Section 1(1) of the Partnership Act 1890 (the “Act”) states that “Partnership is the relation which subsists between persons carrying on a business in common with a view of profit”. Partnership agreements traditionally take the form of a deed but this is not a requirement of the Act or the general law. A partnership agreement may arise if parties have been dealing together for a number of years even if nothing has been committed to writing. However, where the terms of the partnership agreement are disputed the partners often regret not having documented their relationship.
Despite a limited liability partnership (LLP) being a body corporate which is required to lodge an incorporation document with Companies House before being formally incorporated there is similarly no legal obligation upon members to be party to a membership agreement. In the absence of a membership agreement the default rules in regulation 7 of the Limited Liability Partnerships Regulations 2001 will apply. Regulation 7(1) stipulates that “All the members of a limited liability partnership are entitled to share equally in the capital and profits of the limited liability partnership”. The founding members of a LLP may be reluctant to share profits equally with newly admitted members and to rely upon the default rules.
In both cases it is prudent for partners and members to document their relationship in order to regulate their affairs and avoid the constraints of statute. In the context of partnership documentation our team of specialist lawyers regularly drafts bespoke documents for traditional partnerships, limited partnerships and LLPs, including the following types of documents:
- partnership deeds
- limited partnership agreements for English limited partnerships formed in accordance with the Limited Partnerships Act 1907
- LLP membership agreements
- explanatory manuals for all forms of deeds and agreements
- transfer agreements transferring the business of a partnership to a LLP or limited company
- tax indemnity provisions
- deeds of adherence for admitting new partners and members
- retirement deeds for partners and members exiting partnerships and LLPs
- deeds of dissolution
Our recent experience includes:
- settling a retirement deed for a partner retiring from a limited partnership which covered his rights to equity, co-investment and carried interest as a good leaver
- drafting a guide to a LLP members’ agreement for a niche firm covering such topics as drawings on account of profits and distributions, tax reserves, accounts, duties of members, retirement and restrictive covenants for use by the senior partner in his negotiations with an acquisitive national law firm.
How Fox & Partners can help…
- clear and concise drafting of partnership documentation
- review of existing documentation to ensure compliance with the latest law and recommended best practice.
Please call us on 020 7618 2400