EXCLUSION OF A PARTNER IN BOLIVIA: WHAT TO DO WHEN A PARTNER HARMS THE COMPANY

When a partner misbehaves or their actions negatively impact the functioning of a business, Bolivian law allows for their exclusion under justified grounds. This legal mechanism protects the stability and interests of the company against conduct that could jeopardize its continuity or reputation. Below, we explain when the exclusion of a partner is applicable, how the process is carried out, and what its legal effects are under Bolivian commercial law.

WHEN CAN A PARTNER BE EXCLUDED FROM A COMPANY IN BOLIVIA?

In Bolivia, any partner may be excluded from a company if there is just cause. The law clearly outlines situations where a partner’s behavior is deemed detrimental to the company.

GROUNDS FOR EXCLUSION

Serious breach of obligations: Repeated failure to fulfill agreed-upon duties or assigned functions can justify exclusion.
Fraudulent or malicious acts against the company: A typical example is falsifying documents or conducting operations that harm the business.
Improper use of the company’s name or assets: Using the company’s identity for personal matters—such as opening unauthorized bank accounts or signing unrelated contracts—may warrant exclusion.
Loss of legal capacity or bankruptcy: Except in corporations or limited liability companies, a partner may be excluded if declared legally incapable or bankrupt.

These rules also apply to managing partners in limited partnerships by shares, further extending their scope.

PROCEDURE TO EXCLUDE A PARTNER IN BOLIVIA

The exclusion may be requested by the company’s representatives or any partner, but always under their personal responsibility. The process is judicial and follows a summary procedure, which means it must be resolved promptly without a lengthy trial.

ESSENTIAL STEPS TO EXCLUDE A PARTNER IN BOLIVIA

Filing the exclusion lawsuit: Submitted before the competent court.
Notification to the other partners: If the request is filed by one partner, all others must be notified.
Deadline to act: The right to request exclusion expires 90 days after the cause becomes known.

Practical example: A partner discovers that another partner used company funds to finance a personal business. If the exclusion is not requested within three months from the discovery, the right to do so is lost.

LEGAL EFFECTS OF EXCLUDING A PARTNER FROM A COMPANY IN BOLIVIA

Once the exclusion takes effect, the law provides a set of consequences aimed at preserving economic balance and protecting both the company and the excluded partner.

LEGAL RIGHTS OF THE EXCLUDED PARTNER UNDER BOLIVIAN LAW

Payment for their share: The excluded partner has the right to receive the monetary value of their equity interest and accrued profits up to the exclusion date.
Participation in pending transactions: Even after exclusion, they remain entitled to profits and losses from operations initiated before their departure.
Retention of value: The company may withhold the excluded partner’s share until all pending transactions are finalized.
Reimbursement for in-use contributions: If the partner contributed an asset for use (e.g., a vehicle or property), they are entitled to monetary compensation if the asset is essential for the business.
Liability to third parties: The excluded partner remains liable for company obligations until the modification of the partnership agreement is registered with the Commercial Registry.

KEY CONSIDERATIONS FOR COMPANIES IN BOLIVIA

We recommend regularly reviewing your company’s bylaws and partnership agreements to include efficient exclusion mechanisms and prevent a problematic partner from harming the financial and operational health of the business.

Additionally, this process must be properly documented and supported by legal counsel to ensure its validity—especially if the excluded partner contests it.

Is a partner harming your business? Contact us for comprehensive legal advice to protect your company’s interests and ensure compliance with Bolivian law.

Frequently Asked Questions (FAQs)

What does it legally mean for a partner to “misbehave”?

It means engaging in serious misconduct such as fraud, misuse of company assets, or repeated failure to fulfill obligations, which justifies their exclusion.

How can I prove that a partner is harming the company?

Through documents, witness statements, or accounting records that show fraudulent or negligent behavior.

Can a partner be excluded without going to court?

No. In Bolivia, exclusion must be requested through a judicial process and follow a summary procedure.

What if the excluded partner disagrees?

They can defend themselves during the legal process. However, if just cause is proven, the exclusion will be upheld.

What happens to the company’s debts at the time of exclusion?

The excluded partner remains liable to third parties for existing obligations until the exclusion is registered in the Commercial Registry.

Bibliography

Constitución Política del Estado Plurinacional de Bolivia
Bolivian Commercial Code
Relevant Bolivian commercial jurisprudence

The content of this article does not reflect the technical opinion of Rigoberto Paredes & Associates and should not be considered a substitute for legal advice. The information presented herein corresponds to the date of publication and may be outdated at the time of reading. Rigoberto Paredes & Associates assumes no responsibility for keeping the information in this article up to date, as legal regulations may change over time.