A Partnership or LLP Dispute
Partnership and LLP disputes can be caused by a number of different factors. After all, the very nature of a partnership or LLP often blends personal and professional relationships together in a way that shareholder disputes and director disputes might not.
Things that could cause a partnership dispute include:
- The proportioning of liability;
- An intention to leave the partnership or LLP;
- A partner’s misconduct;
- The breakdown of the partnership’s professional relationship; or
- A partner neglecting their professional duties.
The impacts of these reasons for disputes will be reduced depending on the type of partnership that you are part of, and whether or not there is a relevant agreement in place.
There are three main types of partnerships:
- An ‘ordinary’ partnership, whereby the business has no legal distinction from the partners themselves. As part of an ordinary partnership, if the business has debts, these are shared between the partners.
- A limited partnership, which is made up of ordinary and limited partners. Limited partners’ liability is limited to the money they have invested in the business.
- A limited liability partnership, which has the benefit of being a corporate entity, and all partners have a limited liability. Therefore, the debts of the business are not also those of the partners.
While the different types of partnerships will determine a partner’s liability, they don’t eliminate the possibility of a partnership dispute.
Disputes:
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Instead, the risk of partnership disputes is often reduced by having a partnership or LLP Agreement in place.
A good partnership or LLP agreement will set out each partner’s duties, obligations and rights. It might classify the different classes of partner, outline the financing and profit-sharing arrangements, and provide an overview of the management structure.
Crucially, though, an effective partnership or LLP agreement will include how disputes will be dealt with, by setting out the terms and mechanisms of partner exits, and will govern the paying out of an existing partner’s interest. It is also likely to contain a clause declaring a partnership cannot be dissolved by the service of a dissolution notice.
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How Loch Law can help
From helping you with drafting a partnership or LLP agreement, to guiding you through a partnership dispute, the team at Loch Law have a wealth of experience in dealing with partnership-based disputes.
Areas we often advise on:
- Rights and responsibilities of partners and members;
- Disputes over governance of the Partnership or LLP;
- Disputes over share of profit or losses;
- Dissolving the partnership;
- Partner misconduct;
- Exit and retirement packages; and
- Breach of duties.
Having our own team of in-house solicitor advocates and barristers means we will be with you every step of the way. Whilst seeking a resolution out of court is often best, if a court hearing is necessary, our solicitor advocates and barristers will be there to represent you before the court.
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What is a partnership or LLP agreement?
A partnership or LLP agreement outlines the rights and responsibilities of all parties who enter a partnership or LLP. Not a legal requirement, but something that we strongly recommend you have, the written document should also include detailed clarification and guidance on subjects like a partner’s or member’s right to sell their share of the partnership or LLP, and whether one could dissolve the partnership or LLP.
Can I sell my share of a partnership?
Whether or not you can sell your share of a partnership should be outlined in your partnership agreement. If the agreement allows for any party to sell their share of a partnership, it should also provide clear process instructions for how this can be done.
Without a partnership agreement in place, the sale of your share of a partnership is unlikely to be a smooth process. That’s because the Partnership Act of 1890 does not explicitly outline a partner’s right to sell their share of a partnership.
What happens when a partner leaves a partnership?
What happens when a partner leaves a partnership should be outlined in the partnership agreement. This will dictate the rights and responsibilities that each party has as part of the partnership.
