Dissolving a Partnership under the Uniform Partnership Act
The Uniform Partnership Act (UPA) is an act that governs the operation of partnerships, including partnership dissolutions. The UPA was established in 1914 and many later revisions have occurred in the 1990’s (referred to as the RUPA). Many state laws governing partnership dissolution are based on the UPA.
Section 31 of the UPA gives several reasons for permitting a partnership dissolution. These include additional reasons not stated in Arizona law, such as the bankruptcy of any partner or of the partnership itself, the death of any partner, or any event that makes it unlawful for the business of the partnership to be carried on.
In addition, Section 32 of the UPA, provides courts great latitude and power to decide the dissolution of a partnership.
Dissolving a Partnership in Arizona
In Arizona a partnership may be dissolved either judicially or non-judicially. A.R.S. § 29-344 states four separate ways a limited partnership may be dissolved non-judicially (i.e., without court intervention). First, if there is a time specified in the certificate of limited partnership, then the partnership may be dissolved at that time as a matter of course. Second, if certain events occur as stated in the partnership agreement, then the partnership may be dissolved per that document. Third, if all partners give written consent, then the partnership may be dissolved. Fourth, if a general partner withdraws and there is no remaining general partner (with an exception set forth in the law if limited partners agree to continue the partnership). For non-judicial dissolutions it is vital to look at the partnership agreement (if there is one) for actions that can lead to a dissolution or to see if all partners can simply agree that the partnership may be dissolved.
If needed, the Superior Court of Arizona may get involved. If the court finds that it is “not reasonably practicable to carry on the business in conformity with the partnership agreement” then the court may order the dissolution of the partnership (see A.R.S. § 29-345). This is mainly needed when the non-judicial options don’t provide a satisfactory resolution. One classic example is where the partners just don’t see eye-to-eye with each other and the business becomes deadlocked because neither one of them alone can act on behalf of the company.