PARTNERSHIP vol 30 | ��˾��ҹ��

PARTNERSHIP vol 30(1) commentary, partnership agreements

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About this title—authors, overview

Commentary

1 Definition

2 The relationship

3 ‘Carrying on’ a business in common

4 ‘Business’

5 ‘In common’

6 ‘With a view of profit’

7 Case law indications

8 Introduction

9 Joint property ownership

10 Sharing gross returns

11 Sharing net profits

12 The overall approach

13 Ascertaining the date of commencement

14 What constitutes the start of business

15 Dating a partnership agreement

16 The general rule

17 Spouses

18 The general position

19 Repudiation by the minor

20 Liabilities to third parties

21 Tortious obligations

22 Where a deputy has been or is appointed

23 Where no deputy has been appointed

24 Aliens

25 Bankrupts

26 Partnerships

27 Trustees and personal representatives

28 Companies and limited liability partnerships

29 Illegality of purpose and anti-competition

30 Consequences of illegality

31 General freedom

32 Provisions on business names in Part 41 of the Companies Act 2006—scope and application

33 Prohibited names

34 Disclosure in stationery etc

35 Further disclosure requirements

36 Criminal consequences of breach

37 Civil consequences of breach

38 The effect of naming the firm

39 Passing off

40 Trade marking

41 Names and marks as marketable commodities

42 Third-party use of the name

43 Means of termination

44 Introduction

45 The power of partners to bind the firm

46 Limitations on agency

47 General

48 Guidance on acts within a single partner’s normal authority

49 Acts normally outside a single partner’s normal authority

50 Recent development of the law defining a partner’s authority

51 General

52 No actual authority

53 Knowledge of the lack of authority

55 Termination

56 Additional agency provision

57 Pledging the firm’s credit

58 The nature of partners’ liability for contractual debts

59 Several liability of a deceased partner’s estate

60 Joint and several liability for wrongful acts

61 Misapplication of money or property

62 The nature of liability for wrongful acts etc

63 Improper employment of trust property

64 Connecting liability to ‘holding out’

65 What constitutes ‘holding out’

66 Reliance upon the holding out

67 The giving of credit

68 Holding out after a partner’s death or retirement

69 Admissions or representations by partners

70 General

71 Exceptions

72 Duality

73 Notices in relation to ratification

74 General

75 Novation

76 Continuing contracts

77 General position

78 Discharge of debts

79 Appropriation of debts

80 Novation

81 Continuing guarantees

82 Continuing liability of former partners

83 Advertisement of dissolution or change in partnership

84 Death, bankruptcy or retirement of a partner

85 Ex-partners held out as partners; and ‘apparent’ partners

86 Section 36 notice of dissolution or changes in the firm

87 Agreement between the partners

88 Written partnership agreement

89 Contrary terms

90 Express statement of implied terms

91 Varying unanimity

92 Updating the partnership agreement

93 General

94 Sharing capital, profits and losses: introduction

95 Sharing capital

96 Sharing profits

97 Sharing losses

98 Indemnity for normal activities

99 Interest on money contributed by partners

100 Participation in the firm’s management

101 Partnership does not give rise to remuneration

102 Introduction of new partners

103 Disputes between partners

104 Keeping the partnership books and records

105 The power to expel

106 Continuance after expiry of fixed term

107 Termination by Section 26 notice

108 Termination by Section 32 notice

109 Termination by contractual notice

110 Fraud and bad faith

111 Withdrawal and supersession of notice

112 The basis of the duty

113 The duration of the duty

114 The extent of the duty

115 Accountability for private profits

116 Applications of the principle

117 The principle

118 Purchase of another partner’s share

119 The nature of a partnership share

120 Section 31(1): the effect of assignment

121 Assignees’ rights upon dissolution

122 The general concept of partnership property

123 The foundation of partnership property: Section 20(1)

124 The scope of the section

125 Property originally brought into the partnership

126 Property subsequently brought into the partnership

127 Property bought with partnership money

128 Examples of resulting trusts under Section 21

129 Property purchased from individual partners’ funds

130 The parties’ intention as determinant

131 Section 20(3)

132 The limits of Section 20(3)

133 Extending the Section 20(3) principles

134 Application of fiduciary duties to property rights

135 Acquisitions by means other than purchase

136 Gifts of property

137 Increasing capital

138 Decreasing capital

139 The legal estate

140 Nature of the beneficial interest

141 The use of partnership property

142 The value of partnership property

143 Availability of partnership property for partnership debts

144 The effect of changes in the constitution of the partnership

145 Quantifying partners’ shares

146 The relevance of partners’ contributions

147 Displacing the presumption of equality

148 Differentiating sharing of capital and profits or losses

149 The meaning of the lien

150 Lien’s operation over stock-in-trade

151 Who may enforce the lien

152 Termination of the lien

153 Section 23: liability of partnership assets for the separate debts of a partner

154 Section 23: Execution against a partner’s share

155 The extent of a Section 23 order

156 Rights of the other partners

157 The extent of intangible property

158 Goodwill in general

159 Goodwill as between partners

161 Implied restrictions on partners

162 Express restrictions on partners

163 Enforceability of restrictive covenants: relative bargaining power

164 Enforceability of restrictive covenants: demonstrating a protectable interest

165 Enforceability of restrictive covenants: what is assessed for reasonableness

166 The scope of activities prohibited by covenants

167 Geographical radius

168 Duration of restrictive covenants

169 Drafting the covenant

170 Remedies for breach

171 Competition law

172 Protection of goodwill—third parties

173 Goodwill in medical partnerships

174 Other intellectual property rights

175 General

176 Implied requirements to keep accounts

177 Obligations upon corporate partners

178 Tax requirements

179 Generally accepted accounting practice

180 The firm’s accounts

181 The partners’ own funds

182 Capital accounts

183 Current accounts

184 Tax reserves

186 Unattributed reserves

187 Annuities

188 Revaluations

189 Appointment of accountants

190 General

191 Circumstances in which dissolution may occur

192 Dissolution on notice

193 Death or bankruptcy

194 Charging orders

195 Illegality

196 Grounds for the court to order dissolution

197 Permanent incapacity

198 Conduct prejudicially affecting the business

199 Breach of partnership agreement, or other damaging conduct

200 Unavoidable loss

201 Just and equitable grounds

202 Dissolution and the Insolvency Act 1986

203 Dissolution under the Financial Services and Markets Act 2000

204 Jurisdiction

205 Transfer between courts

206 Procedural aspects: parties

207 Procedural aspects: commencing the action

208 Costs of dissolution applications

209 The lack of a statutory right to retire

210 The situation with defaulting partners

211 Retirement from an insolvent partnership

212 The lack of a statutory right to expel

213 Expulsion and partnerships at will

214 Varieties of express power

215 Exercising a power to expel

216 The right to be heard

217 The circumstances of appointment

218 Grounds for appointment

219 The powers of a receiver

220 The position of a receiver

221 The presumption in favour of sale

222 Options other than sale

223 Conduct of a sale

224 The granting of declarations etc

225 Partners’ continuing authority

226 Limitations on authority

227 Bankrupt partner’s lack of authority

228 Publicly notifying dissolution (or retirement)

229 Return of premiums

230 Employment contracts

231 Leases

232 Banks

233 Profits and losses after dissolution

234 Making an election under Section 42(1)

235 Ascertainment of profits under Section 42(1)

236 Ascertaining the interest payable

237 The effect of an option to purchase

238 Accounting issues where dissolution is not followed by winding up

239 Valuing assets in the absence of agreement

240 Best practice on valuation clauses

241 Valuing goodwill

242 Valuing work in progress

243 Annuities

245 Dealing with losses

246 The rule in Garner v Murray

247 Distribution of remaining assets

248 Personal representatives’ rights

249 Leaving the capital in the partnership

250 The relationship between the firm and the estate

251 Partnership creditors’ rights

252 The relationship between joint and separate creditors and estates

253 Absolute bequests of partnership shares

254 Life interests in partnership shares

256 Insolvent partnerships without concurrent bankruptcy petitions

257 Potential petitioners

258 Petitions by partners

259 Procedure on petition

260 The effect of presentation of a petition

261 Insolvent partnerships with concurrent bankruptcy petitions

262 The consequences of concurrent petitions

263 Joint bankruptcy petitions by all partners

264 Insolvency proceedings taken against partners but not the firm

265 Liquidators and trustees

266 Partners’ status whilst winding up continues

267 The Company Directors Disqualification Act 1986

268 Introduction

269 Procedure

270 Moratorium

271 Effect of arrangement

272 Interlocking arrangements

273 Partnership administration orders

274 Insolvency of a single partner

275 Set off

276 Dealing with joint and separate debts and estates

277 Distinguishing the classes of debts

278 Distinguishing the estates

279 Separating out the different estates

280 Summary of distribution principles

281 Definitions

282 Membership

283 The corporate partnership agreement

284 Definition and membership

285 Advantages and disadvantages

286 The group partnership agreement

287 Definition 1: a partnership in respect of a partner’s partnership share

288 Definition 2: a sub-partnership from within a partnership

289 The sub-partnership agreement

290 The nature of such groups

291 The status of EEIGs

292 EEIGs and partnerships

293 EEIG documentation

294 Introduction

295 The use of limited partnerships as venture capital vehicles

296 The two types of partner

297 Contrast with limited liability partnerships

298 Formation and definition

299 General partners

300 Limited partners

301 A limited partner’s capital contribution

302 The management of the firm

303 What constitutes ‘management’

304 Inability to bind the firm

305 Other differences between general and limited partners

306 The firm’s name

307 Registration

308 Changes in particulars

309 Publication of changes

310 Keeping and inspection of the register

311 Limited partnerships at will

312 Circumstances of dissolution

313 Insolvency

314 Concurrent petitions against limited partners

316 The limited partner’s ability to prove in the winding up

317 Collective investment schemes under the Financial Services and Markets Act 2000

318 Private fund limited partnerships

319 Private fund limited partnerships: exemption from limited partnership restrictions

320 Private fund limited partnerships: reduction in duty of good faith

321 Background

322 Limited liability partnerships as bodies corporate

323 Membership eligibility and classification

324 Analogies with limited companies

325 Name

326 A view to profit

327 Employment status of members

328 Disclosure requirements

329 Liability for negligence

330 Taxation

331 The role of the registrar

332 The incorporation document

333 Submission of documents

334 Registrable names

335 Power to change a name

336 Registered office

337 Members’ names and addresses

338 Registration certificates

339 Original members

340 New members

341 Cessation of membership

342 Designated members: appointment and cessation

343 Designated members’ role

344 Members prohibited from management

345 Agency as the basis

346 A duty of good faith between members

347 Partnership agreements

348 Default provisions

349 Matters not provided for

350 Minority protection

351 Binding the LLP

352 Limitations on active members

353 Apparent authority of former members

354 Co-extensive liability

355 The general principles of transparency

356 Exceptions to transparency

357 Income tax

358 National insurance

359 Capital gains tax

360 Inheritance tax

361 Stamp duty and stamp duty land tax

362 Value added tax

363 Application of the Companies Act 2006 to accounts and auditing

364 Record keeping

365 Accounting years

366 Duty to prepare accounts

367 Approval of accounts

369 Delivery of accounts

370 Accounting requirements

371 Definitions

372 Nature of relaxations

373 Audit requirements

374 Medium-sized LLPs

375 Form and content of accounts—non-exempt LLPs

376 General

377 Loans and other debts due to members

378 Members’ other interests

379 Supplemental information as to members’ interests

380 Disclosure of profit shares

381 Disclosure for small LLPs

382 Appointment of auditors

383 Appointment of auditors in default

384 Deemed reappointment of auditors

385 Auditors’ rights

386 Removal of auditors

387 Termination of auditors’ office

388 Incorporation provisions

389 Minimum membership

390 Formalities for contracts and documents

391 Events affecting an LLP’s status

392 Debentures

393 Business identification: name

394 Business identification: other details

395 Confirmation statements

396 Arrangements and reconstructions

398 Fraudulent trading

399 Matters arising after winding up

400 The registrar’s functions and offices

401 LLPs and holding companies etc

402 The statutory regime

403 The basic approach

404 Making the proposals

405 Considering the proposals

406 Administration orders

407 Receiverships

408 Contributions by members

409 Members’ voluntary winding up

410 Members’ voluntary winding up liquidators

411 Creditors’ voluntary winding up

412 Creditors’ voluntary winding up liquidators

413 Provisions applicable to both kinds

414 Applications

416 General provisions

417 Removal of liquidators

418 Further general provisions

419 General

420 Inability to pay debts

421 The liquidator’s application

422 The ‘sunshine test’

423 The court’s discretion

424 The members’ knowledge

425 Provisions to avoid abuse

426 Other Insolvency Act 1986 provisions

427 Company Directors Disqualification Act 1986

428 Financial Services and Markets Act 2000

429 Betting and Gaming Duties Act 1981

430 Bills of Sale Act (1878) Amendment Act 1882

431 Contracts (Rights of Third Parties) Act 1999

432 Corporate Bodies’ Contracts Act 1960

433 Courts and Legal Services Act 1990

434 Employment Rights Act 1996

435 Equality Act 2010

436 Solicitors’ Act 1974

437 Culpable officer provisions

438 In general

439 Self assessment and the current year basis

440 Returns

441 Liability of partners

442 Ascertainment of profits

443 Directors’ fees

444 Deductions

445 Capital allowances

446 Interest relief

447 Pre-trading expenses

448 Basis of assessment and calculation

449 Commencement and termination of trade

450 Change of partners

451 Partnership with company members

452 Foreign resident partnership

453 Limited partnerships

454 In general

455 Disposal of partnership assets to third party

456 Partnership assets divided in kind among the partners

457 Changes in partnership sharing ratios

458 Roll-over and hold-over relief on replacement of business assets

459 Relief for gifts of business assets

460 In general

461 Transactions at arm’s length

462 Exemptions and reliefs for business property

463 Partnership and VAT

464 Transfers of interests in land

465 Introduction of property interests

466 Transfers out of a partnership

467 Transfers of leases or interests in them

468 Incorporating a partnership

469 Transfers between partnerships

470 Dissolution of a partnership

471 Consultancy arrangements

472 Payments to partners on retirement

473 Annuities provided by a partnership

474 Discrimination: general

475 Protected characteristics

476 Discrimination

477 Other prohibited conduct

478 Disability discrimination

479 Maternity etc rights

480 Age discrimination

481 Application to partnerships: formation and recruitment

482 Application to partnerships: dealings with partners

483 The consequences of discrimination

484 Limited and limited liability partnerships

485 European restrictions

486 United Kingdom restrictions

487 Applying fiduciary duties to partnership admission

488 Introduction

489 Agreements and the Partnership Act 1890

490 Agreements and limited liability partnerships

491 The existence of an agreement

492 Making agreements comprehensive

493 Construction of agreements

494 A purposive approach to construction

495 Terms of a fixed-term partnership continued after the term’s end

496 The layout of an agreement

497 Parties

498 Definitions and interpretation

499 Commencement

500 Nature of business

501 Duration

502 Name

503 Property

504 Chattels and intangible property

505 Goodwill

506 Accounts

507 Banking arrangements

508 Capital

509 Current accounts

510 Revaluations

511 Drawings

512 Profits and losses

513 Profits and losses for limited liability partnerships

514 Partners’ obligations

515 Leave

517 Limitations on partners’ authority

518 Indemnity and expenses

519 Cars

520 Insurance

522 Expulsion

523 Provisions relating to death, retirement or expulsion

524 Payments following death, retirement or expulsion

525 Other provisions following retirement or expulsion

526 Notices

527 Dispute resolution

528 Jurisdiction

529 Setting the partnership joint venture in context

530 Reasons for choosing a partnership as a vehicle

531 Partnership joint ventures and risk

532 Defining the joint venture

533 The right to withdraw

534 Initial capital investment

535 Returning assets to their original owner

536 The use of assets held outside the joint venture partnership

537 The use of third-party assets

538 Drawings

539 Profits and losses

540 The level of personal input

541 Partners’ obligations

542 Methods of participation by partners

543 Delegation and change of control

544 Decision taking by the partners

545 Deadlock

546 Restrictions on authority

547 Assignments

548 Indemnities

549 Benefits in kind

550 Insurance

551 Voluntary retirement

552 Compulsory retirement

553 Expulsion for cause

554 Expulsion without cause

555 Death or dissolution

556 Dissolution by expiration

557 Dissolution by illegality, or by the court

558 Consequences of one partner’s cessation of partnership

559 Conduct of a winding up

560 Powers during a winding up

561 Remuneration for the conduct of the winding up

562 Accounting issues on dissolution

563 Post-dissolution use of the name

564 Dispute resolution

565 Notices

566 Entire agreement

567 Third-party benefits

569 Inclusion

570 Background

571 Commencement

572 Overall scope of the Legal Services Act 2007

573 Legal activities

574 Authorised persons

575 Part 5 of the Legal Services Act 2007

576 The overall scheme

577 The concept of managers

578 Involvement of lawyers only

579 Licensing authorities

580 Licensing rules

581 Responsible officers

582 Ownership of licensed bodies

583 Restricted interests

584 Material interests

585 Controlled interests

586 Power to impose share limits and voting limits

587 Control of external interests

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