BL - 2 - Partnership Flashcards
Is the existence of a partnership a question of law or of fact?
It is very much a question of fact - running a business together with a view of profit
Who can be a partner?
Any legally capable person
Can a company become a partner
yes
Is there a maximum number of persons of the same partnership?
No
What rules apply for partnership names?
- the names of partners are without any issues
- prior approval for business names
If a partnership uses a business name, it must comply with …
the disclosure requirements under the CA. Details of partners must appear
- at the place of business
- on partnership stationary
What is a partnership at will
It is a partnership where no specific duration or fixed term is set.
When can a partnership at will be determined?
at any time by giving notice to the other partners
Is there a requirement to give written notice when determining a partnership?
Only if the partnership agreement was made by deed
What is a sleeping partner?
It is a partner who simply invests, without being involved in the management
Which decision among partners requires unanimity?
The decision to change the nature of the business
All matters connected with the partnership business are decided by…
simple majority
Is there any right to expel a partner under the PA?
No
What should a partnership agreement provide for regarding a partner’s share in case that partner leaves?
- 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
What are the proceeds of a dissolution used for?
- repay third party creditors
- repay partner creditors
repay partners’ capital entitlements
What is the requirement for a restriction on ex-partners competing with the partnership business, approaching employees, etc.?
The clause must be reasonable in scope
What are the fiduciary duties the partners owe each other?
- 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
Who has the right to inspect partnership books?
Only the partners
What is the requirement for a partner binding the partnership as a whole?
He must act within the scope of his
(a) actual authority
OR
(b) apparent/ostensible authority
What is apparent/ostensible authority?
It would appear to the third party that the transaction is authorized by the partnership in the circumstances
How many questions does apparent authority ask for?
Four
What are the four questions of apparent authority?
- 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?
If there is no apparent/ostensible authority, then the partnership will
NOT be bound.
Only the partner concerned will be fully liable.
If a partner has entered into a transaction with only apparent authority, what rights do the other partners have?
They may claim any losses from that partner that results from the transaction.
Who is liable for the debts and obligations of the partnership?
The partners are liable:
- joint and severally
- without limit
Where a partnership is unable to pay its debts, a creditor is entitled to…
obtain payment from the private assets of the partners
Which debts is a partner liable for?
For the debts incurred whilst a partner. This applies even after he leaves the partnership
Is a new partner liable for the partnership’s old debts (i.e., before he became a partner)?
no
How can a retiring partner protect himself from debts?
- deed of release from willing creditors
- novation agreement with willing creditors
- indemnity from continuing partners
When will a retired partner be liable for debts incurred after his retirement?
- if he fails to give notice to third partners that he is leaving the partnership:
(a) actual notice
(b) constructive notice
What is actual notice for a retiring partner?
It means actually informing existing and former clients/customers
What is constructive notice for a retiring partner?
It means placing an advertisement in the London Gazette
What is holding out?
- doing/allowing something that suggests one is a partner
- which is relied upon by someone
- who gives credit to the partnership as a result
