2005 Illinois Code - 805 ILCS 205/ Uniform Partnership Act. Part VI - Dissolution And Winding Up
(805 ILCS 205/Pt. VI heading)
PART VI
DISSOLUTION AND WINDING UP
(805 ILCS 205/29) (from Ch. 106 1/2, par. 29)
(Section scheduled to be repealed on January 1, 2008)
Sec. 29.
The dissolution of a partnership is the change in the relation of
the partners caused by any partner ceasing to be associated in the carrying
on as distinguished from the winding up of the business.
(Source: Laws 1917, p. 625.)
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(805 ILCS 205/30) (from Ch. 106 1/2, par. 30)
(Section scheduled to be repealed on January 1, 2008)
Sec. 30.
On dissolution the partnership is not terminated, but continues
until the winding up of partnership affairs is completed.
(Source: Laws 1917, p. 625.)
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(805 ILCS 205/31) (from Ch. 106 1/2, par. 31)
(Section scheduled to be repealed on January 1, 2008)
Sec. 31.
Dissolution is caused:
(1) Without violation of the agreement between the partners,
(a) By the termination of the definite term or particular undertaking
specified in the agreement,
(b) By the express will of any partner when no definite term or
particular undertaking is specified,
(c) By the express will of all the partners who have not assigned their
interests or allowed them to be charged for their separate debts, either
before or after the termination of any specified term or particular
undertaking,
(d) By the expulsion of any partner from the business bona fide in
accordance with such a power conferred by the agreement between the
partners;
(2) In contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of this
section, by the express will of any partner at any time;
(3) By any event which makes it unlawful for the business of the
partnership to be carried on or for the members to carry it on in
partnership;
(4) By the death of any partner;
(5) By the bankruptcy of any partner or the partnership;
(6) By the judgment of a court under Section 32.
(Source: P.A. 84‑545.)
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(805 ILCS 205/32) (from Ch. 106 1/2, par. 32)
(Section scheduled to be repealed on January 1, 2008)
Sec. 32.
(1) On application by or for a partner the court shall order a
dissolution whenever:
(a) A partner has been declared a lunatic in any judicial proceeding or
is shown to be of unsound mind,
(b) A partner becomes in any other way incapable of performing his part
of the partnership contract,
(c) A partner has been guilty of such conduct as tends to affect
prejudicially the carrying on of the business,
(d) A partner wilfully or persistently commits a breach of the
partnership or agreement, or otherwise so conducts himself in matters
relating to the partnership business that it is not reasonably practicable
to carry on the business in partnership with him,
(e) The business of the partnership can only be carried on at a loss.
(f) Other circumstances render a dissolution equitable.
(2) On the application of the purchaser of a partner's interest under
Sections 28 or 29:
(a) After the termination of the specified term or particular
undertaking,
(b) At any time if the partnership was a partnership at will when the
interest was assigned or when the charging order was issued.
(Source: P.A. 79‑1366.)
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(805 ILCS 205/33) (from Ch. 106 1/2, par. 33)
(Section scheduled to be repealed on January 1, 2008)
Sec. 33.
Except so far as may be necessary to wind up partnership affairs
or to complete transactions begun but not then finished, dissolution
terminates all authority of any partner to act for the partnership.
(1) With respect to the partners,
(a) When the dissolution is not by the act, bankruptcy or death of a
partner; or
(b) When the dissolution is by such act, bankruptcy or death of a
partner, in cases where Section 34 so requires.
(2) With respect to persons not partners, as declared in Section 35.
(Source: Laws 1917, p. 625.)
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(805 ILCS 205/34) (from Ch. 106 1/2, par. 34)
(Section scheduled to be repealed on January 1, 2008)
Sec. 34.
Liability of partners inter se upon dissolution.
Where the dissolution is caused by the act, death or bankruptcy of
a partner, each partner is liable to his co‑partners for his share of any
liability created by any partner acting for the partnership as if the
partnership had not been dissolved unless:
(a) The dissolution being by act of any partner, the partner acting for
the partnership had knowledge of the dissolution;
(b) The dissolution being by the death or bankruptcy of a partner, the
partner acting for the partnership had knowledge or notice of the death or
bankruptcy; or
(c) The liability is for a debt, obligation, or liability for which the
partner is not liable as provided in subsection (b) of Section 15.
(Source: P.A. 88‑573, eff. 8‑11‑94.)
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(805 ILCS 205/35) (from Ch. 106 1/2, par. 35)
(Section scheduled to be repealed on January 1, 2008)
Sec. 35.
(1) After dissolution a partner can bind the partnership except as
provided in paragraph (3)
(a) By any act appropriate for winding up partnership affairs or
completing transactions unfinished at dissolution.
(b) By any transaction which would bind the partnership if dissolution
had not taken place, provided the other party to the transaction
(I) Had extended credit to the partnership prior to dissolution and had
no knowledge or notice of the dissolution; or
(II) Though he had not so extended credit, had nevertheless known of the
partnership prior to dissolution, and, having no knowledge or notice of
dissolution, the fact of dissolution had not been advertised in a newspaper
of general circulation in the place (or in each place if more than one) at
which the partnership business was regularly carried on.
(2) The liability of a partner under paragraph (1b) shall be satisfied
out of partnership assets alone when such partner had been prior to
dissolution
(a) Unknown as a partner to the person with whom the contract is made;
and
(b) So far unknown and inactive in partnership affairs that the business
reputation of the partnership could not be said to have been in any degree
due to his connection with it.
(3) The partnership is in no case bound by any act of a partner after
dissolution
(a) Where the partnership is dissolved because it is unlawful to carry
on the business, unless the act is appropriate for winding up partnership
affairs; or
(b) Where the partner has become bankrupt; or
(c) Where the partner has no authority to wind up partnership affairs,
except by a transaction with one who
(I) Had extended credit to the partnership prior to dissolution and had
no knowledge or notice of his want of authority; or
(II) Had not extended credit to the partnership prior to dissolution,
and, having no knowledge or notice of his want of authority, the fact of
his want of authority has not been advertised in the manner provided for
advertising the fact of dissolution in paragraph (1b II).
(4) Nothing in this section shall affect the liability under Section 16
of any person who after dissolution represents himself or consents to
another representing him as a partner in a partnership engaged in carrying
on business.
(Source: Laws 1917, p. 625.)
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(805 ILCS 205/36) (from Ch. 106 1/2, par. 36)
(Section scheduled to be repealed on January 1, 2008)
Sec. 36.
Liability of partners upon dissolution.
(1) The dissolution of the partnership does not of itself
discharge the existing liability of any partner.
(2) A partner is discharged from any existing liability upon dissolution
of the partnership by an agreement to that effect between himself, the
partnership creditor and the person or partnership continuing the business,
and such agreement may be inferred from the course of dealing between the
creditor having knowledge of the dissolution and the person or partnership
continuing the business.
(3) Where a person agrees to assume the existing obligations of a
dissolved partnership, the partners whose obligations have been assumed
shall be discharged from any liability to any creditor of the partnership
who, knowing of the agreement, consents to a material alteration in the
nature or time of payment of such obligations.
(4) The individual property of a deceased partner shall be liable for
those obligations of the partnership incurred while he was a partner and
for which he was liable under Section 15 but
subject to the prior payment of his separate debts.
(Source: P.A. 88‑573, eff. 8‑11‑94.)
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(805 ILCS 205/37) (from Ch. 106 1/2, par. 37)
(Section scheduled to be repealed on January 1, 2008)
Sec. 37.
Unless otherwise agreed the partners who have not wrongfully
dissolved the partnership or the legal representative of the last surviving
partner, not bankrupt, has the right to wind up the partnership affairs:
Provided, however, that any partner, his legal representative or his
assignee, upon cause shown, may obtain winding up by the court.
(Source: Laws 1917, p. 625.)
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(805 ILCS 205/38) (from Ch. 106 1/2, par. 38)
(Section scheduled to be repealed on January 1, 2008)
Sec. 38.
(1) When dissolution is caused in any way, except in contravention
of the partnership agreement, each partner, as against his co‑partners and
all persons claiming through them in respect of their interests in the
partnership, unless otherwise agreed, may have the partnership property
applied to discharge its liabilities, and the surplus applied to pay in
cash the net amount owing to the respective partners. But if dissolution is
caused by expulsion of a partner, bona fide under the partnership
agreement, and if the expelled partner is discharged from all partnership
liabilities, either by payment or agreement under Section 36 (2), he shall
receive in cash only the net amount due him from the partnership.
(2) When dissolution is caused in contravention of the partnership
agreement the rights of the partners shall be as follows:
(a) Each partner who has not caused dissolution wrongfully shall have,
I. All the rights specified in paragraph (1) of this section, and
II. The right, as against each partner who has caused the dissolution
wrongfully, to damages for breach of the agreement.
(b) The partners who have not caused the dissolution wrongfully, if they
all desire to continue the business in the same name, either by themselves
or jointly with others, may do so, during the agreed term for the
partnership and for that purpose may possess the partnership property,
provided they secure the payment by bond approved by the court, or pay to
any partner who has caused the dissolution wrongfully, the value of his
interest in the partnership at the dissolution, less any damages
recoverable under clause (2a II) of this section, and in like manner
indemnify him against all present or future partnership liabilities.
(c) A partner who has caused the dissolution wrongfully shall have:
I. If the business is not continued under the provisions of paragraph
(2b) all the rights of a partner under paragraph (1), subject to clause (2a
II), of this section.
II. If the business is continued under paragraph (2b) of this section
the right as against his co‑partners and all claiming through them in
respect of their interests in the partnership, to have the value of his
interest in the partnership, less any damages caused to his co‑partners by
the dissolution, ascertained and paid to him in cash, or the payment
secured by bond approved by the court, and to be released from all existing
liabilities of the partnership; but in ascertaining the value of the
partner's interest the value of the good will of the business shall not be
considered.
(Source: Laws 1917, p. 625.)
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(805 ILCS 205/39) (from Ch. 106 1/2, par. 39)
(Section scheduled to be repealed on January 1, 2008)
Sec. 39.
Where a partnership contract is rescinded on the ground of the
fraud or misrepresentation of one of the parties thereto, the party
entitled to rescind is, without prejudice to any other right, entitled,
(a) To a lien on, or right of retention of, the surplus of the
partnership property after satisfying the partnership liabilities to third
persons for any sum of money paid by him for the purchase of an interest in
the partnership and for any capital or advances contributed by him; and
(b) To stand, after all liabilities to third persons have been
satisfied, in the place of the creditors of the partnership for any
payments made by him in respect of the partnership liabilities, and
(c) To be indemnified by the person guilty of the fraud or making the
representation against all debts and liabilities of the partnership.
(Source: Laws 1917, p. 625.)
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(805 ILCS 205/40) (from Ch. 106 1/2, par. 40)
(Section scheduled to be repealed on January 1, 2008)
Sec. 40.
Settlement of accounts between partners.
In settling accounts
between the partners after dissolution, the following rules shall be observed,
subject to any agreement to the contrary:
(a) The assets of the partnership are:
I. The partnership property,
II. The contributions of the partners specified in |
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clause (d) of this paragraph.
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(b) The liabilities of the partnership shall rank in order of payment,
as follows:
I. Those owing to creditors other than partners,
II. Those owing to partners other than for capital
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III. Those owing to partners in respect of capital,
IV. Those owing to partners in respect of profits.
(c) The assets shall be applied in the order of their declaration in
clause (a) of this paragraph to the satisfaction of the liabilities.
(d) Except as provided in subsection (b) of Section 15:
(1) The partners shall contribute, as provided by
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Section 18 (a) the amount necessary to satisfy the liabilities; and
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(2) if any, but not all, of the partners are
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insolvent, or, not being subject to process, refuse to contribute, the other partners shall contribute their share of the liabilities, and, in the relative proportions in which they share the profits, the additional amount necessary to pay the liabilities.
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(e) An assignee for the benefit of creditors or any person appointed by
the court shall have the right to enforce the contributions specified in
clause (d) of this paragraph.
(f) Any partner or his legal representative shall have the right to
enforce the contributions specified in clause (d) of this paragraph, to the
extent of the amount which he has paid in excess of his share of the
liability.
(g) The individual property of a deceased partner shall be liable for
the contributions specified in clause (d) of this paragraph.
(h) When partnership property and the individual properties of the
partners are in the possession of a court for distribution, partnership
creditors shall have priority on partnership property and separate
creditors on individual property, saving the rights of lien or secured
creditors as heretofore.
(i) Where a partner has become bankrupt or his estate is insolvent the
claims against his separate property shall rank in the following order:
I. Those owing to separate creditors,
II. Those owing to partnership creditors,
III. Those owing to partners by way of contribution.
(Source: P.A. 88‑573, eff. 8‑11‑94.)
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(805 ILCS 205/41) (from Ch. 106 1/2, par. 41)
(Section scheduled to be repealed on January 1, 2008)
Sec. 41.
(1) When any new partner is admitted into an existing partnership,
or when any partner retires and assigns (or the representative of the
deceased partner assigns) his rights in partnership property to two or more
of the partners, or to one or more of the partners and one or more third
persons, if the business is continued without liquidation of the
partnership affairs, creditors of the first or dissolved partnership are
also creditors of the partnership so continuing the business.
(2) When all but one partner retire and assign (or the representative of
a deceased partner assigns) their rights in partnership property to the
remaining partner, who continues the business without liquidation of
partnership affairs, either alone or with others, creditors of the
dissolved partnership are also creditors of the person or partnership so
continuing the business.
(3) When any partner retires or dies and the business of the dissolved
partnership is continued as set forth in paragraphs (1) and (2) of this
section, with the consent of the retired partners or the representative of
the deceased partner, but without any assignment of his right in
partnership property, rights of creditors of the dissolved partnership and
of the creditors of the person or partnership continuing the business shall
be as if such assignment had been made.
(4) When all the partners or their representatives assign their rights
in partnership property to one or more third persons who promise to pay the
debts and who continue the business of the dissolved partnership, creditors
of the dissolved partnership are also creditors of the person or
partnership continuing the business.
(5) When any partner wrongfully causes a dissolution and the remaining
partners continue the business under the provisions of Section 38 (2b),
either alone or with others, and without liquidation of the partnership
affairs, creditors of the dissolved partnership are also creditors of the
person or partnership continuing the business.
(6) When a partner is expelled and the remaining partners continue the
business, either alone or with others, without liquidation of the
partnership affairs, creditors of the dissolved partnership are also
creditors of the person or partnership continuing the business.
(7) The liability of a third person becoming a partner in the
partnership continuing the business, under this section to the creditors of
the dissolved partnership shall be satisfied out of partnership property
only.
(8) When the business of a partnership after dissolution is continued
under any conditions set forth in this section the creditors of the
dissolved partnership, as against the separate creditors of the retiring or
deceased partner or the representative of the deceased partner, have a
prior right to any claim of the retired partner or the representative of
the deceased partner against the person or partnership continuing the
business, on account of the retired or deceased partner's interest in the
dissolved partnership or on account of any consideration promised for such
interest or for his right in partnership property.
(9) Nothing in this section shall be held to modify any right of
creditors to set aside any assignment on the ground of fraud.
(10) The use by the person or partnership continuing the business of the
partnership name, or the name of a deceased partner as part thereof, shall
not of itself make the individual property of the deceased partner liable
for any debts contracted by such person or partnership.
(Source: Laws 1917, p. 625.)
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(805 ILCS 205/42) (from Ch. 106 1/2, par. 42)
(Section scheduled to be repealed on January 1, 2008)
Sec. 42.
When any partner retires or dies, and the business is continued
under any of the conditions set forth in Section 41 (1, 2, 3, 5, 6), or
Section 38 (2b), without any settlement of accounts as between him or his
estate and the person or partnership continuing the business, unless
otherwise agreed, he or his legal representative as against such persons or
partnership may have the value of his interest at the date of dissolution
ascertained, and shall receive as an ordinary creditor an amount equal to
the value of his interest in the dissolved partnership with interest, or,
at his option or at the option of his legal representative, in lieu of
interest, the profits attributable to the use of his right in the property
of the dissolved partnership: Provided, that the creditors of the dissolved
partnership as against the separate creditors, or the representative of the
retired or deceased partner, shall have priority on any claim arising under
this section, as provided by Section 41 (8) of this act.
(Source: Laws 1917, p. 625.)
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(805 ILCS 205/43) (from Ch. 106 1/2, par. 43)
(Section scheduled to be repealed on January 1, 2008)
Sec. 43.
The right to an account of his interest shall accrue to any
partner, or his legal representative, as against the winding up partners
or the surviving partners or the person or partnership continuing the
business, at the date of dissolution, in the absence of any agreement to
the contrary.
(Source: Laws 1917, p. 625.)
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