Liability of partner after conversion or merger

1. Law
2. Arkansas Code
3. Business and Commercial Law
4. Partnerships
5. Uniform Partnership Act (1996)
6. Conversion and Merger
7. Liability of partner after conversion or merger

1. (a) A conversion or merger under this chapter does not discharge any liability under § 4-46-306 or § 4-46-703 of a person that was a partner in or dissociated as a partner from a converting or constituent partnership, but:

   1. (1) The provisions of this chapter pertaining to the collection or discharge of the liability continue to apply to the liability;

   2. (2) The converted or surviving organization is deemed to be the converting or constituent partnership under § 4-46-306 or § 4-46-703; and

   3. (3) If a person is required to pay any amount under this subsection:

      1. (A) The person has a right of contribution from each other person that was liable as a partner under § 4-46-306 when the obligation was incurred and has not been released from the obligation under § 4-46-703; and

      2. (B) The contribution due from each other person is in proportion to the right to receive distributions in the capacity of partner in effect for each other person when the obligation was incurred.

2. (b) In addition to any other liability provided by law:

   1. (1) A person that immediately before a conversion or merger became effective was a partner in a converting or constituent partnership that was not a limited liability partnership is personally liable for each obligation of the converted or surviving organization arising from a transaction with a third party after the conversion or merger becomes effective if at the time the third party enters into the transaction, the third party:

      1. (A) Does not have notice of the conversion or merger; and

      2. (B) Reasonably believes that:

         1. (i) The converted or surviving organization is the converting or constituent partnership;

         2. (ii) The converting or constituent partnership is not a limited liability partnership; and

         3. (iii) The person is a partner in the converting or constituent partnership; and

   2. (2) A person that was dissociated as a partner from a converting or constituent partnership before the conversion or merger became effective is personally liable for each obligation of the converted or surviving organization arising from a transaction with a third party after the conversion or merger becomes effective if:

      1. (A) Immediately before the conversion or merger became effective the converting or surviving partnership was not a limited liability partnership; and

      2. (B) At the time the third party enters into the transaction less than two (2) years have passed since the person dissociated as a partner and the third party:

         1. (i) Does not have notice of the dissociation;

         2. (ii) Does not have notice of the conversion or merger; and

         3. (iii) Reasonably believes that:

            1. (a) The converted or surviving organization is the converting or constituent partnership;

            2. (b) The converting or constituent partnership is not a constituent limited liability partnership; and

            3. (c) The person is a partner in the converting or constituent partnership.

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