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362.1-701 Purchase of dissociated partner's interest.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
If a partner is dissociated from a partnership without resulting in a dissolution and
winding up of the partnership business under KRS 362.1-801, then the partnership
shall cause the dissociated partner's interest in the partnership to be purchased for a
buyout price determined pursuant to subsection (2) of this section.
The buyout price of a dissociated partner's interest is the amount that would have
been distributable to the dissociating partner under KRS 362.1-807(2) 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 shall be paid from the date of dissociation to the date of payment.
Damages for wrongful dissociation under KRS 362.1-602(2), and all other amounts
owing, whether or not presently due, from the dissociated partner to the partnership,
shall be offset against the buyout price. Interest shall be paid from the date the
amount owed becomes due to the date of payment.
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
KRS 362.1-702.
If no agreement for the purchase of a dissociated partner's interest is reached within
one hundred twenty (120) days after a written demand for payment, then 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) of this section.
If a deferred payment is authorized under subsection (8) of this section, then 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) of
this section, stating the time of payment, the amount and type of security for
payment, and the other terms and conditions of the obligation.
The payment or tender required by subsection (5) or (6) of this section shall 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 (120) days after the written
notice, the dissociated partner commences an action to determine the buyout
price, any offsets under subsection (3) of this section, or other terms of the
obligation to purchase.
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,
(9)
unless the partner establishes to the satisfaction of the court that earlier payment
will not cause undue hardship to the business of the partnership. A deferred
payment shall be adequately secured and bear interest.
A dissociated partner may maintain an action against the partnership, pursuant to
KRS 362.1-405(2)(b)2., to determine the buyout price of that partner's interest, any
offsets under subsection (3) of this section, or other terms of the obligation to
purchase. The action shall be commenced within one hundred twenty (120) days
after the partnership has tendered payment or an offer to pay or within one (1) 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) of this section, and accrued interest, and enter judgment
for any additional payment or refund. If deferred payment is authorized under
subsection (8) of this section, then 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) of this section.
Effective: July 12, 2006
History: Created 2006 Ky. Acts ch. 149, sec. 49, effective July 12, 2006.
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