution before the third party knew or received a
 
 2           notification of the waiver may not be adversely
 
 3           affected.
 
 4      425-140  Right to wind up partnership business.(a)  After
 
 5 dissolution, a partner who has not wrongfully dissociated may
 
 6 participate in winding up the partnership's business, but on
 
 7 application of any partner, partner's legal representative, or
 
 8 transferee, a court of competent jurisdiction for good cause
 
 9 shown, may order judicial supervision of the winding up.
 
10      (b)  The legal representative of the last surviving partner
 
11 may wind up a partnership's business.
 
12      (c)  A person winding up a partnership's business may
 
13 preserve the partnership business or property as a going concern
 
14 for a reasonable time, prosecute and defend actions and
 
15 proceedings, whether civil, criminal, or administrative, settle
 
16 and close the partnership's business, dispose of and transfer the
 
17 partnership's property, discharge the partnership's liabilities,
 
18 distribute the assets of the partnership pursuant to section
 
19 425-144, settle disputes by mediation or arbitration, and perform
 
20 other necessary acts.
 
21      425-141  Partner's power to bind partnership after
 
22 dissolution.  Subject to section 425-142, a partnership is bound
 
23 by a partner's act after dissolution that:
 

 
 
Page 46                                                    1512
                                     S.B. NO.           S.D. 1        
                                            

 
 1      (1)  Is appropriate for winding up the partnership business;
 
 2           or
 
 3      (2)  Would have bound the partnership under section 425-112
 
 4           before dissolution, if the other party to the
 
 5           transaction did not have notice of the dissolution.
 
 6      425-142  Statement of dissolution.(a)  After dissolution,
 
 7 a partner who has not wrongfully dissociated may file a statement
 
 8 of dissolution stating the name of the partnership and that the
 
 9 partnership has dissolved and is winding up its business.
 
10      (b)  A statement of dissolution cancels a filed registration
 
11 for the purposes of section 425-114(a) and is a limitation on
 
12 authority for the purposes of section 425-114(b).
 
13      (c)  For the purposes of sections 425-112 and 425-141, a
 
14 person not a partner is deemed to have notice of the dissolution
 
15 and the limitation on the partners' authority as a result of the
 
16 statement of dissolution ninety days after it is filed.
 
17      (d)  After filing and, if appropriate, recording a statement
 
18 of dissolution, a dissolved partnership may file and, if
 
19 appropriate, record a registration statement which will operate
 
20 with respect to a person not a partner as provided in section
 
21 425-114(a) and (b) in any transaction, whether or not the
 
22 transaction is appropriate for winding up the partnership
 
23 business.
 

 
 
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 1      425-143  Partner's liability to other partners after
 
 2 dissolution.(a)  Except as otherwise provided in subsection (b)
 
 3 and section 425-117, after dissolution a partner is liable to the
 
 4 other partners for the partner's share of any partnership
 
 5 liability incurred under section 425-141.
 
 6      (b)  A partner who, with knowledge of the dissolution,
 
 7 incurs a partnership liability under section 425-141(2) by an act
 
 8 that is not appropriate for winding up the partnership business
 
 9 is liable to the partnership for any damage caused to the
 
10 partnership arising from the liability.
 
11      425-144  Settlement of accounts and contributions among
 
12 partners.(a)  In winding up a partnership's business, the
 
13 assets of the partnership, including the contributions of the
 
14 partners required by this section, shall be applied to discharge
 
15 its obligations to creditors, including, to the extent permitted
 
16 by law, partners who are creditors.  Any surplus shall be applied
 
17 to pay in cash the net amount distributable to partners in
 
18 accordance with their right to distributions under subsection
 
19 (b).
 
20      (b)  Each partner is entitled to a settlement of all
 
21 partnership accounts upon winding up the partnership business.
 
22 In settling accounts among the partners, profits and losses that
 
23 result from the liquidation of the partnership assets must be
 

 
 
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 1 credited and charged to the partners' accounts.  The partnership
 
 2 shall make a distribution to a partner in an amount equal to any
 
 3 excess of the credits over the charges in the partner's account.
 
 4 A partner shall contribute to the partnership an amount equal to
 
 5 any excess of the charges over the credits in the partner's
 
 6 account but excluding from the calculation charges attributable
 
 7 to an obligation for which the partner is not personally liable
 
 8 under section 425-117.
 
 9      (c)  If a partner fails to contribute the full amount
 
10 required under subsection (b), all of the other partners shall
 
11 contribute, in the proportions in which those partners share
 
12 partnership losses, the additional amount necessary to satisfy
 
13 the partnership obligations for which they are personally liable
 
14 under section 425-117.  A partner or partner's legal
 
15 representative may recover from the other partners any
 
16 contributions the partner makes to the extent the amount
 
17 contributed exceeds that partner's share of the partnership
 
18 obligations for which the partner is personally liable under
 
19 section 425-117.
 
20      (d)  After the settlement of accounts, each partner shall
 
21 contribute, in the proportion in which the partner shares
 
22 partnership losses, the amount necessary to satisfy partnership
 
23 obligations that were not known at the time of the settlement and
 

 
 
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 1 for which the partner is personally liable under section 425-117.
 
 2      (e)  The estate of a deceased partner is liable for the
 
 3 partner's obligation to contribute to the partnership.
 
 4      (f)  An assignee for the benefit of creditors of a
 
 5 partnership or a partner, or a person appointed by a court to
 
 6 represent creditors of a partnership or a partner, may enforce a
 
 7 partner's obligation to contribute to the partnership.
 
 8                     MISCELLANEOUS PROVISIONS
 
 9      425-145  Short title.  This part may be cited as the
 
10 Uniform Partnership Act."
 
11      SECTION 2.  Section 425-1, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "425-1  Registration and annual statements.  Whenever any
 
14 general partnership is formed under the laws of the State to do
 
15 business in the State, or any general partnership formed under
 
16 the laws of any other jurisdiction shall do business in the
 
17 State, such partnership shall file in the office of the director
 
18 of commerce and consumer affairs the registration and annual
 
19 statements hereinafter provided.  A registration statement shall
 
20 be filed by a partnership formed under the laws of the State
 
21 within thirty days after the partnership is formed and by a
 
22 partnership formed under the laws of any other jurisdiction
 
23 within thirty days after the commencement of business in the
 

 
 
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 1 State.  An annual statement shall be filed on or before March 31
 
 2 of each year, as of December 31 of the preceding year.  Every
 
 3 such registration shall contain:
 
 4      (1)  The name of the partnership;
 
 5      (2)  The name and residence of each partner;
 
 6     [(3)  The nature of the partnership business;
 
 7      (4)] (3)  The [location] street address of the [principal
 
 8           place of business] chief executive office of the
 
 9           partnership in the State, and if the partnership is one
 
10           formed under the laws of any other jurisdiction, the
 
11           name of the jurisdiction and the [location of the
 
12           principal place of business] street address of the
 
13           [partnership;] partnership's chief executive office and
 
14           of one office in this State, if there is one;
 
15     [(5)] (4)  The date the partnership was formed, and if the
 
16           partnership is one formed under the laws of any other
 
17           jurisdiction, the date the partnership commenced
 
18           business in the State;
 
19     [(6)] (5)  The fact that none of the partners is either a
 
20           minor or an incompetent person;
 
21     [(7)] (6)  In the case of a foreign general partnership, the
 
22           designation of a person residing within the State as
 
23           agent for service of process and notice[.];
 

 
 
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 1     [(8)] (7)  The names of the partners authorized to execute an
 
 2           instrument transferring real property held in the name
 
 3           of the partnership, and may state the authority, or
 
 4           limitations on the authority, of some or all of the
 
 5           partners to enter into other transactions on behalf of
 
 6           the partnership and any other matter.
 
 7      Every such annual statement shall contain the information
 
 8 specified in paragraphs (1), (2), (3), (4), (6), and (7) [above]
 
 9 and a listing of the names of any partner admitted, withdrawn, or
 
10 who has died during the year.  
 
11      The registration statement of a domestic partnership shall
 
12 be certified by each partner, and the registration statement of a
 
13 foreign partnership shall be certified by at least one partner.
 
14 Each annual statement shall be certified as correct by any
 
15 partner."
 
16      SECTION 3.  Section 425-9, Hawaii Revised Statutes is
 
17 amended to read as follows:
 
18      "425-9  Statement of dissolution.  Whenever a domestic
 
19 general partnership is dissolved, and the business is not
 
20 continued [within the meaning of section 425-141(1), (3), (5), or
 
21 (6)], a statement thereof showing the cause of dissolution shall
 
22 be filed in the office of the director of commerce and consumer
 
23 affairs within thirty days after dissolution.  The statement
 

 
 
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 1 shall be certified by all partners except in such cases as the
 
 2 circumstances make it obviously impossible to secure the
 
 3 signature of one or more partners, which circumstances shall be
 
 4 set forth in the statement."
 
 5      SECTION 4.  Section 425-166, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "[[]425-166[]]  Statement of dissolution.  Whenever a
 
 8 limited liability partnership is dissolved, and the business is
 
 9 not continued [within the meaning of section 425-141(1), (3),
 
10 (5), or (6)], a statement thereof showing the cause of
 
11 dissolution shall be filed in the office of the director within
 
12 thirty days after dissolution.  The statement shall be certified
 
13 by all partners except in cases in which circumstances make it
 
14 impossible to secure the signature of all partners, which
 
15 circumstances shall be set forth in the statement."
 
16      SECTION 5.  Chapter 425, Part IV, Hawaii Revised Statutes is
 
17 repealed.
 
18      SECTION 6.  Statutory material to be repealed is bracketed.
 
19 New statutory material is underscored.
 
20      SECTION 7.  This Act shall take effect on July 1, 2000.
 
21