Business: Writing Topics Partnership Flashcards
Partner Retiring (General Partnership): Effect
Effect:
1. Liability for pre-retirement debts
- Indemnity with Partnership (still directly liable but will be indemnified)
- Novation with all parties (only way to not be liable to 3rd party)
- Liability post retirement
- actual notice to existing creditors (for future dealings with the person)
- Advert in London Gazette for new creditors
- Have information removed from website, stationary etc.
General Partnership: what if partner wants to retire
Ask if it is at will or not at will (was a term or goal provided for in the Partnership Agreement)
- Partnership at will
- give notice
- partnership will dissolve at date of notice (or in notice) - Not at will
- should include retirement provision on how other partners will buy share
LLP: How to retire and effect on liability
- How to retire
- give reasonable notice to other partners
- notice to CH within 14 days
- should be bought out per retirement provision in PA - Liability (general rule limited to capital contribution)
- clawback provision (withdrawn property 2 years before insolvency and was insolvent etc.)
- where only member for over 6 months at any point
How to set up a partnership
- General Partnership
- no formalities
- 2+ persons carrying on business together with a view to make profits
- Consider Partnership Agreement - LLP
- 2+ persons carrying on business together with a view to make profits
- Registration (Name, Address, PSC, Partners and their addresses)
- Consider Partnership Agreement
- Consider Designated Member (need 2)
What to do it partner breaches partnership agreement?
Different to breach of fiduciary duties
- Must show:
- breach of PA
- Caused damages to you or business - Can bring claim against breaching partner. Court may award:
- dissolution of Partnership
- damages
- specific performance - Consider ADR
- if arbitration clause PA
What to do if partner breaches fiduciary duties? And what are the duties?
- Fiduciary duty to act in good faith and exercise powers for benefit of partnership
- could apply to court for dissolution - Disclosure Inforation
- Account for Secret Profits
- unless consent given by other partners
- must account for profit to partnership - Account for profits of competing business
- unless consent given
- must account for all profits
What are the rights of a partner in a partnership?
- Right to equal management
- unless provided otherwise in PA - Right to Distribution equally
- unless provided otherwise in PA - Right to Indemnification for expenses incurred on behalf of partnership
- NO right to renumeration
- unless provided otherwise in PA
Decision making in partnership and how might a client want to amend this?
Generally equal: each partner 1 vote and decisions by majority vote
- can be amended in PA
Unanimous agreement for:
- admission of new partner
- change of PA agreement
- change in nature of business
Amendments:
- can decided on different voting methods
- can assign different roles and powers to different partners
- could agree on lower approval needed for otherwise unanimous decisions
How to Expel a Partner
Only if provided for in PA
Alternatively:
- claim breach of contract and try for specific performance
- dissolve partnership
When is general partnership dissolved?
- Always by
- expiration of term
- expiration of purpose
- by notice (only if undefined term)
- illegality - Subject to PA saying otherwise
- bankruptcy
- death
- taking out charge against your share (only if other partners choose to) - On Application to Court
- partner lacks mental capacity
- partner becomes incapable
- partner’s prejudicial conduct effect business
- partners wilful or persistent breach of PA
- only carried on at a loss
- just and equitable to dissolve
Effects of dissolution of general partnership
Partners still have authority to bind in order to wind down
- pay back creditors
- if insufficient partners personally liable
- must pay losses in proportion of right to profit - pay back partner loans
- pay back partner contributions
- surplus divided in share of profits
When might partner in LLP be personally liable?
- Was only partner for more than 6 months
- jointly and severally liable with LLP for debts incurred after 6 months - For wrongful or fraudulent trading
- Clawback
- withdrew partnership property (profits, salary, interest payments, repayment of loan etc.)
- 2 years before onset of insolvency
- knew or reasonable gourds for believing partnership was insolvent or became insolvent as a result
How to bring an LLP to an end?
Strike Off
- Majority of partners agree
- No limitation apply:
- has traded in past 3 months
- changed name in past 3 months
- is subject to insolvency proceedings - notice
- other members
- employees
- creditors
- trustee of pension fund - CH on application puts notice in London Gazette
- gives other parties time to object - Struck off in 3 months
What is Stamp Duty Exception for LLPs
- property transferred within 1 year of incorporation of LLP
- Transferred by person who is/was:
- partner in partnership comprised of members of LLP; or
- holds holds property as bare trustee for above partner - Proportional ownership of property remains the same between OG partnership and current LLP
What is a limited partnership and what are the requirements to form one?
Gives some partners limited liability and some full liability.
Requirements
- 1+ limited partner not permitted to be involved in management
- 1+ general partner responsible for managing business
- registered with CH
