Internal Affairs of a Partnership Flashcards
In UPA Jurisdictions, partners can sue the partners and partnership only in two broad areas:
- Dissolution
- Accounting
What fiduciary duties does a partner owe the partnership?
- Duty of loyalty
- Duty of care
What does the duty of loyalty include?
Partners must not:
- Compete with the partnership business
- Advance an interest that is adverse to the partnership;
- Usurp a partnership opportunity
Limitations on the duty of loyalty:
- The UPA does not state whether the duty of loyalty can be modified
- The common law will fill in here
What does the duty of care include?
Partners must not:
- Engage in gross negligence or reckless conduct
- Engage in intentional misconduct
- Engage in knowing violations of the law
Who does the duty of loyalty and duty of care apply to?
Only current partners, not former or future partners
When there is no partnership agreement, what is the default rule for sharing profits?
Profits are shared evenly.
Losses will follow profits unless the partnership agreement provides otherwise
Default rule for distributions
As a default rule, partners do not have a right to distributions. Partners do have a right to vote on distributions
Default for rule for adding new partners
All partners must consent to bringing in a new partner
If all partners do not consent to adding a new partner, what is the result?
The partnership is dissolved
T or F: The default rule is that every partner has equal rights to the management and conduct of the partnership
True
Vote required for an ordinary business decision
A majority vote, unless PA provides otherwise
Vote required for an extraordinary business decision
A unanimous vote, unless PA provides otherwise
Examples of an extraordinary business decision
- Amending the partnership agreement
- Dissolving the partnership
T or F: All partners and their agents, by default, are allowed to access records
True, not mandatory though
