Partnership Disputes

Partnership Act 1890

An act of the Parliament of the United Kingdom. This entitles a business to be run as a partnership, requiring a minimum of two individuals.

Partnerships can form by conduct, oral agreement or a written contract.

What is a partnership agreement?

A business partnership is an agreement between individuals to form and operate a business, with the prevailing view that it is for-profit. When this I captured in a written contract, this is known as a partnership agreement.

Partnership Rights

Unless stated otherwise, all partners are equal. Each partner has equal rights to take on new contracts and then the same responsibility to fulfil them. Each partner is also entitled to an equal share in the profits and losses of a company.

It is a common misconception that all partners must own an equal share within a business. It is at the partnerships discretion to distribute ownership in any manner they see fit, so long as it is agreed before it is then written into the agreement.

Common Partnership Disputes

As with any relationship. Partnership issues can occur, and it can be messy. This can be for several reasons:

Distribution of profits

  • Partners who invested more capital at the start
  • Partners with greater skills
  • Number of hours worked by individual partners

Partner who is no longer part of the business

  • Leaving for other work
  • Death
  • Removal by other partners
  • What is done with assets accumulated by partner who is leaving the company
  • Joint liability
  • Taking on of risky contracts without consulting another partner
  • Borrowing of money
  • Debts

Dispute Resolution

Pre-empt

The best way to pre-empt issues is with a comprehensively written Partnership Agreement.

Many businesses either out of the excitement of starting their own company or to save money will try to create their own, either from scratch or from a template they found online.

We cannot advise against this enough, every business is different, with its own goals and partners have their comfort levels.

Beyond prevention

Disputes can be a trying time. When there is a dispute, it is important to focus on the solution, and not the problem.

Should in-house negations, such as this, fail. Then it is time to consider a mediator. Mediators help both sides to present their positions and reach an agreement that is best for the business.

In instances of deadlock. The next step is to consider an amicable separation.

Terminating this relationship can be both complicated and time-consuming. Steps need to be taken to ensure fair distribution of assets, prevent leaving partners poaching clients. When necessary court action, such as injunctions and restraining orders, may be required to avoid damaging the goodwill of the business or the theft of assets.

Why Primas Law?

Primas Law has helped several clients through crafting partnership agreements. We have also helped businesses to protect their interests when disputes threaten their existence and smooth operation.

We have a proven track record in partnership dispute cases and alternative dispute resolution in UK and international companies.

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