LAW OF OBLIGATION ACT, PART 7, CHAPTER 32 & 33

Chapter 32

RELATIONS OF PARTNERS WITH THIRD PARTIES 

  • 593. Representation

If, on the basis of the contract of partnership, a partner is authorised to manage the partnership, it shall be presumed that the partner is also authorised to represent other partners in relations with third parties.

  • 594. Withdrawal of right of representation

(1) A partner who holds a right of representation granted to him or her by the contract of partnership may be deprived of such right with good reason by a unanimous resolution of the other partners unless the contract of partnership prescribes that any resolution be taken by a majority of votes. The primary good reason shall be a material violation of an obligation by a partner or his or her inability to represent the partners.

(2) If a partner is authorised to manage the partnership and represent other partners by the contract of partnership, he or she may be deprived of the right of representation only together with the withdrawal of his or her management right.

  • 595. Liability of partners

It shall be presumed that all partners are jointly and severally liable to third parties for obligations assumed by the partnership.

Chapter 33

DISSOLUTION OF PARTNERSHIP AND DEPARTURE OR EXCLUSION OF PARTNERS 

  • 596. Bases for dissolution of partnership

(1) A partnership is dissolved:

1) by a resolution of the partners;

2) by cancellation of the contract of partnership by a partner;

3) by cancellation of the contract of partnership by an obligee of a partner in the case specified in § 599 of this Act;

4) by the death of a partner;

5) if the objective of the partnership is achieved or if it becomes clear that it is impossible to achieve the objective;

6) upon the expiry of the term of the partnership if the partnership is founded for a specified term;

7) if a partner is declared bankrupt.

(2) The dissolution of a partnership does not terminate or alter the obligations of the partners to third parties.

  • 597. Cancellation by partner

(1) A partner has the right, at any time, to cancel a contract of partnership entered into for an unspecified term. A contract of partnership which is entered into for a specified term may be cancelled only with good reason. The primary good reason shall be a material violation of an obligation by another partner.

(2) Even if a term for cancellation has been determined in the contract of partnership, the partnership may be cancelled without adhering to the term for cancellation for the goods reason specified in subsection (1) of this section.

(3) A contract of partnership entered into for the duration of the lifetime of a partner may be cancelled in the same manner as a contract of partnership entered into for an unspecified term. This also applies if partners continue the activities of a partnership entered into for a specified term after the expiry of the term.

(4) A contract of partnership shall not be cancelled at a time when the dissolution of the partnership would unreasonably damage the lawful interests of the other partners. If a partner cancels a contract of partnership at such time without good reason, the cancelling party is required to compensate any damage incurred by the other partners for this reason.

(5) Any agreements which preclude the right of a partner to cancel a contract of partnership with good reason or which limit such right, contrary to the provisions of subsections (1) to (4) of this section, are void.

  • 598. Obligation to inform of death or bankruptcy of partners

The successors of a partner shall immediately inform the other partners of the death of the partner even if the death of the partner does not constitute a basis for the dissolution of the partnership according the contract of partnership. A trustee in bankruptcy has the same obligation upon the declaration of a partner as bankrupt.

  • 599. Cancellation by obligee of partner

(1) If, in order to satisfy a claim made by an obligee of a partner, execution proceedings have been conducted against the assets of a partner but the claim made by the obligee has not been satisfied, the obligee has the right to cancel the contract of partnership on behalf of the partner without adhering to the term for cancellation.

(2) Rights of a partner arising from the contract of partnership shall not be subject to a claim for payment made by an obligee of the partner during the term of the contract of partnership, except for the rights to a share of the profits.

  • 600. Liquidation of partnership

(1) Upon the dissolution of a partnership, the partnership shall be liquidated and the partnership property shall be distributed between the partners. The provisions concerning distribution of common ownership apply to liquidation unless otherwise provided by this Chapter.

(2) Upon liquidation, partnership property shall be sold in so far as this is necessary to perform the obligations of the partnership and to return contributions.

  • 601. Specifications of management right upon liquidation of partnership

(1) Partners shall perform acts relating to liquidation jointly even if the management right was previously granted only to some of the partners. If the management right is granted to some of the partners by the contract of partnership, these partners may perform acts of management until such time as they become aware or should become aware of the dissolution of the partnership.

(2) If, due to the joint management right arising from the dissolution of a partnership, the interests of the partnership are endangered as a result of the belated consent of all partners for the performance of a transaction, each partner has the right and obligation to continue performing the management obligations granted to him or her by the contract of partnership until such time as the partners are able to organise the performance of the act in another manner. The successors of a partner have the same obligation upon the death of the partner.

  • 602. Performance of obligations

(1) The obligations of a partnership for which the partners are jointly and severally liable shall be the first to be performed out of the partnership property, including the obligations which are divided between the partners with respect to obligees and the obligations with respect to a partner for which the other partners are liable as obligors. If an obligation has not fallen due or is contestable, the amount necessary for the performance of such obligation shall be deposited.

(2) If the partnership property is insufficient to perform the solidary obligations, the partners shall be liable for the amount missing in proportion to their share in the covering of losses. If the amount to be borne by a partner cannot be obtained from the partner, the other partners shall cover the deficit in proportion to their share in the covering of losses, and the claim against the partner who failed to perform the obligation shall pass to them.

  • 603. Return of contributions

(1) After the obligations are performed, contributions made by the partners shall be returned from the remaining partnership property.

(2) If the value of a contribution has decreased, the corresponding partner shall be compensated for the decrease in value.

(3) If the return of a contribution is not possible, compensation shall be paid for the value of the contribution at the time it was made. Compensation shall not be paid for a contribution which consisted of the provision of services to the partnership or the delivery of objects for the partnership to use.

(4) If the partnership property is insufficient to return the contributions, the provisions of subsection 602 (2) of this Act apply.

  • 604. Distribution of residue

Assets remaining after the performance of solidary obligations and the return of contributions belong to the partners in proportion to their share in the distribution of profits.

  • 605. Continuation of partnership

If the partnership contract prescribes that, upon the cancellation of the contract by a partner, the death of a partner or the declaration of a partner as bankrupt, the partnership is to be continued by the remaining partners, the partner is deemed to have departed from the partnership if any of these events occur.

  • 606. Exclusion of partner

If cancellation of the contract of partnership is based on violation of an obligation by a partner, the partner who violates the obligation may be excluded from the partnership by a joint resolution of the other partners. Exclusion shall be effected by making a petition concerning the partner to be excluded.

  • 607. Payment of compensation to departed or excluded partner

If a partner departs or is excluded from a partnership, the other partners shall return or pay compensation for the contribution made by the departed or excluded partner to the partner pursuant to the provisions of § 603 of this Act to the extent that the partner would have received upon the liquidation of the partnership if the partnership had been dissolved at the time of his or her departure or exclusion.

  • 608. Liability of departed or excluded partner

(1) A partner who has departed or been excluded from the partnership shall be jointly and severally liable with the other partners for any obligation of the partnership with respect to obligees which arose before the departure or exclusion of the partner from the partnership if the obligation has fallen due or will fall due within five years after the departure or exclusion of the partner from the partnership.

(2) If an obligee of a partnership demands the performance of an obligation specified in subsection (1) of this section from a partner who has departed or been excluded from the partnership, the other partners shall be liable for the performance of the obligation of the partnership with respect to the partner who has departed or been excluded from the partnership. If such obligation has not yet fallen due, the other partners shall provide the partner who has departed or been excluded from the partnership with security at the partner’s request.

(3) If the partnership property is insufficient to perform the joint obligations and cover the contributions, the partners who have departed or been excluded from the partnership shall be liable to the other partners for the amount missing in proportion to their share in the covering of losses.

  • 609. Completion of transactions

(1) A partner who has departed or been excluded from a partnership shall participate in the distribution of profits and the covering of losses of the partnership arising from the transactions which were not completed by the time of his or her departure or exclusion. The other partners have the right to complete such transactions in the manner which they consider to be the most profitable.

(2) With regard to transactions specified in subsection (1) of this section, a departed or excluded partner may, at the end of each financial year, demand that the partnership submit a report concerning transactions which have been completed in the meantime, pay the amount belonging to the partner and communicate information concerning the status of transactions not yet completed.

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