Partnership Law Flashcards
How is a partnership formed?
There are no formalities in forming a partnership.
A relationship between persons carrying on a business in common with a view to profit - s.1(1) PA.
Section 2 gives more guidance on how to determine if a partnership has been formed
E.g receiving a share of the profits is prima facie evidence that a person is a partner (s.2(3)).
What are the filing requirements of a partnership?
No registration at Companies House needed.
No requirement for accounts to be prepared, but it is implied in PA 1890 that they should be.
What is the problem with relying on the default provisions contained in PA 1890?
Over 100 years old and often unsuited to the modern business environment, particularly large firms.
The most problematic provisions are:
- s.20: relating to partnership property
- s.24(1): relating to sharing profits
- s.24(5): relating to management
- s.24(8): relating to deciding issues
- s.25: relating to expelling partners
- s.26: relating to dissolving the partnership
- s.33: relating to death of a partner
- s.44: relating to distributing assets on winding up
When is the partnership bound by an action by a partner exceeding his powers?
4 step test under s.5 PA 1890 looks at the third party’s view.
- Is this the usual kind of business expected by the firm?
- Is it usual for a sole partner to enter into this contract alone?
If yes:
- Did the third party actually know the partner was not authorised?
- Did the third party know or believe that the partner was not a partner of the firm?
If no, the partnership is bound.
When can a non-partner bind the partnership?
If they had actual or apparent authority to enter into the contract.
They have apparent authority when the firm represents them to the third party as a person that has authority to bind the firm. E.g by giving them a particular title.
The firm may also ‘hold out’ the person as a partner.
How are partners liable for partnership debts?
Contractual debts and obligations - jointly liable.
In tort - joint and severally liable.
A non-partner may be liable if they have been held out as a partner (s.14 PA)
What law is relevant to LLPs?
Regulated by the Limited Liability Partnerships Act 2000 and the Limited Liability Partnerships Regulations 2001.
The CA 2006 is also relevant.
The PA 1890 does not apply to LLPs nor does the common law - s.1(5) LLPA.
How is an LLP formed?
Must be incorporated using an incorporation document (Form LL IN01).
Two or more persons associated for carrying on a lawful business with a view to profit - s.2(1)(a).
Must be some commercial activity (not a charity).
Must have at least 2 designated members.
What are the filing requirements of an LLP?
Required to deliver an annual confirmation statement to the Registrar, and notify it of certain events.
Also required to file annual accounts at Companies House.
When is the LLP not bound by actions of the members?
The LLP is not bound if:
- the member has no authority, and
- the third party knows this, or does not know or believe them to be a member
S.6 LLPA.
When are members of an LLP liable to contribute upon winding up?
- If the LLP agreement requires them to
- If they are guilty of fraudulent or wrongful trading
- If the LLP is insolvent and the ‘clawback’ rule applies
What law is relevant to a LP?
Formed and regulated in accordance with the LPA.
But the PA 1890 and common law also apply.
How is a LP formed?
Must deliver a statement (Form LP5) to the Registrar of Companies.
Will receive a certificate of registration.
Must notify the Registrar of any changes to the LP, but need not file accounts or annual returns.
What is the partners’ liability on winding up a LP?
General partners have unlimited liability.
Limited partners have no liability.
