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SQE1 - BL > BL Partnerships > Flashcards

BL Partnerships Flashcards

1
Q
A
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2
Q

What is the definition of a Partnership?

A

A relationship between persons carrying on a business in common with a view to making a profit

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3
Q

There is an overriding duty of good faith in a partnership. What are those duties?

A

· Honest and full disclosure 😇
· Conflict of duty and interest 🗡️
· Unauthorised personal profit 🤑

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4
Q

Are the partners are personally liable in relation to contracts which are binding on the firm?

A

Yes

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5
Q

Will a new partner automatically be liable in relation to any debts incurred by the partnership before they joined?

A

No

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6
Q

Will a partner will still be liable after they retire in respect of debts incurred by the partnership whilst they were a partner?

A

Yes

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7
Q

If a partner leaves, a third party can treat all apparent partners of the firm (ie before the departure) as jointly liable to pay any new debt incurred by the partnership UNLESS What?

A

The person has been give:

  • actual notice (s 36(1) PA 1890) - for those who have had actual dealings with the partner before departure; or
  • constructive notice by virtue of publication of the departure in the London Gazette (s 36(2) PA 1890) -for those who have not had actual dealings with the partner before departure.

However, a former partner will not be liable for debts to any third party who did not know them to be a partner before they left. No notice at all has to be given to such persons.

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8
Q

When can a non-partner (who was never a partner) be personally liable on a partnership debt?

A

If they have held themselves out as a partner (or have knowingly allowed themselves to be so held out).

Need:

(i) a representation, 🗣️

(ii) Reliance, and 👍

(iii) the third party’s state of mind (‘believing (having faith in) the representation’).🧠

It is important to appreciate that s 14 PA 1890 relates to the liability incurred by the NON-PARTNER, NOT the liability of the firm. The liability of the firm for the acts of a non-partner is established by applying the common law principles of agency.

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9
Q

When will a Partner’s act bind the firm under s5 PA 1890?

A
  • usual kind of business carried out

AND

  • in the usual way.
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10
Q

When will a Partnership NOT be bound by a Partner’s actions under s5 PA 1890?

A

the third party

  • knew that the partner not authorised to enter into the contract on behalf of the firm; or 😈🎩
  • did not know or believe that the partner was a partner. 🤷🎩
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11
Q

What are the risks for a Partner if they bind their firm without actual authority?

A

They may be liable to the other partners for breach of contract.

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12
Q

What rules apply to a non-partner who tries to bind the firm?

A

common law rules of agency apply

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13
Q

When could a non-partner bind the firm under the common law rules of agency?

A
  • held out as having authority to enter into a contract. 🤲🥸
    (the firm represents or permits a representation to be made to a third party that a person has authority to bind the firm).
  • Firm ‘holding out’ that person as a partner.🤲🎩
    (e.g. firm carries on using old letterhead (including that partner’s name) after they retire).
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14
Q

What is the default profit share of a partnership

A

Equal share

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15
Q

How are most partnership decisions made?

A

by a majority

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16
Q

Which partnership decisions require unanimity?

A
  • Changes to the nature of the partnership business; 🏭
  • Introducing a new partner; 👋🎩
  • Varying the rights and duties of partners. ⛓️
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17
Q

How can a partner be expelled under the PA 1890?

A

A partner cannot be expelled by majority vote unless all of the partners have previously expressly agreed that a majority can do this.

(so can’t be voted out)

18
Q

What is the default effect of a Partner leaving a firm?

A

the partnership is dissolved

19
Q

What is the default position on return of capital on dissolution of a partnership?

A

Subject to any written partnership agreement, once all debts and liabilities have been paid, any money/assets left will be distributed so that each partner is

  • paid back their original capital first.

Then,

  • per asset sharing ratio - if no ASR then:
  • per Profit Share Ration - if no PSR then
  • In equal shares
20
Q

Does an LLP have legal personality?

A

Yes

21
Q

Do LLP’s have to be registered?

A

Yes, at companies’ house

22
Q

What is the minimum number of “designated members” required from an LLP?

A

2

23
Q

How does a member cease to be a member of an LPP?

A
  • their death; ☠️
  • dissolution (if the member is a body corporate).🫥
  • agreement with the other members of the LLP;🤝
  • giving notice to the other members of the LLP;📝
24
Q

If there is no partnership agreement, are there default provisions in place for LLPs?

A

Yes

25
Q

By Default:

How do members share in capital and profits

A

Equally

26
Q

By Default:

Does the LLP indemnify its memebers?

A

Yes - an LLP must indemnify its members for payments made and personal liabilities incurred by them in the ordinary and proper conduct of the business of the LLP

27
Q

By Default:

Who takes part in an LLP’s management

A

Every member

28
Q

By Default:

Are members allowed to take remuneration for managing an LLP

A

No

29
Q

By Default:

What is required to admit a new member of an LLP ?

A

consent of all existing members

30
Q

By Default:

How is the ordinary decision making of the LLP decided?

A

Marjority

31
Q

By Default:

Where are the books and records of an LLP available for inspection by the members?

A

At the registered office

32
Q

By Default:

What duty is owed by members of an LLP ?

A

Each member must give
- true accounts and
- full information of
- all things affecting the LLP
- to any member or his legal representative

33
Q

By Default:

What happens if a member of an LLP (without consent) carries on any business of the same nature as, and competing with, the LLP?

A

They must account for and pay over to the LLP all profits made by them in the business

34
Q

By Default:

Does every member of an LLP has a duty to account for benefits derived from transactions with the LLP and its business or property

A

Yes

35
Q

By Default:

Is there an implied right of expulsion of a memeber?

A

No, unless the members have expressly provided for such a power in a Members’ Agreement

36
Q

Who registers for VAT for an LLP

A

The LLP

37
Q

Why might an LLP be more disadvantageous than a company?

A

LLPs are subject to the ‘clawback’ rule, which means that in certain circumstances money taken out of the LLP by members up to two years before commencement of a winding up of the LLP can be clawed back into the pool of assets available to repay LLP’s creditors.

38
Q

Is a memorandum still needed for an incorporation?

A

Yes, but it just mentions the first members.

39
Q

What type of liability do partners have?

A

Joint and several - liable for whole debt but can claim off other partners

40
Q

What is the responsibility for a designated member of an LLP?

A
  • Signing accounts
  • dealing with Coy House
  • Acting for LLP if wound up
41
Q

What happens if an LLP is left with just one member?

A

There’s a 6 month grace period and then the member becomes jointly and severally liable with the LPP after the grace period.

SQE1 - BL (41 decks)

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