TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

Section 9. Revised Uniform Limited Partnership Act, 14-9-100 through 14-9-1204.

ARTICLE 6 DISTRIBUTIONS AND WITHDRAWAL

14-9-602. Withdrawal of general partner.

A person ceases to be a general partner of a limited partnership upon the occurrence of one or more of the following events:
1. The general partner withdraws by voluntary act from the limited partnership as provided in subsection (c) of this Code section;
2. The general partner ceases to be a member of the limited partnership as provided in paragraph (4) of subsection (a) of Code Section 14-9-702;
3. The general partner is removed as a general partner in accordance with the partnership agreement;
4. Unless otherwise provided in writing in the partnership agreement or approved by written consent of all partners at the time, the general partner:
  1. Makes an assignment for the benefit of creditors;
  2. Files a voluntary petition in bankruptcy;
  3. Is adjudicated a bankrupt or insolvent;
  4. Files a petition or answer seeking for himself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation;
  5. Files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against him in any proceeding of this nature; or
  6. Seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of the general partner or of all or any substantial part of his properties;
5. Unless otherwise provided in the partnership agreement or approved by written consent of all partners at the time, 120 days after the commencement of any proceeding against the general partner seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, the proceeding has not been dismissed, or if within 90 days after the appointment without his consent or acquiescence of a trustee, receiver, or liquidator of the general partner or of all or any substantial part of his properties, the appointment is not vacated or stayed or within 90 days after the expiration of any stay, the appointment is not vacated;
6. In the case of a general partner who is an individual:
  1. His death; or
  2. The entry of an order by a court of competent jurisdiction adjudicating him incompetent to manage his person or his estate;
7. Unless otherwise provided in writing in the partnership agreement or approved by written consent of all partners at the time, in the case of a general partner who is a trust or is acting as a general partner by virtue of being a trustee of a trust, the termination of the trust, but not merely the substitution of a new trustee;
8. Unless otherwise provided in writing in the partnership agreement or approved by written consent of all partners at the time, in the case of a general partner that is a separate partnership, the dissolution and commencement of winding up of the separate partnership;
9. Unless otherwise provided in writing in the partnership agreement or approved by written consent of all partners at the time, in the case of a general partner that is a corporation, the filing of a certificate of the corporation's dissolution or the equivalent for the corporation or the revocation of its charter and the lapse of 90 days after notice to the corporation of revocation without a reinstatement of its charter;
10. In the case of an estate, the distribution by the fiduciary of the estate's entire interest in the partnership; or
11. Except as approved by written consent of all partners at the time, any event specified in writing in the partnership agreement as resulting in a person ceasing to be a general partner.
The withdrawing general partner shall give such notice of withdrawal, if any, as is provided for in subsection (c) of this Code section or in writing in the partnership agreement and is subject to damages caused by the failure to give such notice or to such penalties, if any, as are provided for in the agreement for failure to give notice.
A general partner may withdraw by voluntary act from a limited partnership at any time by giving 90 days' written notice to the other partners, or such other notice as is provided for in the partnership agreement, but if the withdrawal violates the partnership agreement or it occurs as a result of otherwise wrongful conduct of the general partner, the limited partnership may recover from the withdrawing general partner damages for breach of the partnership agreement, including the reasonable cost of obtaining replacement of the services the withdrawing general partner was obligated to perform and may offset the damages against the amount otherwise distributable to him, in addition to pursuing any remedies provided for in the partnership agreement or otherwise available under applicable law. Unless otherwise provided in the partnership agreement, in the case of a partnership for a definite term or particular undertaking, a withdrawal by a general partner before the expiration of that term or completion of that undertaking is a breach of the partnership agreement.
A general partner who ceases to be a general partner under this Code section shall be personally liable to any creditor who extended credit to the limited partnership prior to the time:
1. The partnership causes an appropriate certificate of amendment to be executed and filed in accordance with Code Sections 14-9-204 through 14-9-206; or
2. He or his representative files or causes to be filed with the Secretary of State in accordance with the procedures contained in subsection (a) of Code Section 14-9-206 a writing entitled "Filing Pursuant to Paragraph (2) of Subsection (d) of Code Section 14-9-602 of the Official Code of Georgia Annotated" that sets forth:
  1. The name of the limited partnership;
  2. The name and mailing address of the person signing the writing;
  3. That the person signing the writing has ceased to be a general partner in the partnership;
  4. That the person signing the writing has done one or both of the following:
    1. Requested a general partner of the limited partnership to file an amended certificate of limited partnership;
    2. Instituted a proceeding pursuant to Code Section 14-9-204, which proceeding has not been concluded; and
  5. That the writing is being filed pursuant to this paragraph and that the person signing the writing is claiming that he has ceased to be a general partner in the partnership named in the writing.
A general partner who ceases to be a general partner under this Code section shall not be personally liable as a general partner for any partnership debt incurred after one of the events specified in subsection (d) of this Code section unless the applicable creditor at the time the partnership debt is incurred had a reasonable basis for believing that the partner remained a general partner. The creditor shall be deemed to have a reasonable basis for believing that the partner remained a general partner if the creditor was a creditor of the partnership at the time of the general partner's withdrawal or had extended credit to the partnership within two years prior to the withdrawal and, in either case, had no knowledge or notice of the general partner's withdrawal.
The filing of a writing or certificate provided for in subsection (d) of this Code section shall not alone constitute notice within the meaning of subsection (e) of this Code section.

(Code 1981, §14-9-602, enacted by Ga. L. 1988, p. 1016, § 1; Ga. L. 1989, p. 931, § 12.)

Law reviews.

- For note on 1989 amendment to this Code section, see 6 Ga. St. U. L. Rev. 184 (1989).

COMMENT

Note to Georgia Revised Uniform Limited Partnership Act This section provides for how and when a general partner ceases to be such, and for the liability of a general partner who ceases to be such to creditors and to the partnership.

Prior Georgia Law Sections 14-8-29 and 14-8-31 provide for dissolution of a general partnership upon partner dissociation, but the general partnership statute does not define when a partner ceases to be such and does not provide for withdrawal without dissolution of the partnership.

Comparison With Official RULPA Section 14-9-602 incorporates, in Subsection (a), RULPA Section 402, so that withdrawal of a general partner is dealt with in one section. Subsection (a) differs from RULPA Section 402 by clarifying that (1) partner consent prevents withdrawal only as to those events, like bankruptcy or dissolution of a business-entity partner, where there may be some question whether the partner can continue as such despite occurrence of the event; (2) a corporate partner does not withdraw on revocation of its charter until it has been given an opportunity to have the charter reinstated; (3) a trust itself can be a partner; (4) withdrawal may be triggered by other events specified in the partnership agreement; and (5) the partnership agreement may provide for notice of withdrawal in situations other than voluntary withdrawal.

Subsections (b) and (c) differ from the official version of Section 14-9-602 by clarifying what constitutes withdrawal in violation of the agreement, that the partnership can recover the cost of replacing a general partner's services, that 90 days' notice is required for withdrawal and that the partnership agreement may specify damages for wrongful withdrawal. Wrongful withdrawal may include withdrawal that results from removal by the partners, judicial dissolution, or other means stemming from misconduct of the general partner other than voluntary and premature withdrawal.

Subsections (d) and (e) have been added to the official version to clarify the withdrawn general partner's liability to third parties. Under subsection (d), one who has ceased to be a partner is nevertheless liable to creditors who thereafter extend credit before an appropriate filing is made to reflect the withdrawal. [Note that after the certificate is amended to remove a partner's name, the person is no longer a "general partner" under Section 14-9-101(5) even if the partner has not otherwise ceased to be such under Section 14-9-602.]

Under subsection (e), even after the appropriate filing under subsection (d) is made, one who has ceased to be a general partner may continue to be liable to those who extend credit after the withdrawal and who have a reasonable basis for believing that the partner continued as such. Thus, creditors who have relied on the general partner's former status are protected. The situations in which the third party can recover from the former partner - that is, in which the third party is deemed to have a reasonable basis for believing that the former partner remained such - are set forth in subsection (e)(1) and (2). In general, the third party must either know or have notice of the withdrawal. Such notice must, under subsection (f), be more than the mere constructive notice that consists in amendment of the certificate to reflect the partner's withdrawal (although this amendment can serve as the basis of the creditor's knowledge of withdrawal). The notice provision is based on Section 14-8-35, which applies to partner powers and liabilities after dissolution of a general partnership. Since Section 14-9-602 specifically applies to partner withdrawal it, and not Section 14-8-35, will govern whether or not withdrawal causes dissolution under Section 14-9-801.

Note that subsections (d) and (e) cut off liability only to certain persons who extend credit after the general partner's withdrawal. Thus, subsection (d) clearly states that a person who ceases to be a partner shall be personally liable to prior creditors, and subsection (e) applies only to post-notice creditors. There is nothing in the partnership statutes that would permit a partner to cut off an accrued liability by ceasing to be a partner. In fact, Section 14-8-36, which applies to limited partnerships by virtue of Section 14-9-1204, provides that such accrued liability is not cut off even by dissolution of the partnership.

Cross-References "Knowledge" and "notice" defined: § 14-8-3. "General partner" defined: § Section14-9-101(5). General partner withdrawal as cause of dissolution: § 14-9-801(3).

RESEARCH REFERENCES

Am. Jur. 2d.

- 59A Am. Jur. 2d, Partnership, § 815 et seq.

Syfert Injury Law Firm

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