Corporate and Business Law (ENG)

2 Section D: The formation and constitution of business organisations Designed to give you knowledge and application of: D1. Agency Law D2. Partnerships D3. Corporations & legal personality D4. Company formations

3 Learning Outcomes D2: Partnerships  Knowledge of the legislation governing the partnership,both unlimited and limited.  Discuss how partnerships are established.  Authority of partners in relation to partnership activity.  Analyse the liability of various partners for partnership debts.  Way in which partnerships can be brought to an end.

4 The legislation governing the partnership, both unlimited & limited Partnership: Section 1 of the Partnership Act (PA) 1890 defines partnership as “the relation which subsists between persons carrying on a business in common with a view of profit”. Firm: persons who have entered into partnership with one another collectively Partners: persons who have entered into partnership with one another individually Types of partnership Standard partnership (governed by Partnership Act 1890) A contractual association of two or more persons or entities to operate a common enterprise & to share in management & profits and losses of stipulated business. Continued …

5 Limited liability partnership (governed by the Limited Liability Partnership Act 2000)  A form of partnership in which all partners have a limited liability.  Purpose is to form a partnership of any size where partners may be at risk from the careless or accidental negligence of a colleague. Partnership formed by two or more persons / entities, one or more of whom are general partners and one or more of whom are limited partners Limited partnership (governed by Limited Partnership Act 1907) Continued …

6 Establishment of partnerships Voluntary association of persons who co-own the business with the intention to make profit 1 Comes into existence from the date of agreement 2 Partners can be individuals, corporations, other partnerships or business associations 3 Conduct of persons may lead to an implied partnership 4

7 The authority of partners in relation to partnership activity The interests of partners in the partnership property and their rights in relation to the partnership must be determined by the provisions of the Partnership Act 1980 Profit sharing Indemnity Interest on capital Active part in management Change in business Access to records and books of accounts Majority cannot expel partner New partners Dissolution Good faith

8 The liability of various partners for partnership debts Joint and several liabilities (s9) Partner in a firm is jointly liable with other partners for all debts & obligations of the firm incurred while he or she is a partner. Liability for wrongs (s10)  Any wrongful act / omission of any partner acting in ordinary course of business of the firm / with authority of his co-partners, or  loss / injury caused to any person not being a partner in the firm, or  any penalty incurred.  All the partners of the firm are jointly & severally liable to same extent as the partner so acting or omitting to act. Continued … Liability for holding out (s14) Where a non-partner advertises himself / alternatively is advertised to the world as being a partner. It can be either expressed and / or implied.

9 Liability of incoming and retiring partner (s17)  New partner admitted to an existing firm is liable for debts incurred only after he becomes a partner.  Partner who retires is still liable for any outstanding debts incurred while he was a partner, unless the creditors have agreed to release him from liability. The way in which partnerships can be brought to an end Dissolution by expiration or notice  By expiration of that term  By termination / completion of that venture or  Undertaking by any partner giving notice to others of his intention to dissolve the partnership Continued …

10 Dissolution by bankruptcy, death or charge  By death or bankruptcy of any partner  If a partner offers his share in the partnership to be charged under the Act for his separate debts, his partners may dissolve the partnership. Dissolution by illegality of partnership If an event occurs that makes it unlawful for the business of the firm to be carried out or for members of the firm to continue the partnership. Dissolution by the court  Partner incapable of performing his part of contract  Partners willfully committing breach of partnership agreement  When business can only be run at a loss  Just & equitable reasons Continued …

11 Recap  Knowledge of the legislation governing the partnership,both unlimited and limited.  Discuss how partnerships are established.  Authority of partners in relation to partnership activity.  Analyse the liability of various partners for partnership debts.  Way in which partnerships can be brought to an end.