Partnership Agreement Flashcards
What does the Partnership Act provide?
Fallback provisions if there is no partnership agreement
How can partnership agreements be varied?
By unanimous consent
What are typical elements covered in partnership agreements?
- Duration
- Name
- Place
- Property
- Duties
- Dissolution
- Accounts
- Salary
- Powers
- Decision making
- Incoming partners
- Retirement/expulsion of existing partners
- Non-compete/other restrictions
When does a partnership commence?
When s1(1) PA 1890 is satisfied
But useful to set out a date in the partnership agreement
What provisions apply if the partners are working together before the official start of the partnership under their agreement?
The default provisions of PA 1890 will apply
Can a partnership have a fixed term?
Yes, or it may continue until terminated
Do individual partners have a right to any particular asset?
No
What determines whether an asset is partnership property?
Question of fact - depends on the intentions of partners when they acquire it, therefore also subjective
What is generally considered partnership property?
- All property brought into the partnership
- All property bought with money belonging to the firm/partnership
Do partners have equal rights to income and capital and profits and losses?
Yes, even if contributions to capital are unequal
What is a Profit Sharing Ratio (PSR)?
Stipulates how much each partner may draw from the income profits - set out in the partnership agreement. If not, all partners are entitled to share equally.
Are partners entitled to a salary without an agreement?
No
Are all partners required to take part in management?
No, but every partner may take part
What may the agreement state regarding partners’ time and attention to the business?
All partners must devote the whole of their time and attention
What is required to allow incoming partners?
Unanimous consent
What is required for a partner to be expelled?
Unanimity - a partner cannot be expelled by majority vote unless expressly agreed.
What happens if a partner leaves and the agreement is silent?
The effect of leaving is that the partnership is dissolved - usually this is only a technical dissolution, and the remaining partners form a new partnership
What is the risk under the default provisions of the PA 1890 regarding termination of the partnership?
It is open to any of the partners to have the old partnership wound up.
What should the agreement state regarding a partner leaving?
The agreement should explicitly state that the partnership will continue as between remaining partners and should contain details of how a partner can leave.
What limitations might be placed on outgoing partners?
- Non-compete clauses (implied by default under s3o PA 1896)
- Non-solicit clauses - prevent partners from soliciting business from clients
- Non-dealing clauses - prevent partners from entering into contracts with clients, former clients or employees of the partnership
What are the automatic causes for dissolution?
- expiry
- completion of venture
- death or bankruptcy of a partner
- dissolution of partnership by notice
What can lead to dissolution if there is no fixed duration?
Dissolution can occur if the partnership becomes unlawful or by court as a last resort.
How are assets collected and distributed upon dissolution?
Any money or assets left will be distributed so each partner is paid original capital first after debts and liabilities have been paid
How are surplus assets distributed after original capital has been returned to the partners?
It is distributed according to the asset sharing ratio.
