Company Law partnership Essay Example | Topics and Well Written Essays - 1500 words

Company Law partnership - Essay Example In certain circumstances partnerships must be dissolved under the Partnership Act 1890: once a partnership contract is performed - eg it was for a fixed term or for a specific purpose; the death or bankruptcy of a partner; a partner assigns his share to a creditor to satisfy a private debt; any event which makes it unlawful for the firm to continue its business or to have the status of a partnership (s34) (Macintyre, 2005, 464). Under s35 a partner may seek for dissolution on the basis of one of the following five grounds: permanent disability to perform the partnership contract; conduct prejudicial to the carrying on of the firm; wilful or persistent breach of the agreement which makes it untenable for the other partners to continue the agreement; the firm is making a loss and there is no chance of its finances being turned around; and/or that the Court considers it to be 'just and equitable' to dissolve the firm. Under the Mental Health Act 1983 the mental incapacity of a partner can also lead to the dissolution of a partnership. (s34) (Macintyre, 2005, 465). The partners retain the ability to bind the firm following a dissolution to the extent of completing unfinished transactions and all matters incidental to the winding up of the firm (s38 Partnership Act 1890). ... A bankrupt partner cannot bind a firm following dissolution. However, if a receiver is appointed by the Court at the request of one or more partners, then all partners lose their authority to bind the firm (Macintyre, 2005, 466). An organisation's assets consist of both property and goodwill. Goodwill can be defined as "the excess of the market value of a business over the value of its individual assets" (Macintyre, 2005, 466). Once the firm's goodwill is sold it is unlawful for any partner to use the firm's name or solicit its customers. "[H]e must not, I think, avail himself of his special knowledge of the old customers to regain, without consideration, that which he has parted with for value. He must not make his approaches from the vantage ground of his former position. He may not sell the custom and steal away the customers" per Lord MacNachten Trego v Hunt [1896] AC 7 (Macintyre, 2005, 466). If a firm is solvent and has made a profit after settling its debts, then these proceeds will be split between the partners according to the proportion agreed upon in their current contracts. However, if the firm is solvent but has made a loss then either the partnership agreement will determine how the loss should be resolved or s44 Partnership Act 1890 is used to determine how the loss should be resolved (Macintyre, 2005, 467). Losses are to be paid out of profit, or capital or by the individual partners in the proportion they would have shared the profits (s44(a)). Following its winding up the firm must pay its creditors in the order of; external creditors are to be paid in full; partners' loans are to be repaid;