Section 605. Effect of Dissociation as General Partner

(a) Upon a person’s dissociation as a general partner:

(1) the person’s right to participate as a general partner in the management and conduct of the partnership’s activities terminates;

(2) the person’s duty of loyalty as a general partner under Section 408(b)(3) terminates;

(3) the person’s duty of loyalty as a general partner under Section 408(b)(1) and (2) and duty of care under Section 408(c) continue only with regard to matters arising and events occurring before the person’s dissociation as a general partner;

(4) the person may sign and deliver to the [Secretary of State] for filing a statement of dissociation pertaining to the person and, at the request of the limited partnership, shall sign an amendment to the certificate of limited partnership which states that the person has dissociated; and

(5) subject to Section 704 and [Article] 11, any transferable interest owned by the person immediately before dissociation in the person’s capacity as a general partner is owned by the person as a mere transferee.

(b) A person’s dissociation as a general partner does not of itself discharge the person from any obligation to the limited partnership or the other partners which the person incurred while a general partner.

Comment

Source – RUPA Section 603(b).

Subsection (a)(1) – Once a person dissociates as a general partner, the person loses all management rights as a general partner regardless of what happens to the limited partnership. This rule contrasts with RUPA Section 603(b)(1), which permits a dissociated general partner to participate in winding up in some circumstances.

Subsection (a)(4) – Both records covered by this paragraph have the same effect under Section 103(d) – namely, to give constructive notice that the person has dissociated as a general partner. The notice benefits the person by curtailing any further personal liability under Sections 607, 805, and 1111. The notice benefits the limited partnership by curtailing any lingering power to bind under Sections 606, 804, and 1112.

The limited partnership is in any event obligated to amend its certificate of limited partnership to reflect the dissociation of a person as general partner. See Section 202(b)(2). In most circumstances, the amendment requires the signature of the person that has dissociated. Section 204(a)(5)(C). If that signature is required and the person refuses or fails to sign, the limited partnership may invoke Section 205 (Signing and Filing Pursuant to Judicial Order).

Subsection (a)(5) – In general, when a person dissociates as a general partner, the person’s rights as a general partner disappear and, subject to Section 113 (Dual Status), the person’s status degrades to that of a mere transferee. For any person that is both a general partner and a limited partner, the required records must state which transferable interest is owned in which capacity. Section 111(9)(C).

Section 704 provides some special rights when an individual dissociates by dying. Article 11 provides for conversions and mergers. A plan of conversion or merger may provide for the dissociation of a person as a general partner and may override the rule stated in this paragraph.