2021 -- S 0673

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LC002209

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2021

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A N   A C T

RELATING TO CORPORATIONS, ASSOCIATIONS AND PARTNERSHIPS --

PARTNERSHIPS--RHODE ISLAND PARTNERSHIP ACT

     Introduced By: Senators Lombardi, and Coyne

     Date Introduced: March 18, 2021

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

     SECTION 1. Title 7 of the General Laws entitled "CORPORATIONS, ASSOCIATIONS,

AND PARTNERSHIPS" is hereby amended by adding thereto the following chapter:

CHAPTER 12.1

THE RHODE ISLAND PARTNERSHIP ACT

ARTICLE 1

GENERAL PROVISIONS

     7-12.1-101. Short title.

     This chapter shall be known and may be cited as "The Rhode Island Partnership Act".

     7-12.1-102. Definitions.

     As used in this chapter:

     (1) "Business" includes every trade, occupation, and profession.

     (2) "Contribution", except in the phrase "right of contribution", means property or a benefit

described in § 7-12.1-403 which is provided by a person to a partnership to become a partner or in

the person's capacity as a partner.

     (3) "Debtor in bankruptcy" means a person that is the subject of:

     (i) An order for relief under Title 11 of the United States Code or a comparable order under

a successor statute of general application; or

     (ii) A comparable order under federal, state, or foreign law governing insolvency.

     (4) "Distribution" means a transfer of money or other property from a partnership to a

person on account of a transferable interest or in a person's capacity as a partner. The term:

     (i) Includes:

     (A) A redemption or other purchase by a partnership of a transferable interest; and

     (B) A transfer to a partner in return for the partner's relinquishment of any right to

participate as a partner in the management or conduct of the partnership's business or have access

to records or other information concerning the partnership's business; and

     (ii) Does not include amounts constituting reasonable compensation for present or past

service or payments made in the ordinary course of business under a bona fide retirement plan or

other bona fide benefits program.

     (5) "Foreign limited liability partnership" means a foreign partnership whose partners have

limited liability for the debts, obligations, or other liabilities of the foreign partnership under a

provision similar to § 7-12.1-306(c).

     (6) "Foreign partnership" means an unincorporated entity formed under the law of a

jurisdiction other than this state which would be a partnership if formed under the law of this state.

The term includes a foreign limited liability partnership.

     (7) "Jurisdiction", used to refer to a political entity, means the United States, a state, a

foreign country, or a political subdivision of a foreign country.

     (8) "Jurisdiction of formation" means the jurisdiction whose law governs the internal

affairs of an entity.

     (9) "Limited liability partnership", except in the phrase "foreign limited liability

partnership" and in Article 11 of this chapter, means a partnership that has filed a statement of

qualification under § 7-12.1-901 and does not have a similar statement in effect in any other

jurisdiction.

     (10) "Partner" means a person that:

     (i) Has become a partner in a partnership under § 7-12.1-402 or was a partner in a

partnership when the partnership became subject to this chapter under § 7-12.1-110; and

     (ii) Has not dissociated as a partner under § 7-12.1-601.

     (11) "Partnership", except in Article 11 of this chapter, means an association of two (2) or

more persons to carry on as co-owners of a business for profit formed under this chapter or that

becomes subject to this chapter under Article 11 of this chapter or § 7-12.1-110. The term includes

a limited liability partnership.

     (12) "Partnership agreement" means the agreement, whether or not referred to as a

partnership agreement and whether oral, implied, in a record, or in any combination thereof, of all

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the partners of a partnership concerning the matters described in § 7-12.1-105. The term includes

the agreement as amended or restated.

     (13) "Partnership at will" means a partnership in which the partners have not agreed to

remain partners until the expiration of a definite term or the completion of a particular undertaking.

     (14) "Person" means an individual, business corporation, nonprofit corporation,

partnership, limited partnership, limited liability company, general cooperative association, limited

cooperative association, unincorporated nonprofit association, statutory trust, business trust,

common-law business trust, estate, trust, association, joint venture, public corporation, government

or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.

     (15) "Principal office" means the principal executive office of a partnership or a foreign

limited liability partnership, whether or not the office is located in this state.

     (16) "Property" means all property, whether real, personal, or mixed or tangible or

intangible, or any right or interest therein.

     (17) "Record", used as a noun, means information that is inscribed on a tangible medium

or that is stored in an electronic or other medium and is retrievable in perceivable form.

     (18) "Registered agent" means an agent of a limited liability partnership or foreign limited

liability partnership which is authorized to receive service of any process, notice, or demand

required or permitted by law to be served on the partnership.

     (19) "Registered foreign limited liability partnership" means a foreign limited liability

partnership that is registered to do business in this state pursuant to a statement of registration filed

with the secretary of state.

     (20) "Sign" means, with present intent to authenticate or adopt a record:

     (i) To execute or adopt a tangible symbol; or

     (ii) To attach to or logically associate with the record an electronic symbol, sound, or

process.

     (21) "State" means a state of the United States, the District of Columbia, Puerto Rico, the

United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the

United States.

     (22) "Transfer" includes:

     (i) An assignment;

     (ii) A conveyance;

     (iii) A sale;

     (iv) A lease;

     (v) An encumbrance, including a mortgage or security interest;

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     (vi) A gift; and

     (vii) A transfer by operation of law.

     (23) "Transferable interest" means the right, as initially owned by a person in the person's

capacity as a partner, to receive distributions from a partnership, whether or not the person remains

a partner or continues to own any part of the right. The term applies to any fraction of the interest,

by whomever owned.

     (24) "Transferee" means a person to which all or part of a transferable interest has been

transferred, whether or not the transferor is a partner.

     7-12.1-103. Knowledge; Notice.

     (a) A person knows a fact if the person:

     (1) Has actual knowledge of it; or

     (2) Is deemed to know it under subsection (d)(1) of this section or law other than this

chapter.

     (b) A person has notice of a fact if the person:

     (1) Has reason to know the fact from all the facts known to the person at the time in

question; or

     (2) Is deemed to have notice of the fact under subsection (d)(2) of this section.

     (c) Subject to § 7-12.1-117(f), a person notifies another person of a fact by taking steps

reasonably required to inform the other person in ordinary course, whether or not those steps cause

the other person to know the fact.

     (d) A person not a partner is deemed:

     (1) To know of a limitation on authority to transfer real property as provided in § 7-12.1-

303(g); and

     (2) To have notice of:

     (i) A person's dissociation as a partner ninety (90) days after a statement of dissociation

under § 7-12.1-704 becomes effective; and

     (ii) A partnership's:

     (A) Dissolution ninety (90) days after a statement of dissolution under § 7-12.1-802

becomes effective;

     (B) Termination ninety (90) days after a statement of termination under § 7-12.1-802

becomes effective; and

     (C) Participation in a merger, interest exchange, conversion, or domestication, ninety (90)

days after articles of merger, interest exchange, conversion, or domestication under Article 11 of

this chapter become effective.

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     (e) A partner's knowledge or notice of a fact relating to the partnership is effective

immediately as knowledge of or notice to the partnership, except in the case of a fraud on the

partnership committed by or with the consent of that partner.

     7-12.1-104. Governing law.

     The internal affairs of a partnership and the liability of a partner as a partner for a debt,

obligation, or other liability of the partnership are governed by:

     (1) In the case of a limited liability partnership, the law of this state; and

     (2) In the case of a partnership that is not a limited liability partnership, the law of the

jurisdiction in which the partnership has its principal office.

     7-12.1-105. Partnership agreement; Scope, Function, and Limitations.

     (a) Except as otherwise provided in subsections (c) and (d) of this section, the partnership

agreement governs:

     (1) Relations among the partners as partners and between the partners and the partnership;

     (2) The business of the partnership and the conduct of that business; and

     (3) The means and conditions for amending the partnership agreement.

     (b) To the extent the partnership agreement does not provide for a matter described in

subsection (a) of this section, this chapter governs the matter.

     (c) A partnership agreement may not:

     (1) Vary the law applicable under § 7-12.1-104(1);

     (2) Vary the provisions of § 7-12.1-110;

     (3) Vary the provisions of § 7-12.1-307;

     (4) Unreasonably restrict the duties and rights under § 7-12.1-408, but the partnership

agreement may impose reasonable restrictions on the availability and use of information obtained

under that section and may define appropriate remedies, including liquidated damages, for a breach

of any reasonable restriction on use;

     (5) Alter or eliminate the duty of loyalty or the duty of care, except as otherwise provided

in subsection (d) of this section;

     (6) Eliminate the contractual obligation of good faith and fair dealing under § 7-12.1-

409(d), but the partnership agreement may prescribe the standards, if not manifestly unreasonable,

by which the performance of the obligation is to be measured;

     (7) Unreasonably restrict the right of a person to maintain an action under § 7-12.1-410(b);

     (8) Relieve or exonerate a person from liability for conduct involving bad faith, willful or

intentional misconduct, or knowing violation of law;

     (9) Vary the power of a person to dissociate as a partner under § 7-12.1-602(a), except to

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require that the notice under § 7-12.1-601(1) to be in a record;

     (10) Vary the grounds for expulsion specified in § 7-12.1-601(5);

     (11) Vary the causes of dissolution specified in § 7-12.1-801(4) or (5);

     (12) Vary the requirement to wind up the partnership's business as specified in § 7-12.1-

802(a), (b)(1), and (d);

     (13) Vary the right of a partner under § 7-12.1-901(f) to vote on or consent to a cancellation

of a statement of qualification;

     (14) Vary the right of a partner to approve a merger, interest exchange, conversion, or

domestication under §§ 7-12.1-11.23(a)(2), 7-12.1-11.33(a)(2), 7-12.1-11.43(a)(2), or 7-12.1-

11.53(a)(2);

     (15) Vary the required contents of a plan of merger under § 7-12.1-11.22(a), plan of interest

exchange under § 7-12.1-11.32(a), plan of conversion under § 7-12.1-11.42(a), or plan of

domestication under § 7-12.1-11.52(a);

     (16) Vary any requirement, procedure, or other provision of this chapter pertaining to:

     (i) Registered agents; or

     (ii) The secretary of state, including provisions pertaining to records authorized or required

to be filed with the secretary of state under this chapter; or

     (17) Except as otherwise provided in §§ 7-12.1-106 and 7-12.1-107(b), restrict the rights

under this chapter of a person other than a partner.

     (d) Subject to subsection (c)(8) of this section, without limiting other terms that may be

included in a partnership agreement, the following rules apply:

     (1) The partnership agreement may:

     (i) Specify the method by which a specific act or transaction that would otherwise violate

the duty of loyalty may be authorized or ratified by one or more disinterested and independent

persons after full disclosure of all material facts; and

     (ii) Alter the prohibition in § 7-12.1-406(a)(2) to the extent the prohibition requires only

that the partnership's total assets not be less than the sum of its total liabilities.

     (2) To the extent the partnership agreement expressly relieves a partner of a responsibility

that the partner would otherwise have under this chapter and imposes the responsibility on one or

more other partners, the agreement also may eliminate or limit any fiduciary duty of the partner

relieved of the responsibility which would have pertained to the responsibility.

     (3) If not manifestly unreasonable, the partnership agreement may:

     (i) Alter or eliminate the aspects of the duty of loyalty stated in § 7-12.1-409(b);

     (ii) Identify specific types or categories of activities that do not violate the duty of loyalty;

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     (iii) Alter the duty of care, but may not authorize conduct involving bad faith, willful or

intentional misconduct, or knowing violation of law; and

     (iv) Alter or eliminate any other fiduciary duty.

     (e) The court shall decide as a matter of law whether a term of a partnership agreement is

manifestly unreasonable under subsection (c)(6) or (d)(3) of this section. The Providence County

superior court:

     (1) Shall make its determination as of the time the challenged term became part of the

partnership agreement and by considering only circumstances existing at that time; and

     (2) May invalidate the term only if, in light of the purposes and business of the partnership,

it is readily apparent that:

     (i) The objective of the term is unreasonable; or

     (ii) The term is an unreasonable means to achieve the term's objective.

     7-12.1-106. Partnership agreement -- Effect on partnership and person becoming

partner -- Preformation agreement.

     (a) A partnership is bound by and may enforce the partnership agreement, whether or not

the partnership has itself manifested assent to the agreement.

     (b) A person that becomes a partner is deemed to assent to the partnership agreement.

     (c) Two (2) or more persons intending to become the initial partners of a partnership may

make an agreement providing that upon the formation of the partnership the agreement will become

the partnership agreement.

     7-12.1-107. Partnership agreement -- Effect on third parties and relationship to

records effective on behalf of partnership.

     (a) A partnership agreement may specify that its amendment requires the approval of a

person that is not a party to the agreement or the satisfaction of a condition. An amendment is

ineffective if its adoption does not include the required approval or satisfy the specified condition.

     (b) The obligations of a partnership and its partners to a person in the person's capacity as

a transferee or person dissociated as a partner are governed by the partnership agreement. Subject

only to a court order issued under § 7-12.1-504(b)(2) to effectuate a charging order, an amendment

to the partnership agreement made after a person becomes a transferee or is dissociated as a partner:

     (1) Is effective with regard to any debt, obligation, or other liability of the partnership or

its partners to the person in the person's capacity as a transferee or person dissociated as a partner;

and

     (2) Is not effective to the extent the amendment:

     (i) Imposes a new debt, obligation, or other liability on the transferee or person dissociated

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as a partner; or

     (ii) Prejudices the rights under § 7-12.1-701 of a person that dissociated as a partner before

the amendment was made.

     (c) If a record delivered by a partnership to the secretary of state for filing becomes

effective and contains a provision that would be ineffective under §§ 7-12.1-105(c) or 7-12.1-

105(d)(3) if contained in the partnership agreement, the provision is ineffective in the record.

     (d) Subject to subsection (c) of this section, if a record delivered by a partnership to the

secretary of state for filing becomes effective and conflicts with a provision of the partnership

agreement:

     (1) The agreement prevails as to partners, persons dissociated as partners, and transferees;

and

     (2) The record prevails as to other persons to the extent they reasonably rely on the record.

     7-12.1-108. Signing of records to be delivered for filing to secretary of state.

     (a) A record filed with the secretary of state pursuant to this chapter must be signed as

follows:

     (1) Except as otherwise provided in subsections (a)(2) and (a)(3) of this section, a record

signed by a partnership must be signed by a person authorized by the partnership.

     (2) A record filed on behalf of a dissolved partnership that has no partner must be signed

by the person winding up the partnership's business under § 7-12.1-802(c) or a person appointed

under § 7-12.1-802(d) to wind up the business.

     (3) A statement of denial by a person under § 7-12.1-304 must be signed by that person.

     (4) Any other record delivered on behalf of a person to the secretary of state for filing must

be signed by that person.

     (b) A record filed under this chapter may be signed by an agent. Whenever this chapter

requires a particular individual to sign a record and the individual is deceased or incompetent, the

record may be signed by a legal representative of the individual.

     (c) A person that signs a record as an agent or legal representative affirms as a fact that the

person is authorized to sign the record.

     7-12.1-109. Liability for inaccurate information in filed record.

     (a) If a record filed with the secretary of state under this chapter and filed by the secretary

of state contains inaccurate information, a person that suffers loss by reliance on the information

may recover damages for the loss from:

     (1) A person that signed the record, or caused another to sign it on the person's behalf, and

knew the information to be inaccurate at the time the record was signed; and

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     (2) Subject to subsection (b) of this section, a partner if:

     (i) The record was delivered for filing on behalf of the partnership; and

     (ii) The partner knew or had notice of the inaccuracy for a reasonably sufficient time before

the information was relied upon so that, before the reliance, the partner reasonably could have:

     (A) Effected an amendment under § 7-12.1-901(f);

     (B) Filed a petition under § 7-12.1-112; or

     (C) Filed with the secretary of state a statement of change under § 7-12.1-909 or a statement

of correction under § 7-12.1-116.

     (b) To the extent the partnership agreement expressly relieves a partner of responsibility

for maintaining the accuracy of information contained in records delivered on behalf of the

partnership to the secretary of state for filing under this chapter and imposes that responsibility on

one or more other partners, the liability stated in subsection (a)(2) of this section applies to those

other partners and not to the partner that the partnership agreement relieves of the responsibility.

     (c) An individual who signs a record authorized or required to be filed under this chapter

affirms under penalty of perjury that the information stated in the record is accurate.

     7-12.1-110. Application to existing relationships -- Effect of repeal of prior acts.

     (a) This chapter governs only:

     (1) A partnership formed on or after January 1, 2022; and

     (2) Except as otherwise provided in subsection (c) of this section, a partnership formed

before January 1, 2022, which elects, in the manner provided in its partnership agreement or by law

for amending the partnership agreement, to be subject to this chapter.

     (b) Except as otherwise provided in subsection (c) of this section, on and after January 1,

2022, this chapter governs all partnerships.

     (c) With respect to a partnership that elects pursuant to subsection (a)(2) of this section to

be subject to this chapter, after the election takes effect the provisions of this chapter relating to the

liability of the partnership's partners to third parties apply to:

     (1) A third party that had not done business with the partnership in the year before the

election took effect; and

     (2) A third party that had done business with the partnership in the year before the election

took effect only if the third party knows or has been notified of the election; and

     (d) On and after January 1, 2022, the liability of the partnership's partner to third parties

shall apply to all third parties, but except for any obligation incurred prior to the third party

acquiring notice of the election pursuant to the provisions of subsection (c)(2) of this section.

     (e) The repeal of a prior act by this chapter does not impair, diminish or affect any right,

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privilege or immunity accrued or established, any suit pending, any right of action conferred, or

any duty, restriction, liability or penalty imposed or required, under the provisions of the act, prior

to the repeal.

     7-12.1-111. Delivery of record.

     (a) Except as otherwise provided in this chapter, permissible means of delivery of a record

include delivery by hand, mail, conventional commercial practice, and electronic transmission.

     (b) Delivery to the secretary of state is effective only when a record is received by the

secretary of state.

     7-12.1-112. Signing and filing pursuant to judicial order.

     (a) If a person required by this chapter to sign a record or deliver a record to the secretary

of state for filing under this chapter does not do so, any other person that is aggrieved may petition

the superior court to order:

     (1) The person to sign the record;

     (2) The person to deliver the record to the secretary of state for filing; or

     (3) The secretary of state to file the record unsigned.

     (b) If a petitioner under subsection (a) of this section is not the partnership or foreign

limited liability partnership to which the record pertains, the petitioner shall make the partnership

or foreign partnership a party to the action.

     (c) A record filed under subsection (a)(3) of this section is effective without being signed.

     7-12.1-113. Filing requirements.

     (a) To be filed by the secretary of state pursuant to this chapter, a record must be received

by the secretary of state, comply with this chapter, and satisfy the following:

     (1) The filing of the record must be required or permitted by this chapter;

     (2) The record must be physically delivered in written form unless and to the extent the

secretary of state permits electronic delivery of records;

     (3) The words in the record must be in English, and numbers must be in Arabic or Roman

numerals, but the name of an entity need not be in English if written in English letters or Arabic or

Roman numerals;

     (4) The record must be signed by a person authorized or required under this chapter to sign

the record; and

     (5) The record must state the name and capacity, if any, of each individual who signed it,

either on behalf of the individual or the person authorized or required to sign the record, but need

not contain a seal, attestation, acknowledgment, or verification.

     (b) If any law other than this chapter prohibits the disclosure by the secretary of state of

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information contained in a record filed with the secretary of state, the secretary of state shall file

the record if the record otherwise complies with this chapter but may redact the information.

     (c) When a record is filed with the secretary of state, any fee required under this chapter

and any fee, tax, interest, or penalty required to be paid under this chapter or law other than this

chapter must be paid in a manner permitted by the secretary of state or by that law.

     (d) The secretary of state may require that a record delivered in written form be

accompanied by an identical or conformed copy.

     (e) The secretary of state may provide forms for filings required or permitted to be made

by this chapter, but, except as otherwise provided in subsection (f) of this section, their use is not

required.

     (f) The secretary of state may require that a cover sheet for a filing be on a form prescribed

by the secretary of state.

     7-12.1-114. Effective date and time.

     Except as otherwise provided in § 7-12.1-115 and subject to § 7-12.1-116(c), a record filed

under this chapter is effective:

     (1) On the date and at the time of its filing by the secretary of state, as provided in § 7-

12.1-117(b);

     (2) On the date of filing and at the time specified in the record as its effective time, if later

than the time under subsection (1) of this section;

     (3) At a specified delayed effective date and time, which may not be more than ninety (90)

days after the date of filing; or

     (4) If a delayed effective date is specified, but no time is specified, at one minute past

twelve am (12:01 a.m.) on the date specified, which may not be more than ninety (90) days after

the date of filing.

     7-12.1-115. Withdrawal of filed record before effectiveness.

     (a) Except as otherwise provided in §§ 7-12.1-11.24, 7-12.1-11.34, 7-12.1-11.44, and 7-

12.1-11.54, a record filed with the secretary of state may be withdrawn before it takes effect by

delivering to the secretary of state for filing a statement of withdrawal.

     (b) A statement of withdrawal must:

     (1) Be signed by each person that signed the record being withdrawn, except as otherwise

agreed by those persons;

     (2) Identify the record to be withdrawn; and

     (3) If signed by fewer than all the persons that signed the record being withdrawn, state

that the record is withdrawn in accordance with the agreement of all the persons that signed the

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record.

     (c) On filing by the secretary of state of a statement of withdrawal, the action or transaction

evidenced by the original record does not take effect.

     7-12.1-116. Correcting filed record.

     (a) A person on whose behalf a filed record was filed with the secretary of state may correct

the record if:

     (1) The record at the time of filing was inaccurate;

     (2) The record was defectively signed; or

     (3) The electronic transmission of the record to the secretary of state was defective.

     (b) To correct a filed record, a person on whose behalf the record was delivered to the

secretary of state must deliver to the secretary of state for filing a statement of correction.

     (c) A statement of correction:

     (1) May not state a delayed effective date;

     (2) Must be signed by the person correcting the filed record;

     (3) Must identify the filed record to be corrected;

     (4) Must specify the inaccuracy or defect to be corrected; and

     (5) Must correct the inaccuracy or defect.

     (d) A statement of correction is effective as of the effective date of the filed record that it

corrects except for purposes of § 7-12.1-103(d) and as to persons relying on the uncorrected filed

record and adversely affected by the correction. For those purposes and as to those persons, the

statement of correction is effective when filed.

     7-12.1-117. Duty of secretary of state to file -- Review of refusal to file -- Delivery of

record by secretary of state.

     (a) The secretary of state shall file a record filed with the secretary of state which satisfies

this chapter. The duty of the secretary of state under this section is ministerial.

     (b) When the secretary of state files a record, the secretary of state shall record it as filed

on the date and at the time of its delivery. After filing a record, the secretary of state shall deliver

to the person that submitted the record a copy of the record with an acknowledgment of the date

and time of filing and, in the case of a statement of denial, also to the partnership to which the

statement pertains.

     (c) If the secretary of state refuses to file a record, the secretary of state shall, not later than

fifteen (15) business days after the record is delivered:

     (1) Return the record or notify the person that submitted the record of the refusal; and

     (2) Provide a brief explanation in a record of the reason for the refusal.

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     (d) If the secretary of state refuses to file a record, the person that submitted the record may

petition the superior court to compel filing of the record. The record and the explanation of the

secretary of state of the refusal to file must be attached to the petition. The Providence County

superior court may decide the matter in a summary proceeding.

     (e) The filing of or refusal to file a record does not:

     (1) Affect the validity or invalidity of the record in whole or in part; or

     (2) Create a presumption that the information contained in the record is correct or incorrect.

     (f) Except as otherwise provided by § 7-12.1-909 or by law other than this chapter, the

secretary of state may deliver any record to a person by delivering it:

     (1) In person to the person that submitted it;

     (2) To the address of the person's registered agent;

     (3) To the principal office of the person; or

     (4) To another address the person provides to the secretary of state for delivery.

     7-12.1-118. Reservation of power to amend or repeal.

     The general assembly has power to amend or repeal all or part of this chapter at any time,

and all limited liability partnerships and foreign limited liability partnerships subject to this chapter

shall be governed by the amendment or repeal.

     7-12.1-119. Supplemental principles of law.

     Unless displaced by particular provisions of this chapter, the principles of law and equity

supplement this chapter.

ARTICLE 2

NATURE OF PARTNERSHIP

     7-12.1-201. Partnership as entity.

     (a) A partnership is an entity distinct from its partners.

     (b) A partnership is the same entity regardless of whether the partnership has a statement

of qualification in effect under § 7-12.1-901.

     7-12.1-202. Formation of partnership.

     (a) Except as otherwise provided in subsection (b) of this section, the association of two

(2) or more persons to carry on as co-owners a business for profit forms a partnership, whether or

not the persons intend to form a partnership.

     (b) An association formed under a statute other than this chapter, a predecessor statute, or

a comparable statute of another jurisdiction is not a partnership under this chapter.

     (c) In determining whether a partnership is formed, the following rules apply:

     (1) Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common

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property, or part ownership does not by itself establish a partnership, even if the co-owners share

profits made by the use of the property;

     (2) The sharing of gross returns does not by itself establish a partnership, even if the persons

sharing them have a joint or common right or interest in property from which the returns are

derived; and

     (3) A person who receives a share of the profits of a business is presumed to be a partner

in the business, unless the profits were received in payment:

     (i) Of a debt by installments or otherwise;

     (ii) For services as an independent contractor or of wages or other compensation to an

employee;

     (iii) Of rent;

     (iv) Of an annuity or other retirement or health benefit to a deceased or retired partner or a

beneficiary, representative, or designee of a deceased or retired partner;

     (v) Of interest or other charge on a loan, even if the amount of payment varies with the

profits of the business, including a direct or indirect present or future ownership of the collateral,

or rights to income, proceeds, or increase in value derived from the collateral; or

     (vi) For the sale of the goodwill of a business or other property by installments or otherwise.

     7-12.1-203. Partnership property.

     Property acquired by a partnership is property of the partnership and not of the partners

individually.

     7-12.1-204. When property is partnership property.

     (a) Property is partnership property if acquired in the name of:

     (1) The partnership; or

     (2) One or more partners with an indication in the instrument transferring title to the

property of the person's capacity as a partner or of the existence of a partnership but without an

indication of the name of the partnership.

     (b) Property is acquired in the name of the partnership by a transfer to:

     (1) The partnership in its name; or

     (2) One or more partners in their capacity as partners in the partnership, if the name of the

partnership is indicated in the instrument transferring title to the property.

     (c) Property is presumed to be partnership property if purchased with partnership assets,

even if not acquired in the name of the partnership or of one or more partners with an indication in

the instrument transferring title to the property of the person's capacity as a partner or of the

existence of a partnership.

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     (d) Property acquired in the name of one or more of the partners, without an indication in

the instrument transferring title to the property of the person's capacity as a partner or of the

existence of a partnership and without use of partnership assets, is presumed to be separate property,

even if used for partnership purposes.

ARTICLE 3

RELATIONS OF PARTNERS TO PERSONS DEALING WITH PARTNERSHIP

     7-12.1-301. Partner agent of partnership.

     Subject to the effect of a statement of partnership authority under § 7-12.1-303, the

following rules apply:

     (1) Each partner is an agent of the partnership for the purpose of its business. An act of a

partner, including the signing of an instrument in the partnership name, for apparently carrying on

in the ordinary course the partnership business or business of the kind carried on by the partnership

binds the partnership, unless the partner did not have authority to act for the partnership in the

particular matter and the person with which the partner was dealing knew or had notice that the

partner lacked authority.

     (2) An act of a partner which is not apparently for carrying on in the ordinary course the

partnership's business or business of the kind carried on by the partnership binds the partnership

only if the act was actually authorized by all the other partners.

     7-12.1-302. Transfer of partnership property.

     (a) Partnership property may be transferred as follows:

     (1) Subject to the effect of a statement of partnership authority under § 7-12.1-303,

partnership property held in the name of the partnership may be transferred by an instrument of

transfer signed by a partner in the partnership name;

     (2) Partnership property held in the name of one or more partners with an indication in the

instrument transferring the property to them of their capacity as partners or of the existence of a

partnership, but without an indication of the name of the partnership, may be transferred by an

instrument of transfer signed by the persons in whose name the property is held; or

     (3) Partnership property held in the name of one or more persons other than the partnership,

without an indication in the instrument transferring the property to them of their capacity as partners

or of the existence of a partnership, may be transferred by an instrument of transfer signed by the

persons in whose name the property is held.

     (b) A partnership may recover partnership property from a transferee only if it proves that

signing of the instrument of initial transfer did not bind the partnership under § 7-12.1-301 and:

     (1) As to a subsequent transferee who gave value for property transferred under subsections

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(a)(1) and (a)(2) of this section, proves that the subsequent transferee knew or had been notified

that the person who signed the instrument of initial transfer lacked authority to bind the partnership;

or

     (2) As to a transferee who gave value for property transferred under subsection (a)(3) of

this section, proves that the transferee knew or had been notified that the property was partnership

property and that the person who signed the instrument of initial transfer lacked authority to bind

the partnership.

     (c) A partnership may not recover partnership property from a subsequent transferee if the

partnership would not have been entitled to recover the property, under subsection (b) of this

section, from any earlier transferee of the property.

     (d) If a person holds all the partners' interests in the partnership, all the partnership property

vests in that person. The person may sign a record in the name of the partnership to evidence vesting

of the property in that person and may file or record the record.

     7-12.1-303. Statement of partnership authority.

     (a) A partnership may deliver to the secretary of state for filing a statement of partnership

authority. The statement:

     (1) Must include the name of the partnership and:

     (i) If the partnership is not a limited liability partnership, the street and mailing addresses

of its principal office; or

     (ii) If the partnership is a limited liability partnership, the name and street and mailing

addresses of its registered agent;

     (2) With respect to any position that exists in or with respect to the partnership, may state

the authority, or limitations on the authority, of all persons holding the position to:

     (i) Sign an instrument transferring real property held in the name of the partnership; or

     (ii) Enter into other transactions on behalf of, or otherwise act for or bind, the partnership;

and

     (3) May state the authority, or limitations on the authority, of a specific person to:

     (i) Sign an instrument transferring real property held in the name of the partnership; or

     (ii) Enter into other transactions on behalf of, or otherwise act for or bind, the partnership.

     (b) To amend or cancel a statement of authority filed by the secretary of state, a partnership

must deliver to the secretary of state for filing an amendment or cancellation stating:

     (1) The name of the partnership;

     (2) If the partnership is not a limited liability partnership, the street and mailing addresses

of the partnership's principal office;

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     (3) If the partnership is a limited liability partnership, the name and street and mailing

addresses of its registered agent;

     (4) The date the statement being affected became effective; and

     (5) The contents of the amendment or a declaration that the statement is canceled.

     (c) A statement of authority affects only the power of a person to bind a partnership to

persons that are not partners.

     (d) Subject to subsection (c) of this section and § 7-12.1-103(d)(1), and except as otherwise

provided in subsections (f), (g), and (h) of this section, a limitation on the authority of a person or

a position contained in an effective statement of authority is not by itself evidence of any person's

knowledge or notice of the limitation.

     (e) Subject to subsection (c) of this section, a grant of authority not pertaining to transfers

of real property and contained in an effective statement of authority is conclusive in favor of a

person that gives value in reliance on the grant, except to the extent that if the person gives value:

     (1) The person has knowledge to the contrary;

     (2) The statement has been canceled or restrictively amended under subsection (b) of this

section; or

     (3) A limitation on the grant is contained in another statement of authority that became

effective after the statement containing the grant became effective.

     (f) Subject to subsection (c) of this section, an effective statement of authority that grants

authority to transfer real property held in the name of the partnership, a certified copy of which

statement is recorded in the office for recording transfers of the real property, is conclusive in favor

of a person that gives value in reliance on the grant without knowledge to the contrary, except to

the extent that when the person gives value:

     (1) The statement has been canceled or restrictively amended under subsection (b) of this

section, and a certified copy of the cancellation or restrictive amendment has been recorded in the

office for recording transfers of the real property; or

     (2) A limitation on the grant is contained in another statement of authority that became

effective after the statement containing the grant became effective, and a certified copy of the later-

effective statement is recorded in the office for recording transfers of the real property.

     (g) Subject to subsection (c) of this section, if a certified copy of an effective statement

containing a limitation on the authority to transfer real property held in the name of a partnership

is recorded in the office for recording transfers of that real property, all persons are deemed to know

of the limitation.

     (h) Subject to subsection (i) of this section, an effective statement of dissolution is a

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cancellation of any filed statement of authority for the purposes of subsection (f) of this section and

is a limitation on authority for purposes of subsection (g) of this section.

     (i) After a statement of dissolution becomes effective, a partnership may deliver to the

secretary of state for filing and, if appropriate, may record a statement of authority that is designated

as a post-dissolution statement of authority. The statement operates as provided in subsections (f)

and (g) of this section.

     (j) Unless canceled earlier, an effective statement of authority is canceled by operation of

law five (5) years after the date on which the statement, or its most recent amendment, becomes

effective. The cancellation is effective without recording under subsection (f) or (g) of this section.

     (k) An effective statement of denial operates as a restrictive amendment under this section

and may be recorded by certified copy for purposes of subsection (f)(1) of this section.

     7-12.1-304. Statement of denial.

     A person named in a filed statement of authority granting that person authority may deliver

to the secretary of state for filing a statement of denial that:

     (1) Provides the name of the partnership and the caption of the statement of authority to

which the statement of denial pertains; and

     (2) Denies the grant of authority.

     7-12.1-305. Partnership liable for partner's actionable conduct.

     (a) A partnership is liable for loss or injury caused to a person, or for a penalty incurred, as

a result of a wrongful act or omission, or other actionable conduct, of a partner acting in the ordinary

course of business of the partnership or with the actual or apparent authority of the partnership.

     (b) If, in the course of the partnership's business or while acting with actual or apparent

authority of the partnership, a partner receives or causes the partnership to receive money or

property of a person not a partner, and the money or property is misapplied by a partner, the

partnership is liable for the loss.

     7-12.1-306. Partner's liability.

     (a) Except as otherwise provided in subsections (b) and (c) of this section, all partners are

liable jointly and severally for all debts, obligations, and other liabilities of the partnership unless

otherwise agreed by the claimant or provided by law.

     (b) A person that becomes a partner is not personally liable for a debt, obligation, or other

liability of the partnership incurred before the person became a partner.

     (c) A debt, obligation, or other liability of a partnership incurred while the partnership is a

limited liability partnership is solely the debt, obligation, or other liability of the limited liability

partnership. A partner is not personally liable, directly or indirectly, by way of contribution or

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otherwise, for a debt, obligation, or other liability of the limited liability partnership solely by

reason of being or acting as a partner. This subsection applies:

     (1) Despite anything inconsistent in the partnership agreement that existed immediately

before the vote or consent required to become a limited liability partnership under § 7-12.1-901(b);

and

     (2) Regardless of the dissolution of the limited liability partnership.

     (d) The failure of a limited liability partnership to observe formalities relating to the

exercise of its powers or management of its business is not a ground for imposing liability on a

partner for a debt, obligation, or other liability of the partnership.

     (e) The cancellation or administrative revocation of a limited liability partnership's

statement of qualification does not affect the limitation in this section on the liability of a partner

for a debt, obligation, or other liability of the partnership incurred while the statement was in effect.

     7-12.1-307. Actions by and against partnership and partners.

     (a) A partnership may sue and be sued in the name of the partnership.

     (b) To the extent not inconsistent with § 7-12.1-306, a partner may be joined in an action

against the partnership or named in a separate action.

     (c) A judgment against a partnership is not by itself a judgment against a partner. A

judgment against a partnership may not be satisfied from a partner's assets unless there is also a

judgment against the partner.

     (d) A judgment creditor of a partner may not levy execution against the assets of the partner

to satisfy a judgment based on a claim against the partnership unless the partner is personally liable

for the claim under § 7-12.1-306 and:

     (1) A judgment based on the same claim has been obtained against the partnership and a

writ of execution on the judgment has been returned unsatisfied in whole or in part;

     (2) The partnership is a debtor in bankruptcy;

     (3) The partner has agreed that the creditor need not exhaust partnership assets;

     (4) A court grants permission to the judgment creditor to levy execution against the assets

of a partner based on a finding that partnership assets subject to execution are clearly insufficient

to satisfy the judgment, that exhaustion of partnership assets is excessively burdensome, or that the

grant of permission is an appropriate exercise of the court's equitable powers; or

     (5) Liability is imposed on the partner by law or contract independent of the existence of

the partnership.

     (e) This section applies to any debt, liability, or other obligation of a partnership which

results from a representation by a partner or purported partner under § 7-12.1-308.

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     7-12.1-308. Liability of purported partner.

     (a) If a person, by words or conduct, purports to be a partner, or consents to being

represented by another as a partner, in a partnership or with one or more persons not partners, the

purported partner is liable to a person to whom the representation is made, if that person, relying

on the representation, enters into a transaction with the actual or purported partnership. If the

representation, either by the purported partner or by a person with the purported partner's consent,

is made in a public manner, the purported partner is liable to a person who relies upon the purported

partnership even if the purported partner is not aware of being held out as a partner to the claimant.

If partnership liability results, the purported partner is liable with respect to that liability as if the

purported partner were a partner. If no partnership liability results, the purported partner is liable

with respect to that liability jointly and severally with any other person consenting to the

representation.

     (b) If a person is thus represented to be a partner in an existing partnership, or with one or

more persons not partners, the purported partner is an agent of persons consenting to the

representation to bind them to the same extent and in the same manner as if the purported partner

were a partner with respect to persons who enter into transactions in reliance upon the

representation. If all the partners of the existing partnership consent to the representation, a

partnership act or obligation results. If fewer than all the partners of the existing partnership consent

to the representation, the person acting and the partners consenting to the representation are jointly

and severally liable.

     (c) A person is not liable as a partner merely because the person is named by another as a

partner in a statement of partnership authority.

     (d) A person does not continue to be liable as a partner merely because of a failure to file

a statement of dissociation or to amend a statement of partnership authority to indicate the person's

dissociation as a partner.

     (e) Except as otherwise provided in subsections (a) and (b) of this section, persons who are

not partners as to each other are not liable as partners to other persons.

ARTICLE 4

RELATIONS OF PARTNERS TO EACH OTHER AND TO PARTNERSHIP

     7-12.1-401. Partner's rights and duties.

     (a) Each partner is entitled to an equal share of the partnership distributions and, except in

the case of a limited liability partnership, is chargeable with a share of the partnership losses in

proportion to the partner's share of the distributions.

     (b) A partnership shall reimburse a partner for any payment made by the partner in the

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course of the partner's activities on behalf of the partnership, if the partner complied with this

section and § 7-12.1-409 in making the payment.

     (c) A partnership shall indemnify and hold harmless a person with respect to any claim or

demand against the person and any debt, obligation, or other liability incurred by the person by

reason of the person's former or present capacity as a partner, if the claim, demand, debt, obligation,

or other liability does not arise from the person's breach of this section or §§ 7-12.1-407 or 7-12.1-

409.

     (d) In the ordinary course of its business, a partnership may advance reasonable expenses,

including attorneys' fees and costs, incurred by a person in connection with a claim or demand

against the person by reason of the person's former or present capacity as a partner, if the person

promises to repay the partnership if the person ultimately is determined not to be entitled to be

indemnified under subsection (c) of this section.

     (e) A partnership may purchase and maintain insurance on behalf of a partner against

liability asserted against or incurred by the partner in that capacity or arising from that status even

if, under § 7-12.1-105(c)(7), the partnership agreement could not eliminate or limit the person's

liability to the partnership for the conduct giving rise to the liability.

     (f) A partnership shall reimburse a partner for an advance to the partnership beyond the

amount of capital the partner agreed to contribute.

     (g) A payment or advance made by a partner which gives rise to a partnership obligation

under subsections (b) or (f) of this section constitutes a loan to the partnership which accrues

interest from the date of the payment or advance.

     (h) Each partner has equal rights in the management and conduct of the partnership's

business.

     (i) A partner may use or possess partnership property only on behalf of the partnership.

     (j) A partner is not entitled to remuneration for services performed for the partnership,

except for reasonable compensation for services rendered in winding up the business of the

partnership.

     (k) A difference arising as to a matter in the ordinary course of business of a partnership

may be decided by a majority of the partners. An act outside the ordinary course of business of a

partnership and an amendment to the partnership agreement may be undertaken only with the

affirmative vote or consent of all the partners.

     7-12.1-402. Becoming partner.

     (a) Upon formation of a partnership, a person becomes a partner under § 7-12.1-202(a).

     (b) After formation of a partnership, a person becomes a partner:

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     (1) As provided in the partnership agreement;

     (2) As a result of a transaction effective under Article 11 of this chapter; or

     (3) With the affirmative vote or consent of all the partners.

     (c) A person may become a partner without:

     (1) Acquiring a transferable interest; or

     (2) Making or being obligated to make a contribution to the partnership.

     7-12.1-403. Form of contribution.

     A contribution may consist of property transferred to, services performed for, or another

benefit provided to the partnership or an agreement to transfer property to, perform services for, or

provide another benefit to the partnership.

     7-12.1-404. Liability for contribution.

     (a) A person's obligation to make a contribution to a partnership is not excused by the

person's death, disability, termination, or other inability to perform personally.

     (b) If a person does not fulfill an obligation to make a contribution other than money, the

person is obligated at the option of the partnership to contribute money equal to the value of the

part of the contribution which has not been made.

     (c) The obligation of a person to make a contribution may be compromised only by the

affirmative vote or consent of all the partners. If a creditor of a limited liability partnership extends

credit or otherwise acts in reliance on an obligation described in subsection (a) of this section

without knowledge or notice of a compromise under this subsection, the creditor may enforce the

obligation.

     7-12.1-405. Sharing of and right to distributions before dissolution.

     (a) Any distribution made by a partnership before its dissolution and winding up must be

in equal shares among partners, except to the extent necessary to comply with a transfer effective

under § 7-12.1-503 or charging order in effect under § 7-12.1-504.

     (b) Subject to § 7-12.1-701, a person has a right to a distribution before the dissolution and

winding up of a partnership only if the partnership decides to make an interim distribution.

     (c) A person does not have a right to demand or receive a distribution from a partnership

in any form other than money. Except as otherwise provided in § 7-12.1-806, a partnership may

distribute an asset in kind only if each part of the asset is fungible with each other part and each

person receives a percentage of the asset equal in value to the person's share of distributions.

     (d) If a partner or transferee becomes entitled to receive a distribution, the partner or

transferee has the status of, and is entitled to all remedies available to, a creditor of the partnership

with respect to the distribution. However, the partnership's obligation to make a distribution is

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subject to offset for any amount owed to the partnership by the partner or a person dissociated as

partner on whose account the distribution is made.

     7-12.1-406. Limitations on distributions by limited liability partnership.

     (a) A limited liability partnership may not make a distribution, including a distribution

under § 7-12.1-806, if after the distribution:

     (1) The partnership would not be able to pay its debts as they become due in the ordinary

course of the partnership's business; or

     (2) The partnership's total assets would be less than the sum of its total liabilities plus the

amount that would be needed, if the partnership were to be dissolved and wound up at the time of

the distribution, to satisfy the preferential rights upon dissolution and winding up of partners and

transferees whose preferential rights are superior to the rights of persons receiving the distribution.

     (b) A limited liability partnership may base a determination that a distribution is not

prohibited under subsection (a) of this section on:

     (1) Financial statements prepared on the basis of accounting practices and principles that

are reasonable in the circumstances; or

     (2) A fair valuation or other method that is reasonable under the circumstances.

     (c) Except as otherwise provided in subsection (e) of this section, the effect of a distribution

under subsection (a) of this section is measured:

     (1) In the case of a distribution as defined in § 7-12.1-102(4)(i), as of the earlier of:

     (i) The date money or other property is transferred or debt is incurred by the limited liability

partnership; or

     (ii) The date the person entitled to the distribution ceases to own the interest or rights being

acquired by the partnership in return for the distribution;

     (2) In the case of any other distribution of indebtedness, as of the date the indebtedness is

distributed; and

     (3) In all other cases, as of the date:

     (i) The distribution is authorized, if the payment occurs not later than one hundred twenty

(120) days after that date; or

     (ii) The payment is made, if the payment occurs more than one hundred twenty (120) days

after the distribution is authorized.

     (d) A limited liability partnership's indebtedness to a partner or transferee incurred by

reason of a distribution made in accordance with this section is at parity with the partnership's

indebtedness to its general, unsecured creditors, except to the extent subordinated by agreement.

     (e) A limited liability partnership's indebtedness, including indebtedness issued as a

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distribution, is not a liability for purposes of subsection (a) of this section if the terms of the

indebtedness provide that payment of principal and interest is made only if and to the extent that a

payment of a distribution could then be made under this section. If the indebtedness is issued as a

distribution, each payment of principal or interest is treated as a distribution, the effect of which is

measured on the date the payment is made.

     (f) In measuring the effect of a distribution under § 7-12.1-806, the liabilities of a dissolved

limited liability partnership do not include any claim that has been disposed of under §§ 7-12.1-

807, 7-12.1-808, or 7-12.1-809.

     7-12.1-407. Liability for improper distributions by limited liability partnership.

     (a) Except as otherwise provided in subsection (b) of this section, if a partner of a limited

liability partnership consents to a distribution made in violation of § 7-12.1-406 and in consenting

to the distribution fails to comply with § 7-12.1-409, the partner is personally liable to the

partnership for the amount of the distribution which exceeds the amount that could have been

distributed without the violation of § 7-12.1-406.

     (b) To the extent the partnership agreement of a limited liability partnership expressly

relieves a partner of the authority and responsibility to consent to distributions and imposes that

authority and responsibility on one or more other partners, the liability stated in subsection (a) of

this section applies to the other partners and not to the partner that the partnership agreement

relieves of the authority and responsibility.

     (c) A person that receives a distribution knowing that the distribution violated § 7-12.1-

406 is personally liable to the limited liability partnership but only to the extent that the distribution

received by the person exceeded the amount that could have been properly paid under § 7-12.1-

406.

     (d) A person against which an action is commenced because the person is liable under

subsection (a) of this section may:

     (1) Implead any other person that is liable under subsection (a) of this section and seek to

enforce a right of contribution from the person; and

     (2) Implead any person that received a distribution in violation of subsection (c) of this

section and seek to enforce a right of contribution from the person in the amount the person received

in violation of subsection (c) of this section.

     (e) An action under this section is barred unless commenced not later than two (2) years

after the distribution.

     7-12.1-408. Rights to information of partners and persons dissociated as partner.

     (a) A partnership shall keep its books and records, if any, at its principal office.

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     (b) On reasonable notice, a partner may inspect and copy during regular business hours, at

a reasonable location specified by the partnership, any record maintained by the partnership

regarding the partnership's business, financial condition, and other circumstances, to the extent the

information is material to the partner's rights and duties under the partnership agreement or this

chapter.

     (c) The partnership shall furnish to each partner:

     (1) Without demand, any information concerning the partnership's business, financial

condition, and other circumstances which the partnership knows and is material to the proper

exercise of the partner's rights and duties under the partnership agreement or this chapter, except to

the extent the partnership can establish that it reasonably believes the partner already knows the

information; and

     (2) On demand, any other information concerning the partnership's business, financial

condition, and other circumstances, except to the extent the demand or the information demanded

is unreasonable or otherwise improper under the circumstances.

     (d) The duty to furnish information under subsection (c) of this section also applies to each

partner to the extent the partner knows any of the information described in subsection (c) of this

section.

     (e) Subject to subsection (j) of this section, on ten (10) days' demand made in a record

received by a partnership, a person dissociated as a partner may have access to information to which

the person was entitled while a partner if:

     (1) The information pertains to the period during which the person was a partner;

     (2) The person seeks the information in good faith; and

     (3) The person satisfies the requirements imposed on a partner by subsection (b) of this

section.

     (f) Not later than ten (10) days after receiving a demand under subsection (e) of this section,

the partnership in a record shall inform the person that made the demand of:

     (1) The information that the partnership will provide in response to the demand and when

and where the partnership will provide the information; and

     (2) The partnership's reasons for declining, if the partnership declines to provide any

demanded information.

     (g) A partnership may charge a person that makes a demand under this section the

reasonable costs of copying, limited to the costs of labor and material.

     (h) A partner or person dissociated as a partner may exercise the rights under this section

through an agent or, in the case of an individual under legal disability, a legal representative. Any

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restriction or condition imposed by the partnership agreement or under subsection (j) of this section

applies both to the agent or legal representative and to the partner or person dissociated as a partner.

     (i) Subject to § 7-12.1-505, the rights under this section do not extend to a person as

transferee.

     (j) In addition to any restriction or condition stated in its partnership agreement, a

partnership, as a matter within the ordinary course of its business, may impose reasonable

restrictions and conditions on access to and use of information to be furnished under this section,

including designating information confidential and imposing nondisclosure and safeguarding

obligations on the recipient. In a dispute concerning the reasonableness of a restriction under this

subsection, the partnership has the burden of proving reasonableness.

     7-12.1-409. Standards of conduct for partners.

     (a) A partner owes to the partnership and the other partners the duties of loyalty and care

stated in subsections (b) and (c) of this section.

     (b) The fiduciary duty of loyalty of a partner includes the duties:

     (1) To account to the partnership and hold as trustee for it any property, profit, or benefit

derived by the partner:

     (i) In the conduct or winding up of the partnership's business;

     (ii) From a use by the partner of the partnership's property; or

     (iii) From the appropriation of a partnership opportunity;

     (2) To refrain from dealing with the partnership in the conduct or winding up of the

partnership business as or on behalf of a person having an interest adverse to the partnership; and

     (3) To refrain from competing with the partnership in the conduct of the partnership's

business before the dissolution of the partnership.

     (c) The duty of care of a partner in the conduct or winding up of the partnership business

is to refrain from engaging in grossly negligent or reckless conduct, willful or intentional

misconduct, or a knowing violation of law.

     (d) A partner shall discharge the duties and obligations under this chapter or under the

partnership agreement and exercise any rights consistently with the contractual obligation of good

faith and fair dealing.

     (e) A partner does not violate a duty or obligation under this chapter or under the

partnership agreement solely because the partner's conduct furthers the partner's own interest.

     (f) All the partners may authorize or ratify, after full disclosure of all material facts, a

specific act or transaction by a partner that otherwise would violate the duty of loyalty.

     (g) It is a defense to a claim under subsection (b)(2) of this section and any comparable

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claim in equity or at common law that the transaction was fair to the partnership.

     (h) If, as permitted by subsection (f) of this section or the partnership agreement, a partner

enters into a transaction with the partnership which otherwise would be prohibited by subsection

(b)(2) of this section, the partner's rights and obligations arising from the transaction are the same

as those of a person that is not a partner.

     7-12.1-410. Actions by partnership and partners.

     (a) A partnership may maintain an action against a partner for a breach of the partnership

agreement, or for the violation of a duty to the partnership, causing harm to the partnership.

     (b) A partner may maintain an action against the partnership or another partner, with or

without an accounting as to partnership business, to enforce the partner's rights and protect the

partner's interests, including rights and interests under the partnership agreement or this chapter or

arising independently of the partnership relationship.

     (c) A right to an accounting on dissolution and winding up does not revive a claim barred

by law.

     7-12.1-411. Continuation of partnership beyond definite term or particular

undertaking.

     (a) If a partnership for a definite term or particular undertaking is continued, without an

express agreement, after the expiration of the term or completion of the undertaking, the rights and

duties of the partners remain the same as they were at the expiration or completion, so far as is

consistent with a partnership at will.

     (b) If the partners, or those of them who habitually acted in the business during the term or

undertaking, continue the business without any settlement or liquidation of the partnership, they

are presumed to have agreed that the partnership will continue.

ARTICLE 5

TRANSFERABLE INTERESTS AND RIGHTS OF TRANSFEREES AND

CREDITORS

     7-12.1-501. Partner not co-owner of partnership property.

     A partner is not a co-owner of partnership property and has no interest in partnership

property which can be transferred, either voluntarily or involuntarily.

     7-12.1-502. Nature of transferable interest.

     A transferable interest is personal property.

     7-12.1-503. Transfer of transferable interest.

     (a) A transfer, in whole or in part, of a transferable interest:

     (1) Is permissible;

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     (2) Does not by itself cause a person's dissociation as a partner or a dissolution and winding

up of the partnership business; and

     (3) Subject to § 7-12.1-505, does not entitle the transferee to:

     (i) Participate in the management or conduct of the partnership's business; or

     (ii) Except as otherwise provided in subsection (c) of this section, have access to records

or other information concerning the partnership's business.

     (b) A transferee has the right to:

     (1) Receive, in accordance with the transfer, distributions to which the transferor would

otherwise be entitled; and

     (2) Seek under § 7-12.1-801(5) a judicial determination that it is equitable to wind up the

partnership business.

     (c) In a dissolution and winding up of a partnership, a transferee is entitled to an account

of the partnership's transactions only from the date of dissolution.

     (d) A partnership need not give effect to a transferee's rights under this section until the

partnership knows or has notice of the transfer.

     (e) A transfer of a transferable interest in violation of a restriction on transfer contained in

the partnership agreement is ineffective if the intended transferee has knowledge or notice of the

restriction at the time of transfer.

     (f) Except as otherwise provided in § 7-12.1-601(4)(ii), if a partner transfers a transferable

interest, the transferor retains the rights of a partner other than the transferable interest transferred

and retains all the duties and obligations of a partner.

     (g) If a partner transfers a transferable interest to a person that becomes a partner with

respect to the transferred interest, the transferee is liable for the partner's obligations under §§ 7-

12.1-404 and 7-12.1-407 known to the transferee when the transferee becomes a partner.

     7-12.1-504. Charging order.

     (a) On application by a judgment creditor of a partner or transferee, a court may enter a

charging order against the transferable interest of the judgment debtor for the unsatisfied amount

of the judgment. A charging order constitutes a lien on a judgment debtor's transferable interest and

requires the partnership to pay over to the person to which the charging order was issued any

distribution that otherwise would be paid to the judgment debtor.

     (b) To the extent necessary to effectuate the collection of distributions pursuant to a

charging order in effect under subsection (a) of this section, the court may:

     (1) Appoint a receiver of the distributions subject to the charging order, with the power to

make all inquiries the judgment debtor might have made; and

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     (2) Make all other orders necessary to give effect to the charging order.

     (c) Upon a showing that distributions under a charging order will not pay the judgment

debt within a reasonable time, the court may foreclose the lien and order the sale of the transferable

interest. The purchaser at the foreclosure sale obtains only the transferable interest, does not thereby

become a partner, and is subject to § 7-12.1-503.

     (d) At any time before foreclosure under subsection (c) of this section, the partner or

transferee whose transferable interest is subject to a charging order under subsection (a) of this

section may extinguish the charging order by satisfying the judgment and filing a certified copy of

the satisfaction with the court that issued the charging order.

     (e) At any time before foreclosure under subsection (c) of this section, a partnership or one

or more partners whose transferable interests are not subject to the charging order may pay to the

judgment creditor the full amount due under the judgment and thereby succeed to the rights of the

judgment creditor, including the charging order.

     (f) This chapter does not deprive any partner or transferee of the benefit of any exemption

law applicable to the transferable interest of the partner or transferee.

     (g) This section provides the exclusive remedy by which a person seeking in the capacity

of a judgment creditor to enforce a judgment against a partner or transferee may satisfy the

judgment from the judgment debtor's transferable interest.

     7-12.1-505. Power of legal representative of deceased partner.

     If a partner dies, the deceased partner's legal representative may exercise:

     (1) The rights of a transferee provided in § 7-12.1-503(c); and

     (2) For purposes of settling the estate, the rights the deceased partner had under § 7-12.1-

408.

ARTICLE 6

DISSOCIATION

     7-12.1-601. Events causing dissociation.

     A person is dissociated as a partner when:

     (1) The partnership knows or has notice of the person's express will to withdraw as a

partner, but, if the person has specified a withdrawal date later than the date the partnership knew

or had notice, on that later date;

     (2) An event stated in the partnership agreement as causing the person's dissociation occurs;

     (3) The person is expelled as a partner pursuant to the partnership agreement;

     (4) The person is expelled as a partner by the affirmative vote or consent of all the other

partners if:

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     (i) It is unlawful to carry on the partnership business with the person as a partner;

     (ii) There has been a transfer of all of the person's transferable interest in the partnership,

other than:

     (A) A transfer for security purposes; or

     (B) A charging order in effect under § 7-12.1-504 which has not been foreclosed;

     (iii) The person is an entity and:

     (A) The partnership notifies the person that it will be expelled as a partner because the

person has filed a statement of dissolution or the equivalent, the person has been administratively

dissolved, the person's charter or the equivalent has been revoked, or the person's right to conduct

business has been suspended by the person's jurisdiction of formation; and

     (B) Not later than ninety (90) days after the notification, the statement of dissolution or the

equivalent has not been withdrawn, rescinded, or revoked, or the person's charter or the equivalent

or right to conduct business has not been reinstated; or

     (iv) The person is an unincorporated entity that has been dissolved and whose activities

and affairs are being wound up;

     (5) On application by the partnership or another partner, the person is expelled as a partner

by judicial order because the person:

     (i) Has engaged or is engaging in wrongful conduct that has affected adversely and

materially, or will affect adversely and materially, the partnership's business;

     (ii) Has committed willfully or persistently, or is committing willfully or persistently, a

material breach of the partnership agreement or a duty or obligation under § 7-12.1-409; or

     (iii) Has engaged or is engaging in conduct relating to the partnership's business which

makes it not reasonably practicable to carry on the business with the person as a partner;

     (6) The person:

     (i) Becomes a debtor in bankruptcy;

     (ii) Signs an assignment for the benefit of creditors; or

     (iii) Seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator

of the person or of all or substantially all the person's property;

     (7) In the case of an individual:

     (i) The individual dies;

     (ii) A guardian or general conservator for the individual is appointed; or

     (iii) A court orders that the individual has otherwise become incapable of performing the

individual's duties as a partner under this chapter or the partnership agreement;

     (8) In the case of a person that is a testamentary or inter vivos trust or is acting as a partner

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by virtue of being a trustee of such a trust, the trust's entire transferable interest in the partnership

is distributed;

     (9) In the case of a person that is an estate or is acting as a partner by virtue of being a

personal representative of an estate, the estate's entire transferable interest in the partnership is

distributed;

     (10) In the case of a person that is not an individual, the existence of the person terminates;

     (11) The partnership participates in a merger under Article 11 of this chapter and:

     (i) The partnership is not the surviving entity; or

     (ii) Otherwise as a result of the merger, the person ceases to be a partner;

     (12) The partnership participates in an interest exchange under Article 11 of this chapter

and, as a result of the interest exchange, the person ceases to be a partner;

     (13) The partnership participates in a conversion under Article 11 of this chapter;

     (14) The partnership participates in a domestication under Article 11 of this chapter and,

as a result of the domestication, the person ceases to be a partner; or

     (15) The partnership dissolves and completes winding up.

     7-12.1-602. Power to dissociate as partner -- Wrongful dissociation.

     (a) A person has the power to dissociate as a partner at any time, rightfully or wrongfully,

by withdrawing as a partner by express will under § 7-12.1-601(1).

     (b) A person's dissociation as a partner is wrongful only if the dissociation:

     (1) Is in breach of an express provision of the partnership agreement; or

     (2) In the case of a partnership for a definite term or particular undertaking, occurs before

the expiration of the term or the completion of the undertaking and:

     (i) The person withdraws as a partner by express will, unless the withdrawal follows not

later than ninety (90) days after another person's dissociation by death or otherwise under §§ 7-

12.1-601(6) through 7-12.1-601(10) or wrongful dissociation under this subsection;

     (ii) The person is expelled as a partner by judicial order under § 7-12.1-601(5);

     (iii) The person is dissociated under § 7-12.1-601(6); or

     (iv) In the case of a person that is not a trust other than a business trust, an estate, or an

individual, the person is expelled or otherwise dissociated because it willfully dissolved or

terminated.

     (c) A person that wrongfully dissociates as a partner is liable to the partnership and to the

other partners for damages caused by the dissociation. The liability is in addition to any debt,

obligation, or other liability of the partner to the partnership or the other partners.

     7-12.1-603. Effect of dissociation.

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     (a) If a person's dissociation results in a dissolution and winding up of the partnership

business, Article 8 of this chapter applies; otherwise, Article 7 of this chapter applies.

     (b) If a person is dissociated as a partner:

     (1) The person's right to participate in the management and conduct of the partnership's

business terminates, except as otherwise provided in § 7-12.1-802(c); and

     (2) The person's duties and obligations under § 7-12.1-409 end with regard to matters

arising and events occurring after the person's dissociation, except to the extent the partner

participates in winding up the partnership's business pursuant to § 7-12.1-802.

     (c) A person's dissociation does not of itself discharge the person from any debt, obligation,

or other liability to the partnership or the other partners which the person incurred while a partner.

ARTICLE 7

PERSON'S DISSOCIATION AS A PARTNER WHEN BUSINESS NOT WOUND UP

     7-12.1-701. Purchase of interest of person dissociated as partner.

     (a) If a person is dissociated as a partner without the dissociation resulting in a dissolution

and winding up of the partnership business under § 7-12.1-801, the partnership shall cause the

person's interest in the partnership to be purchased for a buyout price determined pursuant to

subsection (b) of this section.

     (b) The buyout price of the interest of a person dissociated as a partner is the amount that

would have been distributable to the person under § 7-12.1-806(b) if, on the date of dissociation,

the assets of the partnership were sold and the partnership were wound up, with the sale price equal

to the greater of:

     (1) The liquidation value; or

     (2) The value based on a sale of the entire business as a going concern without the person.

     (c) Interest accrues on the buyout price from the date of dissociation to the date of payment,

but damages for wrongful dissociation under § 7-12.1-602(b), and all other amounts owing,

whether or not presently due, from the person dissociated as a partner to the partnership, must be

offset against the buyout price.

     (d) A partnership shall defend, indemnify, and hold harmless a person dissociated as a

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 person under § 7-12.1-702.

     (e) If no agreement for the purchase of the interest of a person dissociated as a partner is

reached not later than one hundred twenty (120) days after a written demand for payment, the

partnership shall pay, or cause to be paid, in money to the person the amount the partnership

estimates to be the buyout price and accrued interest, reduced by any offsets and accrued interest

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under subsection (c) of this section.

     (f) If a deferred payment is authorized under subsection (h) of this section, 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 (c) 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.

     (g) The payment or tender required by subsections (e) or (f) of this section must be

accompanied by the following:

     (1) A statement of partnership assets and liabilities as of the date of dissociation;

     (2) The latest available partnership balance sheet and income statement, if any;

     (3) An explanation of how the estimated amount of the payment was calculated; and

     (4) Written notice that the payment is in full satisfaction of the obligation to purchase

unless, not later than one hundred twenty (120) days after the written notice, the person dissociated

as a partner commences an action to determine the buyout price, any offsets under subsection (c)

of this section, or other terms of the obligation to purchase.

     (h) A person that wrongfully dissociates as a partner before the expiration of a definite term

or the completion of a particular undertaking is not entitled to payment of any part of the buyout

price until the expiration of the term or completion of the undertaking, unless the person establishes

to the satisfaction of the court that earlier payment will not cause undue hardship to the business of

the partnership. A deferred payment must be adequately secured and bear interest.

     (i) A person dissociated as a partner may maintain an action against the partnership,

pursuant to § 7-12.1-410(b)(2), to determine the buyout price of that person's interest, any offsets

under subsection (c) of this section, or other terms of the obligation to purchase. The action must

be commenced not later than one hundred twenty (120) days after the partnership has tendered

payment or an offer to pay or within one year after written demand for payment if no payment or

offer to pay is tendered. The court shall determine the buyout price of the person's interest, any

offset due under subsection (c) of this section, and accrued interest, and enter judgment for any

additional payment or refund. If deferred payment is authorized under subsection (h) of this section,

the court shall also determine the security for payment and other terms of the obligation to purchase.

The court may assess reasonable attorneys' 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 (g) of this

section.

     7-12.1-702. Power to bind and liability of person dissociated as partner.

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     (a) After a person is dissociated as a partner without the dissociation resulting in a

dissolution and winding up of the partnership business and before the partnership is merged out of

existence, converted, or domesticated under Article 11, or dissolved, the partnership is bound by

an act of the person only if:

     (1) The act would have bound the partnership under § 7-12.1-301 before dissociation; and

     (2) At the time the other party enters into the transaction:

     (i) Less than two (2) years has passed since the dissociation; and

     (ii) The other party does not know or have notice of the dissociation and reasonably

believes that the person is a partner.

     (b) If a partnership is bound under subsection (a) of this section, the person dissociated as

a partner which caused the partnership to be bound is liable:

     (1) To the partnership for any damage caused to the partnership arising from the obligation

incurred under subsection (a) of this section; and

     (2) If a partner or another person dissociated as a partner is liable for the obligation, to the

partner or other person for any damage caused to the partner or other person arising from the

liability.

     7-12.1-703. Liability of person dissociated as partner to other persons.

     (a) Except as otherwise provided in subsection (b) of this section, a person dissociated as

a partner is not liable for a partnership obligation incurred after dissociation.

     (b) A person that is dissociated as a partner is liable on a transaction entered into by the

partnership after the dissociation only if:

     (1) A partner would be liable on the transaction; and

     (2) At the time the other party enters into the transaction:

     (i) Less than two (2) years has passed since the dissociation; and

     (ii) The other party does not have knowledge or notice of the dissociation and reasonably

believes that the person is a partner.

     (c) By agreement with a creditor of a partnership and the partnership, a person dissociated

as a partner may be released from liability for a debt, obligation, or other liability of the partnership.

     (d) A person dissociated as a partner is released from liability for a debt, obligation, or

other liability of the partnership if the partnership's creditor, with knowledge or notice of the

person's dissociation but without the person's consent, agrees to a material alteration in the nature

or time of payment of the debt, obligation, or other liability.

     7-12.1-704. Statement of dissociation.

     (a) A person dissociated as a partner or the partnership may deliver to the secretary of state

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for filing a statement of dissociation stating the name of the partnership and that the person has

dissociated from the partnership.

     (b) A statement of dissociation is a limitation on the authority of a person dissociated as a

partner for the purposes of § 7-12.1-303.

     7-12.1-705. Continued use of partnership name.

     Continued use of a partnership name, or the name of a person dissociated as a partner as

part of the partnership name, by partners continuing the business does not of itself make the person

dissociated as a partner liable for an obligation of the partners or the partnership continuing the

business.

ARTICLE 8

DISSOLUTION AND WINDING UP

     7-12.1-801. Events causing dissolution.

     A partnership is dissolved, and its business must be wound up, upon the occurrence of any

of the following:

     (1) In a partnership at will, the partnership knows or has notice of a person's express will

to withdraw as a partner, other than a partner that has dissociated under §§ 7-12.1-601(2) through

7-12.1-601(10), but, if the person has specified a withdrawal date later than the date the partnership

knew or had notice, on the later date;

     (2) In a partnership for a definite term or particular undertaking:

     (i) Within ninety (90) days after a person's dissociation by death or otherwise under §§ 7-

12.1-601(6) through 7-12.1-601(10) or wrongful dissociation under § 7-12.1-602(b), the

affirmative vote or consent of at least half of the remaining partners to wind up the partnership

business, for which purpose a person's rightful dissociation pursuant to § 7-12.1-602(b)(2)(i)

constitutes that partner's consent to wind up the partnership business;

     (ii) The affirmative vote or consent of all the partners to wind up the partnership business;

or

     (iii) The expiration of the term or the completion of the undertaking;

     (3) An event or circumstance that the partnership agreement states causes dissolution;

     (4) On application by a partner, the entry by the superior court of an order dissolving the

partnership on the grounds that:

     (i) The conduct of all or substantially all the partnership's business is unlawful;

     (ii) The economic purpose of the partnership is likely to be unreasonably frustrated;

     (iii) Another partner has engaged in conduct relating to the partnership business which

makes it not reasonably practicable to carry on the business in partnership with that partner; or

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     (iv) It is otherwise not reasonably practicable to carry on the partnership business in

conformity with the partnership agreement;

     (5) On application by a transferee, the entry by the superior court of an order dissolving

the partnership on the ground that it is equitable to wind up the partnership business:

     (i) After the expiration of the term or completion of the undertaking, if the partnership was

for a definite term or particular undertaking at the time of the transfer or entry of the charging order

that gave rise to the transfer; or

     (ii) At any time, if the partnership was a partnership at will at the time of the transfer or

entry of the charging order that gave rise to the transfer; or

     (6) The passage of ninety (90) consecutive days during which the partnership does not have

at least two (2) partners.

     7-12.1-802. Winding up.

     (a) A dissolved partnership shall wind up its business and, except as otherwise provided in

§ 7-12.1-803, the partnership continues after dissolution only for the purpose of winding up.

     (b) In winding up its business, the partnership:

     (1) Shall discharge the partnership's debts, obligations, and other liabilities, settle and close

the partnership's business, and marshal and distribute the assets of the partnership; and

     (2) May:

     (i) Deliver to the secretary of state for filing a statement of dissolution stating the name of

the partnership and that the partnership is dissolved;

     (ii) Preserve the partnership business and property as a going concern for a reasonable time;

     (iii) Prosecute and defend actions and proceedings, whether civil, criminal, or

administrative;

     (iv) Transfer the partnership's property;

     (v) Settle disputes by mediation or arbitration;

     (vi) Deliver to the secretary of state for filing a statement of termination stating the name

of the partnership and that the partnership is terminated; and

     (vii) Perform other acts necessary or appropriate to the winding up.

     (c) A person whose dissociation as a partner resulted in dissolution may participate in

winding up as if still a partner, unless the dissociation was wrongful.

     (d) If a dissolved partnership does not have a partner and no person has the right to

participate in winding up under subsection (c) of this section, the personal or legal representative

of the last person to have been a partner may wind up the partnership's business. If the representative

does not exercise that right, a person to wind up the partnership's business may be appointed by the

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affirmative vote or consent of transferees owning a majority of the rights to receive distributions at

the time the consent is to be effective. A person appointed under this subsection has the powers of

a partner under § 7-12.1-804 but is not liable for the debts, obligations, and other liabilities of the

partnership solely by reason of having or exercising those powers or otherwise acting to wind up

the partnership's business.

     (e) On the application of any partner or person entitled under subsection (c) of this section

to participate in winding up, the superior court may order judicial supervision of the winding up of

a dissolved partnership, including the appointment of a person to wind up the partnership's business,

if:

     (1) The partnership does not have a partner and within a reasonable time following the

dissolution no person has been appointed under subsection (d) of this section; or

     (2) The applicant establishes other good cause.

     7-12.1-803. Rescinding dissolution.

     (a) A partnership may rescind its dissolution, unless a statement of termination applicable

to the partnership has become effective or the superior court has entered an order under §§ 7-12.1-

801(4) or 7-12.1-801(5) dissolving the partnership.

     (b) Rescinding dissolution under this section requires:

     (1) The affirmative vote or consent of each partner; and

     (2) If the partnership has filed with the secretary of state a statement of dissolution and:

     (i) The statement has not become effective, delivery to the secretary of state for filing of a

statement of withdrawal under § 7-12.1-115 applicable to the statement of dissolution; or

     (ii) The statement of dissolution has become effective, delivery to the secretary of state for

filing of a statement of rescission stating the name of the partnership and that dissolution has been

rescinded under this section.

     (c) If a partnership rescinds its dissolution:

     (1) The partnership resumes carrying on its business as if dissolution had never occurred;

     (2) Subject to subsection (c)(3) of this section, any liability incurred by the partnership

after the dissolution and before the rescission has become effective is determined as if dissolution

had never occurred; and

     (3) The rights of a third party arising out of conduct in reliance on the dissolution before

the third party knew or had notice of the rescission may not be adversely affected.

     7-12.1-804. Power to bind partnership after dissolution.

     (a) A partnership is bound by a partner's act after dissolution which:

     (1) Is appropriate for winding up the partnership business; or

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     (2) Would have bound the partnership under § 7-12.1-301 before dissolution if, at the time

the other party enters into the transaction, the other party does not know or have notice of the

dissolution.

     (b) A person dissociated as a partner binds a partnership through an act occurring after

dissolution if:

     (1) At the time the other party enters into the transaction:

     (i) Less than two (2) years has passed since the dissociation; and

     (ii) The other party does not know or have notice of the dissociation and reasonably

believes that the person is a partner; and

     (2) The act:

     (i) Is appropriate for winding up the partnership's business; or

     (ii) Would have bound the partnership under § 7-12.1-301 before dissolution and at the

time the other party enters into the transaction the other party does not know or have notice of the

dissolution.

     7-12.1-805. Liability after dissolution of partner and person dissociated as partner.

     (a) If a partner having knowledge of the dissolution causes a partnership to incur an

obligation under § 7-12.1-804(a) by an act that is not appropriate for winding up the partnership

business, the partner is liable:

     (1) To the partnership for any damage caused to the partnership arising from the obligation;

and

     (2) If another partner or person dissociated as a partner is liable for the obligation, to that

other partner or person for any damage caused to that other partner or person arising from the

liability.

     (b) Except as otherwise provided in subsection (c) of this section, if a person dissociated

as a partner causes a partnership to incur an obligation under § 7-12.1-804(b), the person is liable:

     (1) To the partnership for any damage caused to the partnership arising from the obligation;

and

     (2) If a partner or another person dissociated as a partner is liable for the obligation, to the

partner or other person for any damage caused to the partner or other person arising from the

obligation.

     (c) A person dissociated as a partner is not liable under subsection (b) of this section if:

     (1) Section 7-12.1-802(c) permits the person to participate in winding up; and

     (2) The act that causes the partnership to be bound under § 7-12.1-804(b) is appropriate for

winding up the partnership's business.