Business Law And Practice: Partnerships Flashcards
What is a partnership?
- an agreement between two or or persons carrying on business in common with the view of making profit
What does the partnership act 1890 provide?
- default contract for partnerships
What’s sections of the PA 1890 can be overridden?
-S 1 and 2 (governing how partnerships come into existence
- ss 5-18 detailing covering relationship between partners and third partners in particular liability for debts
What must be included in a partnership agreement?
- Name ( must not include limited, ltd, llp or be offensive)
- address (place of business)
- commencement and duration
As well as other general terms
For decisions to be taken in a partnership what voting majority’s be achieved?
- majority over 50%
What decisions in a partnership can only be made unanimously?
- changing the nature of the business
- introducing a new partner
- changing the terms of the partnership agreement
Based on PA 1890 how should profits be shared?
- equally
What are drawings in a partnership?
- income profits partners receive are known as drawings
What is expulsion and by what voting majority is required for this to be achieved?
- removal of a partner
- no voting majority meaning partner can not be expelled
What is an expulsion clause?
- gives guidance on behaviour required in order for a partner to be expelled
Under what circumstances is a partnership dissolved?
- when a partner is retired
- when a partner dies or is declared bankrupt
- on expirey of a fixed term
- if the partner gives notice of dissolution ordered by the court
- if the business is unlawful this results in automatic dissolution
- can also be dissolved if parties apply for court order under s 35 PA
What is the affect of automatic dissolution?
- company must end and the company and assets must be sold
What is a partial dissolution?
- a clause in. Partnership agreement that even if a partner leaves the partnership can continue so the business can keep running
What is goodwill?
- companies reputation and value of contracts with clients
In what order must distribution of sale proceeds be issued after a sale of a partnership business?
-first creditors must be paid first
- second partners who have loaned money to the business must be paid
- third partners must the. Be paid share capital they are entitled to
- finally any surplus shared between the partners
What is a restraint of trade?
- A clause restricting a partner’s ability to work or compete after leaving the partnership. It is enforceable only if reasonable, protects legitimate business interests (e.g., trade secrets, client relationships), and does not harm public interest.
What specific duties must partners follow under s.28 of the Partnership Act 1890?
- Render true accounts and full information to each other.
- Account for any profits made from the partnership’s business or property.
- Not compete with the partnership without consent.
What requirements must be met for a business to be held liable for contracts entered into based on apparent authority under s.5 of the Partnership Act 1890?
- Authority: The partner must have acted within their express or implied authority as a partner.
- Usual Business: The contract must relate to the usual business of the partnership.
- Third Party Knowledge: The third party must have no knowledge that the partner lacked authority to act.
In what circumstances can a partner avoid personal liability in a general partnership?
- No Authority: They acted without authority and the third party knew they lacked authority (s.5 of the Partnership Act 1890).
- Retirement: They have retired and proper notice of retirement was given to third parties (s.36 of the Partnership Act 1890).
- Agreement: The partnership agreement or contract with the third party explicitly limits their liability.
What is a novation agreement?
- an agreement that transfers liabilities and responsibilities from one party to the other usually a new incoming partner
If a partner leaves a partnership are they still liable for the debts?
- Yes but not new debts entered into after they have left as long as S36 of pa is complied with
How must a partner correctly notify that they are no longer a partner?
- s36 of the PA 1890 they must notify all customers that the director has dealt with that they no longer are a partner
- they must place a notice in the London gazzett
What is “holding out” in partnership law?
When a person is represented as a partner (or allows themselves to be represented) and a third party relies on this representation, they can be held liable as if they were an actual partner, even if they are not. This is based on the principle of estoppel.
What are the duties of designated members of an LLP?
- signing and filing the annual accounts with the registra
- appointing removing and remunerating the auditors
- filing the annual confirmation statement
- sending notices to registrar of companies
-winding up the llp
If A new member joins a llp how quickly must the registrar of companies be informed?
- within 14 days of the appointment by filling form ll apo1
Where must a registrar of charges be kept for an llp?
- all charges must be kept in registered office
Can creditors or members of an llp inspect registrar of charges and at what fee?
- yes and for free
What does the llp regulations 2001 stipulate?
- they are a set of default rules governing the terms of an llp
How can a partner leave an llp?
- by providing reasonable notice to the other members
After a memeber leaves an llp when must they notify companies house?
- within 14 days of leaving
