Partnership Exit Agreement Sample

This article describes the exit strategy and the steps to take to end a general partnership. It examines the nature of the agreement that could be used to document clear agreements for the dissolution of a partnership and stresses the importance of defining in detail the distribution of responsibilities and assets in a period that could be sensitively agreed both personally and commercially. Other provisions that may include a partnership agreement for the outgoing partners include the obligation for the outgoing partner to return to the partnership all registrations or information of know-how or confidential information, and the obligation for the outgoing partner to provide adequate support to the partnership so that the assets are recovered from the remaining members of the partnership or transferred to the partnership as soon as the outgoing partner withdraws. The partnership agreement may also contain a number of restrictive agreements on what an outgoing partner can or cannot do after leaving. These should be appropriate and proportionate on the basis of the facts and circumstances surrounding the partnership, and it is worth obtaining legal advice on the applicability of these provisions to ensure that they are not too aggressive and anti-competitive. The partners should then decide on the distribution of the vacant “share" of the outgoing partner among the remaining partners. From a tax point of view, this may require some consideration and it is therefore advisable to get professional advice on allowances. A day may come when the business is no longer viable and becomes insolvent, and again, it is advisable to have an exit strategy for what will happen before the event to ensure that the process goes smoothly. If the partners have not agreed otherwise (and there is no evidence of such an agreement in a partnership agreement), the partnership may be automatically terminated if a partner dies, goes bankrupt or if a partner authorizes the payment of a royalty on its share of activity. This once again underlines the importance of a partnership agreement to ensure that the trade partnership has sufficient security of existence. Excluding this provision from a partnership agreement can help the company feel safe without a single partner threatening to terminate it. In addition, the partnership agreement could be developed so that partners could suspend the partner instead of deporting him immediately. This has the advantage of ensuring business continuity.

The partnership agreement could also include a provision allowing a majority of partners to force a partner to leave the partnership.