Partnership agreements - default provisions

Question 1

when do these apply?

Answer 1

in the absence of contrary agreement

Question 2

what is technical dissolution and general dissolution?

Answer 2

• Technical dissolution = dissolution (i.e. a partner leaves, death, bankruptcy) but the business continues. Remaining partners carry on as a new partnership.
• General dissolution = dissolution + business to be wound up. Business ceases.

Question 3

what is the position regarding sharing capital and profits?

Answer 3

Partners are entitled to share equally in capital and profits

however, there is case law to suggest that distribution of capital could reflect the initial capital contributions. The claiming partner would need to argue this.

Question 4

what is the position regarding losses?

Answer 4

Partners are jointly liable to contribute equally to losses

Question 5

what is the position regarding management?

Answer 5

Every partner can take part in management

Question 6

what is the position regarding new partners?

Answer 6

Consent of all partners is needed to admit new partners

Question 7

what is the position is the partnership continues working after the expiry of a fixed term?

Answer 7

if a partnership was for a fixed term and the partners continue business on the same terms after that period ends without making a new agreement, the partnership will continue at will

Question 8

what is the position regarding renumeration?

Answer 8

Partners are not entitled to renumeration

Question 9

what is the position regarding interest on capital contributions?

Answer 9

Partners are not entitled to interest on their capital contributions

Question 10

what is the position regarding indemnifying other partners?

Answer 10

The partnership must indemnify a partner for payments/liabilities incurred in the ordinary course of business

Question 11

what is the position regarding voting?

Answer 11

Business matters may be decided by majority vote but change in the nature of the business require unanimous vote

Question 12

what is the position regarding expelling a partner?

Answer 12

There is no power to expel a partner

Question 13

what is the position when a partner derives a benefit from the partnership?

Answer 13

If the other partners have not consented, a partner must account to the firm for any benefit they receive which derives from the partnership

Question 14

what is the position when a partner has a competing business?

Answer 14

If the other partners have not consented, if a partner carried on a competing business of the same nature, they must pay the profits to the partnership

Question 15

how is a partnership dissolved?

Answer 15

• The expiration of a fixed term
• Completion of an undertaking
• Giving notice (= partnership at will) (no notice period requirements)
• Death
• Bankruptcy
• If it becomes unlawful to run the firm (cannot be overridden by agreement)