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Partnership agreements
Whether you are thinking about setting up a partnership, or need advice regarding an existing one, we can help.
Perhaps you are starting a business and have decided that a partnership is the best medium for you. We can help you to negotiate and draft the partnership agreement to protect the interests of the partners and the partnership itself. It can cover matters such as how profit and losses are to be accounted for and distributed, who owns what assets, and the degree of involvement by each partner in the day-to-day management of the partnership. It will also cover what happens when partners disagree, fall out, retire or resign, or when there is a need to expel a partner. It might also include non-competition clauses preventing an ex-partner from competing with your business. The key legislation governing partnerships is the Partnership Act 1890. Partners can conduct their business as they wish provided it is not inconsistent with this. Some provisions contained within it can be varied by way of partnership agreement.
For those operating in specialist areas such as medicine or agriculture, we recognise that there may be additional considerations and can tailor the partnership agreement accordingly. If you are already in a partnership, you might find that the existing agreement needs amending. We can review the agreement in its current form and advise on how it can be improved. It is worth reviewing the agreement periodically to ensure it still effectively meets the changing needs of the partnership. A good time to do this might be if a new partner is invited to join the partnership, who can then be added as a signatory, using a deed of adherence if needs be.
Unfortunately, within partnerships, dispute can arise between partners. If this isn’t properly resolved, the business can suffer or stagnate. We can help to resolve such disputes reminding partners of their rights and duties to the others, which if not expressly contained in the partnership agreement, will be implied by law. One such duty is the requirement to act in good faith towards other partners- they must disclose to each other information pertinent to the business, and account for any profits they may have individually made indirectly from the partnership or from a competing business. Issues may also arise concerning liability for debts, for example whether the firm is indeed liable, and against whom any debt might be enforced. Whilst a new partner cannot be held liable for debts incurred prior to his joining, but a retired partner can be for debts incurred whilst he was a partner. Importantly, a retiring partner can also be liable for debts incurred after he was partner if he has not formally notified customers and suppliers of his departure.
Not all partnership will last forever. We can help with the sale of the partnership, or if one partner wants to leave, the purchase of his or her share by the others. A properly drafted partnership agreement will provide for a partner deciding to resign or retire, as such an eventuality is to be expected. If there is no partnership agreement, the Partnership Act 1890 applies by default, enabling partners to resign with immediate effect. Ideally you should instead insert into a partnership agreement a requisite notice period. We can also help draft a deed of resignation to address any outstanding issues. There may also be the need to expel a partner without his consent, instigated by the other partners. This can be done if the terms of the partnership agreement permit it. This is a potentially fraught and tricky situation, but we can advise on how best to handle it to minimise the fall out. If the partnership agreement does not permit expulsion, a dissolution of the partnership may be needed, with the remaining partners then setting up a partnership anew. Again, we can help you with this.
David Cammack
Solicitor and Notary Public, Commercial Department
“David has provided corporate advice to a number of my clients. I can testify to his eye for detail & his ability to see the flaw or hitch, if there is one, in the best laid schemes.”
Depending on your circumstances you may also need advice on matters such as:
- Shareholder Agreements
- Intellectual Property
- Setting up a business
- Buying or selling a business
- Commercial property
- Joint venture agreements
- Life insurance policies and key-man insurance
If you would like to find out more information on partnership agreements
Please complete our contact us form at the top of this page, email [email protected] or feel free to call us on 01206 577676.