# Title 45 — Partnerships

## Chapter 45-19 — Partner's Dissociation When Business Not Wound Up

### § 45-19-01. (701) Purchase of dissociated partner's interest.

1. If a partner is dissociated from a partnership without resulting in a dissolution and
winding up of the partnership business under section 45-20-01, the partnership shall
cause the dissociated partner's interest in the partnership to be purchased for a buyout
price determined pursuant to subsection 2.
2. The buyout price of a dissociated partner's interest is the amount that would have
been distributable to the dissociating partner under subsection 2 of section 45-20-07 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 were wound up
as of that date. Interest must be paid from the date of dissociation to the date of
payment.
3. Damages for wrongful dissociation under subsection 2 of section 45-18-02, and all
other amounts owing, whether or not presently due, from the dissociated partner to the
partnership, must be offset against the buyout price. Interest must be paid from the
date the amount owed becomes due to the date of payment.
4. 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 45-19-02.
5. If no agreement for the purchase of a dissociated partner's interest is reached within
one hundred twenty 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 subsection 3.
6. If a deferred payment is authorized under subsection 8, 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 subsection 3, stating the time of payment, the amount
and type of security for payment, and the other terms and conditions of the obligation.
7. The payment or tender required by subsection 5 or 6 must be accompanied by the
following:
a. A statement of partnership assets and liabilities as of the date of dissociation;
b. The latest available partnership balance sheet and income statement, if any;
c. An explanation of how the estimated amount of the payment was calculated; and
d. Written notice that the payment is in full satisfaction of the obligation to purchase
unless, within one hundred twenty days after the written notice, the dissociated
partner commences an action to determine the buyout price, any offsets under
subsection 3, or other terms of the obligation to purchase.
8. 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 must be
adequately secured and bear interest.
9. A dissociated partner may maintain an action against the partnership, pursuant to
paragraph 2 of subdivision b of subsection 2 of section 45-16-05, to determine the
buyout price of that partner's interest, any offsets under subsection 3, or other terms of
the obligation to purchase. The action must be commenced within one hundred twenty
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 subsection 3, and accrued interest, and enter judgment for any additional
payment or refund. If deferred payment is authorized under subsection 8, 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 subsection 7.
### § 45-19-02. (702) Dissociated partner's power to bind and liability to partnership.

1. For two years after a partner dissociates without resulting in a dissolution and winding
up of the partnership business, the partnership, including a surviving partnership under
chapter 45-21, is bound by an act of the dissociated partner which would have bound
the partnership under section 45-15-01 before dissociation only if at the time of
entering into the transaction the other party:
a. Reasonably believed that the dissociated partner was then a partner;
b. Did not have notice of the partner's dissociation; and
c. Is not deemed to have had knowledge under subsection 4 of section 45-15-03 or
notice under subsection 3 of section 45-19-04.
2. 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 subsection 1.
### § 45-19-03. (703) Dissociated partner's liability to other persons.

1. 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
subsection 2.
2. A partner who dissociates without resulting in a dissolution and winding up of the
partnership business is liable as a partner to the other party in a transaction entered
into by the partnership, or a surviving partnership under chapter 45-21, within two
years after the partner's dissociation, only if at the time of entering into the transaction
the other party:
a. Reasonably believed that the dissociated partner was then a partner;
b. Did not have notice of the partner's dissociation; and
c. Is not deemed to have had knowledge under subsection 4 of section 45-15-03 or
notice under subsection 3 of section 45-19-04.
3. By agreement with the partnership creditor and the partners continuing the business, a
dissociated partner may be released from liability for a partnership obligation.
4. 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.
### § 45-19-04. (704) Statement of dissociation.

1. A dissociated partner or the partnership may file with the secretary of state, along with
the fees provided in section 45-13-05, a statement of dissociation stating the name of
the partnership and that the partner is dissociated from the partnership.
2. A statement of dissociation is a limitation on the authority of a dissociated partner for
the purposes of subsections 3 and 4 of section 45-15-03.
3. For the purposes of subdivision c of subsection 1 of section 45-19-02 and
subdivision c of subsection 2 of section 45-19-03, a person not a partner is deemed to
have notice of the dissociation ninety days after the statement of dissociation is filed.
### § 45-19-05. (705) Continued use of partnership name.

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.
