Who owns what?
- Be clear about what assets belong to the business: land/kit/entitlements/intellectual property and each partner’s contribution to and interest in the capital of the partnership
- Often found in the accounts, but with new partnerships, initial contributions (and the way capital profits on particular assets are to be treated) should be listed in particulars/schedules of the partnership agreement
- Keep any declarations of trust involving partnership property with partnership papers
- If land being transferred is a partnership asset, ensure that is noted on the transfer
How can the partnership be brought to an end?
- Default position: dissolution on the death of a partner, assets realised under Partnership Act 1890 and a partner giving notice can determine the partnership
- Decide grounds on which partnership can be brought to an end, and whether it can continue on death, bankruptcy, incapacity or retirement of a partner (and agree on the mechanism)
What happens when the partnership ends or someone leaves?
- Be precise about how an outgoing/deceased partner’s shares (and particular assets) are to be valued on partial or general dissolution (see the case of Harvey v Drake [2011] EWCAm Civ. 838)
- Spell out the mechanism by which continuing partner(s) can buy out the share of a deceased/ outgoing partner; specify notices to be served, timescales, payment periods, and interest payable
What is required of the partners?
- Be clear about duties/time-commitment - avoid “…as is from time to time requisite”?
- Cover attendance at meetings/involvement in other businesses/whether a partner can charge any part of his interest in the partnership etc
How is the partnership to be run?
- Agree on decision-making/voting rights – they can be different for different matters. The default position under the Partnership Act 1890: ordinary matters are decided by a simple majority
- Deal with whether, how, and under what conditions, new partners (e.g. children/spouses) can be introduced
How are ‘issues’ to be dealt with?
- Deal with whether there should be a right to expel, on what grounds and by what mechanism/ what happens when there is mental incapacity or long-term sickness/how disputes of all or particular kinds should be resolved
- Very important: deal with how partners can leave/on serving what notice, and how their partnership shares can be bought out/over what period/with what (if any) interest is payable on capital etc
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For further information about our agriculture services, get in touch with our team in Alconbury, Birmingham, Nottingham, Peterborough or Spalding.