The Partnership Agreement Flashcards
What happens if there is no partnership agreement?
Partnership Act 1890 provides the default.
When can partners’ mutual rights and obligations be varied under PA 1890?
Any time, but with unanimous consent
Does consent need to be express?
No, it can be inferred from a course of dealing
What are some important provisions that would be in a Partnership Agreement or Deed?
- Commencement and duration
- Name and place of business
- Property
- Capital, profits, losses
- Drawings / Salary
- Accounts
- Dissolution
- Duties, powers and restrictions
Why might there be an issue with Partnership Act provisions?
Because statute is over 130 years old and does not reflect modern business.
What can a partnership name not include?
Limited, Ltd, LLP, Public Limited Company, Plc
What do provisions say about partnership property?
All property is owned by the partnership and belongs to the firm
What do the standard provisions say about capital and profits?
Partners are entitled to share equally in capital and profits of business, and to contribute equally towards losses
What happens to share if partners contribute unequally at the start?
Nothing, everything is still equal, in absence of an agreement
What happens if there is no agreement on drawings / salary?
Again, everything is shared equally.
Are partners entitled to a salary in absence of an Agreement?
No. Without an agreement, a partner is not entitled to a salary.
What does the statutory provisions say about work input and roles?
Every partner may take part in management, but no requirement to do so.
How are decisions made in the ordinary course of business in a partnership under the statutory provisions?
Decisions are made by majority, unless it is to do with:
1) Changes to nature of business
2) Introducing new partner
3) Varying rights and duties
In which a unanimity is needed.
What does the statute say about introducing new partners?
No person may be introduced as partner without consent of all existing partners
What does the statute say about expulsion?
A partner cannot be expelled unless all partners consent (including the one getting expelled) – unless, prior, all partners agreed that expulsion can be by majority
What happens if a partner leaves with no partnership agreement?
The partnership is dissolved
If a partnership is dissolved, what do the partners have the right to do in the absence of prior agreement?
Apply to the court to wound up the firm, i.e. sale of assets for repayment of partnership debts and distribution of assets
What is the non-compete duty under the provisions?
Duty not to compete with the firm – otherwise they must account to the firm for all profits made by them in that business
In the statutory provisions, if a partner leaves, can he then compete with the partnership?
Yes, there are no statutory bars for this.
How could a partnership agreement prevent a partner leaving and competing with the firm?
1) Non-compete clauses: prevent competition
2) Non-solicit clauses: prevent partners soliciting business from partnership client’s
3) Non-dealing clauses: prevent former partner entering into contracts with clients, former clients, or employees of partnership
What are restraint of trade clauses?
1) Non-compete
2) Non-solicit
3) Non-dealing
What is important to know before drafting restraint of trade clauses?
Must be reasonable in terms of duration, geographical area and scope
How can a partnership be dissolved?
1) Automatic dissolution
2) Dissolution of partnership by notice
3) Dissolution of partnership if partnership becomes unlawful
4) Dissolution by the court as a last resort
What is automatic dissolution?
1) Expiry of fixed term
2) Completion of specific venture
3) Death or bankruptcy of partner
What is dissolution of partnership by notice?
Where there is no fixed duration, a partner can provide notice
What happens to assets of a dissolved partnership in the absence of an agreement?
Any money / assets left, after payment of debts, will be distributed so that each partner is paid back their original capital first. Surplus is then shared equally unless agreed otherwise.
