Partnership agreements - common express provisions

Question 1

what form can a partnership agreement take?

Answer 1

Agreement can be orally, in writing or by conduct

Question 2

what are the common express provisions? (13)

Answer 2

1. Parties
2. Partnership name
3. Nature + location of partnership business
4. Commencement + duration
5. Capital
6. Profits and losses
7. Management and voting
8. Admission of new partners
9. Expulsion
10. Outgoing partner’s share,
11. Restrictions on competition
12. Termination and winding up,
13. Dispute resolution

Question 3

explain what might be included under the ‘parties’ clause

Answer 3

each partners’ name + status (i.e. full partner, equity partner, voting partner)

Question 4

explain what might be included under the ‘capital’ clause

Answer 4

• Capital contributions + whether any interest is payable on these
• Circumstances when partners will need to contribute more capital

Question 5

explain what might be included under the ‘profits and losses’ clause

Answer 5

• Division if payments are to be unequal
• Drawings (=payments) throughout the year
• Employment related rights i.e. holiday pay, maternity pay

Question 6

explain what might be included under the ‘management and voting’ clause

Answer 6

• Delegating decision-making (generally or on specific issues)
• Restrictions on authority

Question 7

explain what might be included under the ‘admission of new partners’ clause

Answer 7

how this will take place i.e. percentage approval from existing partners

Question 8

explain what might be included under the ‘expulsion’ clause

Answer 8

giving partners authority to expel and in what circumstances i.e. bankruptcy, long-term illness, breach of agreement

Question 9

explain what might be included under the ‘outgoing partner’s share’ clause

Answer 9

acquisition of outgoing partner’s share by remaining partners

Question 10

when is the commencement date in a partnership agreement somewhat redundant?

Answer 10

a partnership begins when the legal definition is satisfied. If this happens before the commencement date, it is considered to have begun at the earlier point.

Question 11

explain what might be included under the ‘termination and winding up’ clause

Answer 11

• The departure of one partner will not dissolve the partnership
• How any surplus on winding up is paid

Question 12

explain what might be included under the ‘dispute resolution’ clause

Answer 12

• Requirement to arbitrate