KRS 362.1-701: Purchase of dissociated partner's interest.

(1) If a partner is dissociated from a partnership without resulting in a dissolution and

winding up of the partnership business under KRS 362.1 -801, then the partnership

shall cause the dissociated partner's interest in the partnership to be purchased for a

buyout price determined pursuant to subsection (2) of this section.

(2) The buyout price of a dissociated partner's interest is the amount that would have

been distributable to the dissociating partner under KRS 362.1-807(2) if, on the date

of dissociation, the assets of the partnership were sold at a price equal to the greater

of the liquidation value or the value based on a sale of the entire business as a going

concern without the dissociated partner and the partnership were wound up as of

that date. Interest shall be paid from the date of dissociation to the date of payment.

(3) Damages for wrongful dissociation under KRS 362.1 -602(2), and all other amounts

owing, whether or not presently due, from the dissociated partner to the partnership,

shall be offs et against the buyout price. Interest shall be paid from the date the

amount owed becomes due to the date of payment.

(4) A partnership shall indemnify a dissociated partner whose interest is being

purchased against all partnership liabilities, whether inc urred before or after the

dissociation, except liabilities incurred by an act of the dissociated partner under

KRS 362.1-702.

(5) If no agreement for the purchase of a dissociated partner's interest is reached within

one hundred twenty (120) days after a w ritten demand for payment, then the

partnership shall pay, or cause to be paid, in cash to the dissociated partner the

amount the partnership estimates to be the buyout price and accrued interest,

reduced by any offsets and accrued interest under subsection (3) of this section.

(6) If a deferred payment is authorized under subsection (8) of this section, then 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 su bsection (3) 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.

(7) The payment or tender required by subsection (5) or (6) of this section shall be

accompanied by the following:

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

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

(c) An explanation of how the estimated amount of the payment was calcul ated;

and

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

purchase unless, within one hundred twenty (120) days after the written

notice, the dissociated partner commences an action to determine the buyout

price, any offset s under subsection (3) of this section, or other terms of the

obligation to purchase.

(8) A partner who wrongfully dissociates before the expiration of a definite term or the

completion of a particular undertaking is not entitled to payment of any portion of

the buyout price until the expiration of the term or completion of the undertaking,

unless the partner establishes to the satisfaction of the court that earlier payment

will not cause undue hardship to the business of the partnership. A deferred

payment shall be adequately secured and bear interest.

(9) A dissociated partner may maintain an action against the partnership, pursuant to

KRS 362.1-405(2)(b)2., to determine the buyout price of that partner's interest, any

offsets under subsection (3) of this section, or other terms of the obligation to

purchase. The action shall be commenced within one hundred twenty (120) days

after the partnership has tendered payment or an offer to pay or within one (1) year

after written demand for payment if no payment or offer to pay is tendered. The

court shall determine the buyout price of the dissociated partner's interest, any offset

due under subsection (3) of this section, and accrued interest, and enter judgment

for any additional payment or refund. If deferred pay ment is authorized under

subsection (8) of this section, then the court shall also determine the security for

payment and other terms of the obligation to purchase. The court may assess

reasonable attorney's 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 (7) of this section.