Law Commissions report on partnerships

The Law Commissions have published a joint report recommending reforms to partnership law

The Journal, December 2003, page 51

The Scottish Law Commission and the Law Commission have published a joint Report on Partnership Law (Scot Law Com no 192; Law Com no 283), the main thrust of which is to encourage continuity of business in place of the rule that a firm ceases to exist on any change in its membership.

The Commissions propose to introduce the concept of separate legal personality for partnerships (and limited partnerships) in England and Wales and clarify that concept in Scotland. However, partners would continue to be personally responsible for partnership obligations and would owe a duty of good faith towards the partnership and the other partners.

The policy has been to “think small first”, on the basis that small firms are less likely to have properly drawn agreements. The draft Bill which accompanies the report provides a default code that will apply unless the partners choose to vary it, dealing with matters such as the sharing of profits and losses, how differences are to be settled and the financial entitlement of a partner leaving. A partnership liquidator should be able to wind up a partnership where this cannot be achieved without dispute.

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