Exclusion of a partner for just cause

A partner has engaged in serious breaches — unfair competition, withholding of company assets, misconduct — that make continuing the relationship unworkable. The law allows for their exclusion, but requires just cause and a proper procedure.

Just cause as a requirement

Art. 91 of Law 19,550 allows for the exclusion of any partner in partnerships, limited liability companies, and general partners of limited partnerships, when just cause exists. The provision deems just cause to exist in the event of a serious breach of the partner's obligations, as well as in cases of incapacity, disqualification, or a declaration of bankruptcy or insolvency proceedings.

Determining just cause is a matter of fact and evidence: conflict or distrust alone is not enough — conduct that seriously affects the company's operation or interests must be proven.

Procedure and effects

Exclusion is decided by a court when the partner does not accept it, and the action may be brought by the company or by any of the partners. Art. 91 sets a ninety-day limitation period from the time the justifying fact became known.

Under arts. 92 and 93, the excluded partner is entitled to the value of their interest as of the date the exclusion is invoked, shares in pending transactions, and remains liable for prior obligations. Properly settling the interest is usually at the core of the dispute.

Common mistakes

• Invoking exclusion after the 90-day limitation period under art. 91 has expired
• Seeking to exclude a partner without proven just cause, based on mere personal conflict
• Failing to properly value and pay the partner's interest
• Confusing exclusion with withdrawal or with dissolution
• Failing to document the conduct on which the exclusion is based

Frequently asked questions