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BL&P > 6. Partnerships > Flashcards

6. Partnerships Flashcards

1
Q

Definition of Partnership

A

Two or more persons are ‘carrying on a business in common with a view of profit

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2
Q

Which sections of the PA 1890 cannot be overriden with an alternative agreement?

A

s1+2: When partnership comes into existence
s 5-18: covers the relationship between partners and third parties and liability for debts

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3
Q

Partnership names CANNOT:

A
  • include ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’;
  • be offensive
  • be the same as an existing trademark; or
  • contain a ‘sensitive’ word or expression, or suggest a connection with government or local authorities, without permission.
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4
Q

If a PA sets out an ‘expiry date’ for their partnership, if they carry on afterwards, is a new agreement required?

A

No, (s 27 PA) same agreement will apply

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5
Q

PA 1890: Decision Making

A
  1. All decisions taken by majority EXCEPT
    i. Changing nature of business
    ii. introducing a new partner
    iii. changing terms of the partnership agreement / general principle that contracts can only be varied with the consent of all the parties
    WHICH MUST BE UNANIMOUS
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6
Q

PA 1890: Shares in Income and Capital Profits

A

All partners share equally (if want something different, must have a term in the Partnership Agreement reflecting this)

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7
Q

PA 1890: Expelling a partner

A

Under the default provisions of the PA 1890, no majority of partners may expel another partner unless the partners have expressly agreed to this (ie. in written partnership agreement)

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8
Q

PA 1890: When does the partnership Dissolve

A
  1. when a partner retires (although the partnership agreement can provide that the other partners carry on in business, which is explained further below)
  2. expiry of a fixed term
  3. death or bankruptcy of any of the partners
  4. if the partners give notice of dissolution to a partner who has (by order of the court) granted a charge over their share of the partnership property, for a debt owed by them alone and not the partnership as a whole
  5. if something happens making it unlawful for the partnership to continue
  6. Can apply to court for dissolution
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9
Q

If a partner leaves and there is no provision in the PA about how to value the outgoing partner’s share, what are they entitled to?

A
  • interest at a rate of 5% per annum on the value of their share until they receive their share from the other parties or
  • such sum the court orders representing share of profits
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10
Q

If a partnership is SOLD, in what order are the proceeds of sale / assets applied by PA 1890

A
  1. creditors paid in full
  2. partners who have lent money to the firm will be repaid, including interest
  3. partners paid their share of partnership capital to which they are entitled
  4. any surplus shares in accordance with the terms of their agreement
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11
Q

when winding up a partnership, who has ‘authority’ to act?

A

Any of the partners UNLESS THEY ARE BANKRUPT

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12
Q

Are there restraints of trade in the PA 1890

A

No

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13
Q

Can partners include restrains of trade in their drafted partnership agreement?

A

Yes, if they protect a legitimate business interest and is no wider than necessary in terms of duration, geography, and scope
- Non-compete
- non-solicitation
- non-dealing

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14
Q

Who makes contracts in a partnership?

A

Contracts may be made by all of the partners acting together or by just one of the partners

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15
Q

When is the partnership bound by a contract entered into it by partners in the firms name?

A

When partner is authorised, either:
1. Partners acted jointly in making contract OR
2. Express actual authority OR
3. Implied actual authority
OR WHEN PARTNER APPEARS TO BE AUTHORISED
4. Apparent Authority

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16
Q

Express Actual Authority

A

Partners expressly gave one of the parters permission to enter into this transaction or transactions of this type, or directly instructed them to do so

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17
Q

Implied Actual Authority

A

Partners have impliedly accepted that one or more partners have authority to represent firm in a particular type of transaction, can be implied when:

  1. All partners are equally involved in running the business
  2. regular course of dealing by one parter which others have not objected to
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18
Q

When does a partner have ‘apparent authority’

A
  1. Transaction related to business carried on by firm;
  2. Transaction is one for which a parter in such a firm would be expected to have authority to act
  3. other party in transaction did not know the partner did not have authority
  4. the other party deals with a person whom they know or believe to be a partner
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19
Q

Novation Agreement Meaning

A

In a NA, a retiring partner will be released from an existing debt, by entering into a contract with the creditor and the other partners and possibly an incoming partner
- creditor releases original partner from liability, firm takes it over
- if partner is retiring without another joining, to ensure contract is binding there must be consideration for creditor’s promise to release the retiring partner from the liability or contract must be executed as a deed

20
Q

After leaving a partnership, does a partner remain liable for partnership debts incurred whilst they were partner?

A

Yes (barring a novation agreement)

21
Q

After leaving a partnership, does a partner remain liable for partnership debts incurred after they have left?

A

NO IF:
- They give actual notice to anyone the firm has dealt with that partner is leaving (direct)
- They give general notice in London Gazette (or other relevant gazette)

22
Q

After dying / being declared bankrupt, does a partner remain liable for partnership debts incurred after they have died / been bankrupt?

A

No, no notice required and estate / person is not liable

23
Q

What does ‘holding out’ mean

A

If a creditor of a partnership relies on a representation that a particular person is a partner in a firm, this person is ‘holding out’ and the creditor may be able to hold this person liable

24
Q

Methods of ‘holding out’

A
  • Oral
  • in writing (leaving partner’s name on letterhead)
  • by conduct
25
Q

Can ‘holding out’ be done by another person (on behalf of a perceived partner) with their knowledge?

A

yes

26
Q

Limited Liability Partnerships: # of members required on incorporation

A
  • at least 2
  • and 2 (can be same) designated as responsible for filing documents at companies house
27
Q

If the number of members in an LLP goes from 2 to 1, what is the consequence wrt debts

A

If number of members reduces to 1 (and this is for more than 6 months) this person jointly and severally liable for any LLP debts incurred during this period from the 6 month point onwards

28
Q

What must an LLP do to incorporate itself?

A

File form LL IN01 at Companies House with Fee

29
Q

Requirements for naming a limited liability partnership

A
  • Must end in LLP, limited liability partnership or Welsh Equivalent
  • Similar name restrictions as companies
  • Must have name outside of place of business and stationary must state name, place of registration and registration number (and address of registered office)
30
Q

Responsibilities of designated members in LLPs

A
  1. signing and filing annual accounts with the registrar
  2. appointing, removing and remunerating the auditors
  3. filing annual confirmation statement
  4. sending notices to the Registrar of companies (eg. for someone leaving or joining LLP) or
  5. winding up the LLP
31
Q

Can LLPs own property?

A

Yes

32
Q

Can LLPs do any of the following: issue debentures, grant fixed charges, grant floating charges

A

Yes to all three

33
Q

Administrative Requirements for LLPs when granting charges

A
  1. Must keep register of charges and a copy of every charge requiring registration at its registered office
  2. must register chargers with Registrar of Companies
34
Q

If an LLP wants to add a new member, what admin tasks must the LLP take on?

A
  • Must send notice to registrar of companies with 14 days of appointment (LL AP01 for individual, LL AP02 for corporate member)
  • Notice to companies house giving service address, residential address and full name, former names, and DOB
35
Q

If a member is leaving an LLP, what must they file / admin requirements

A
  • LLP must file form LLTM01 (individual) or LL TM02 (corporate member) at companies house within 14 days of leaving
36
Q

What does LLP Regulations 2001 say about members leaving LLP?

A
  • GR: Any member can leave after providing reasonable notice, members cannot be expelled (but this could be included in LLP agreement)
37
Q

If there is no partnership agreement and one partner dies - does this have any affect on the partnership?

A
  1. If there is no agreement, death will dissolve the partnership
  2. But partners can negotiate to buy the deceased partner’s share
38
Q

If a partner dies, why would it be beneficial for their estate if the remaining partners bought out their share?

A

Included in the payment will be a sum for the ‘goodwill’ of the business, and if the business was wound up this value would be lost (so better of financially to do it this way)

39
Q

Partner A leaves the partnership and is replaced by Parter B. A creditor sues for a debt under a contract made while Partner A was still a partner - who is liable for the debt?

A

Partner A and the other partners who were partners when the contract was made (NOT partner B)

40
Q

How does the partnership act say that income and capital are to be divided between partners?

A

Generally, they will be shared equally unless there is an EXPRESS or IMPLIED agreement to the contrary

41
Q

What would constitute an ‘implied’ agreement to share income and capital unequally - contravening general rule in the partnership act

A

If there is conduct over multiple years (potentially enhanced by unequal contributions) showing an unequal divide, the partners could be said to have an implied agreement which will be valid

42
Q

What does it mean to say partners are ‘jointly and severally liable for the debts of the business’

A

This means that a creditor can choose to sue any or all of the partners for the whole amount of the debt.

43
Q

If a client wants to create an unincorporated business with others where he has an active role in the management of the company, why is a limited partnership NOT a suitable business mode?

A

limited partnership is not a suitable option as the client cannot be involved in the management of the business if he is a limited partner.

44
Q

Does the PA imply any post-exit restraint of trade clauses?

A

No, if one exists in a partnership agreement it must be express

45
Q

Requirement for a restraint of trade covenant (after exit) to be valid

A
  1. must protect legitimate business interests
  2. must be reasonable in terms of duration and geographic area
  3. should not be so restrictive that they prevent a partner earning a living
  4. limited to the type of business the partnership operated in
46
Q

of designated members required in a limited liability partnership

A

2

BL&P (14 decks)

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