8. Partnerships and Insolvency

This chapter sets out in outline the impact of insolvency on partnerships, the insolvency being that of the firm, one or more of the partners or any combination of those possibilities. It deals in order with the winding up of an insolvent partnership only, the winding up of the insolvent firm with the concurrent bankruptcies of the partners, joint bankruptcy petitions against the partners and separate bankruptcy petitions against the partners. It distinguishes between the rights of partnership and individual creditors and deals with the disqualification of an insolvent partner from the management of a company. The chapter then details the application of the corporate insolvency procedures of voluntary arrangements and administration orders to partnerships.

5. Partners and Each Other

This chapter concerns the relationship between partners and the interface between the contractual and fiduciary duties implicit in such a relationship, including the internal management of the firm. It examines the impact of equity on contractual agreements, including the doctrine of forfeiture. The nebulous overriding duty of good faith is followed by the statutory duties of honesty, no conflict/no profit and no competition. The implied terms in relation to management (including access to partnership information) and control, financial affairs (detailing capital, capital profits and income profits) and the limits on change of partners are followed by a detailed consideration of the validity and exercise of expulsion clauses. Finally, the chapter details the limited effects of both voluntary and involuntary assignments of a partner's share.

14. The LLP Agreement

This chapter explains what the LLP Agreement does, and what default provisions exist in the absence of agreement. It considers whether a duty of good faith exists within the LLP Agreement. It discusses how an LLP Agreement might be amended, and considers the application of contractual remedies: damages, rescission, repudiation and frustration.

13. Rights and Duties of Membership

This chapter addresses the rights and obligations of membership. It explains what a member's share in the LLP entails, and considers how the share can be assigned or treated as property. It considers the duties that members owe to the LLP and to each other, including both fiduciary duties and those that arise under a common law duty of care. It considers what duties a member may have to outsiders, and also the protections that a member may have in the event of unfair treatment by the LLP.

4. Partners and Outsiders

This chapter sets out the vicarious liability of partners for the various forms of partnership liability to third parties. The liability for contracts is based on the concepts of agency and the authority of the partner(s) making the contract, in particular the scope of the implied or usual authority of a partner to bind the other partners. The exception to the undisclosed principal rule is carefully examined. The vicarious liability for torts and crimes committed by a partner is examined, including the apparent paradox of the non-existent legal person of the firm being subject to prosecution. The liability for breaches of equitable liabilities relating to misapplications by a partner is synthesised, including knowing receipt and dishonest assistance in a breach of trust. Then the chapter considers the nature of such liabilities and finally, the effect of a change of partners on such liabilities on both the outgoing and incoming partners.

2. Establishing a Partnership

This chapter describes the various ways of establishing a partnership, either intentionally or otherwise, and who then within the firm is actually a partner as opposed to a creditor or employee/worker. The lack of formality involved is set out together with the existence of partnerships at will, i.e. those with no defined duration. Informal partnerships may arise by financial involvement such as sharing profits, contrasting partners and creditors. Partnership liability may also arise by a person representing themselves as a partner which is relied on by a third party. The chapter then discusses the interface between partners and employees and the current possibility that one person could be both, or more likely both a partner and a worker. Finally, it considers the status of salaried and fixed-share partners.

17. Insolvency and Dissolution

This chapter explains how insolvency law applies to an LLP. It considers the various insolvency processes under the Insolvency Act 1986 that can arise, and the position of members in a winding up, both as potential contributories and also as potential creditors. It addresses investigations into LLPs under the Companies Act 1985, and finally explains how an LLP can be struck from the register and how it can be restored.

16. Termination of Membership

This chapter explains how a person ceases to be a member, and what the consequences of termination of membership is, both in terms of relations with third parties and in terms of relations between the departing member and the LLP. It considers the application of post-termination controls on a departing member.

15. Decision-Making

This chapter explains how an LLP makes decisions, identifying the sorts of decisions that require unanimity and the sorts of decisions that can be decided by a majority. It considers how a decision-making power must be exercised, and the extent to which fetters such as good faith, rationality and natural justice will impact on the decision-making process. Lastly, it considers what the consequences of an unlawful decision are.

12. Membership

This chapter explains what membership of an LLP entails. It explains how a person becomes a member of an LLP, and the different types of membership that are recognised in law. It considers case law on the question as to whether a person can be both a member and an employee, and both a member and a worker. Finally, it explains how a person might be disqualified from being a member of an LLP and the consequences of such a person acting as a member whilst disqualified.