TYPES OF TRADE Flashcards
Ordinary partnership - definition
Carrying on business between persons with a common view of profit:
- every trade, occupation or profession
- can be single transaction (joint venture)
- business must involve some activity
- agree to partnership well before begin to trade
View of profit: must be intention to make a profit, gaining business experience does not make a partnership
Partnership - formation and regulation
- Some have partnership deed if no express agreement then partnership act applies.
Fiduciary duties (upmost good faith):
- Act in good faith
- Not exercise legal right for improper motive
- Not to keep profits from partnership without consent of other partners
- Avoid conflicts of interest
Breach of these may mean partner is liable to repay monies.
Partnership Act
Profit and loss shared equally
Capital deficiency (what partnership owed but can’t pay back) shared in ratios of what each partner originally put in
Management - every partner must contribute to business, decisions can usually be made by the MAJORITY of partners.
Change in nature of business business - must be UNANIMOUS.
New partners - UNANIMOUS
Variation to partnership agreement - ALL
Idemnity - identify partner for liabilities (for sake of partnership)
Remuneration - no partner entitled to remuneration
Interest - none unless advances beyond original capital then 5%
Records and accounts - must be kept at main place of business and all partners must be able to access
Expulsion - MAJORITY only by good faith and good reason
Dissolution - authority continues as far as necessary, any partner can insist on selling assets, payment of debts and distribution of surplus.
Partners liability and authority
Partners jointly and severally liable (sue all, sue one)
Rule 1: Each partner is an agent for partnership UNLESS (third party perception)
- No authority to act for partnership in a particular matter
- Third party doesn’t believe him to be partner or knows he has no authority
Rule 2:
- Partner pledges credit of the from but has no apparent connection with firms ordinary business, firm will not be bound unless there is ‘actual express authority’
Partners liability for debts
Before partner joined - Not liable
During - liable even after leaving (unless agreed not to be with partners)
Incurred after - liable for debts even after leaving if third party has not had notice
Dissolution of a partnership
Absence of any provision partnership act applies:
- Death or bankruptcy (unless pship agreement says otherwise)
- Expiry of a fixed term partnership
- Termination of a single joint venture
- Becomes illegal
- Notice given by a partner
- Order by court (where deemed equitable)
Partnership agreement normally overrides death, retirement or bankruptcy
Defaulted on a debt creditors can sue one of all partners that may end up being dissolved by court
LLP
Limited liability partnership act
Separate legal like company
LLP formation
- incopration document must be submitted to registrar
- LLP must be included in name
- location of registered office (region)
- adress of registered office
- names and adress of all members
- 2 designated members responsible for signing and filling
- registration fee
Pship agreement (not required)
- LLP regulations will apply in absense
Regulations apply from companies legislation but partnership act for profit share, remuneration, inspection of books and expulsion
Regulation of LLP
- retain records, publish accounts, audit
- small and medium sized, audit exemption rules, no requirement for directors report
- LLP must register charges with registrar
- change to membership, designated members, resistered office 14 DAYS
- provide LLP on correspondence outside place of business
- confirmation statement to registrar
- members of LLP may apply for court case in cases of unfair prejudice, can be excluded with UNANIMOUS consent
- guilty of fraudulent trading can lead to disqualification (like a company)
Dissolution of an LLP
Similar rules to a company
Dissolved or terminated with UNANIMOUS consent ( follow formal procedure)
Insolvent - VOLUNTARY agreement to put business in administration or to VOLUNTARY OR COMPULSORY liquidation.
Two modifications to company winding up:
- withdrawals by members 2 YEARS before wind up may be clawed back if it was shown that member knew or had reasonable grounds to believe the LLP was to become insolvent
- past and present members may be required to contribute to assets to extent agreed to in LLP agreement.
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