BL - 2 - Partnership

Question 1

Is the existence of a partnership a question of law or of fact?

Answer 1

It is very much a question of fact - running a business together with a view of profit

Question 2

Who can be a partner?

Answer 2

Any legally capable person

Question 3

Can a company become a partner

Answer 3

yes

Question 4

Is there a maximum number of persons of the same partnership?

Answer 4

No

Question 5

What rules apply for partnership names?

Answer 5

• the names of partners are without any issues
• prior approval for business names

Question 6

If a partnership uses a business name, it must comply with …

Answer 6

the disclosure requirements under the CA. Details of partners must appear
- at the place of business
- on partnership stationary

Question 7

What is a partnership at will

Answer 7

It is a partnership where no specific duration or fixed term is set.

Question 8

When can a partnership at will be determined?

Answer 8

at any time by giving notice to the other partners

Question 9

Is there a requirement to give written notice when determining a partnership?

Answer 9

Only if the partnership agreement was made by deed

Question 10

What is a sleeping partner?

Answer 10

It is a partner who simply invests, without being involved in the management

Question 11

Which decision among partners requires unanimity?

Answer 11

The decision to change the nature of the business

Question 12

All matters connected with the partnership business are decided by…

Answer 12

simple majority

Question 13

Is there any right to expel a partner under the PA?

Answer 13

No

Question 14

What should a partnership agreement provide for regarding a partner’s share in case that partner leaves?

Answer 14

• other partners have option to purchase the share
• valuation of leaving partner’s share
• payment of share (instalment, etc.)
• dissolution if option to purchase is not exercised

Question 15

What are the proceeds of a dissolution used for?

Answer 15

• repay third party creditors
• repay partner creditors
  repay partners’ capital entitlements

Question 16

What is the requirement for a restriction on ex-partners competing with the partnership business, approaching employees, etc.?

Answer 16

The clause must be reasonable in scope

Question 17

What are the fiduciary duties the partners owe each other?

Answer 17

• duty to provide true accounts and full information on partnership matters
• duty to account for profits derived from the position as partner
• duty to account for profits from a competing business

Question 18

Who has the right to inspect partnership books?

Answer 18

Only the partners

Question 19

What is the requirement for a partner binding the partnership as a whole?

Answer 19

He must act within the scope of his
(a) actual authority
OR
(b) apparent/ostensible authority

Question 20

What is apparent/ostensible authority?

Answer 20

It would appear to the third party that the transaction is authorized by the partnership in the circumstances

Question 21

How many questions does apparent authority ask for?

Answer 21

Four

Question 22

What are the four questions of apparent authority?

Answer 22

• is the transaction related to the partnership business?
• would a partner usually be expected to have authority to enter into the transaction?
• does the third party know that the partner has no actual authority?
• does the third party know or doubt that the “partner” isn’t really a partner?

Question 23

If there is no apparent/ostensible authority, then the partnership will

Answer 23

NOT be bound.

Only the partner concerned will be fully liable.

Question 24

If a partner has entered into a transaction with only apparent authority, what rights do the other partners have?

Answer 24

They may claim any losses from that partner that results from the transaction.

Question 25

Who is liable for the debts and obligations of the partnership?

Answer 25

The partners are liable:
- joint and severally
- without limit

Question 26

Where a partnership is unable to pay its debts, a creditor is entitled to…

Answer 26

obtain payment from the private assets of the partners

Question 27

Which debts is a partner liable for?

Answer 27

For the debts incurred whilst a partner. This applies even after he leaves the partnership

Question 28

Is a new partner liable for the partnership’s old debts (i.e., before he became a partner)?

Answer 28

no

Question 29

How can a retiring partner protect himself from debts?

Answer 29

• deed of release from willing creditors
• novation agreement with willing creditors
• indemnity from continuing partners

Question 30

When will a retired partner be liable for debts incurred after his retirement?

Answer 30

• if he fails to give notice to third partners that he is leaving the partnership:
  (a) actual notice
  (b) constructive notice

Question 31

What is actual notice for a retiring partner?

Answer 31

It means actually informing existing and former clients/customers

Question 32

What is constructive notice for a retiring partner?

Answer 32

It means placing an advertisement in the London Gazette

Question 33

What is holding out?

Answer 33

• doing/allowing something that suggests one is a partner
• which is relied upon by someone
• who gives credit to the partnership as a result