A Partnership is one of the oldest business models in England with the current act dating back to 1890. That being said, there are plenty of Partnerships which trade today, in part due to the ease with which one can be set up. There is no company to incorporate and the Partnership can exist automatically, all that is required is two or more people working together with a view to making a profit.
We have previously written about the importance of Partnership Agreements, which sets out some key considerations. However, a recent case of Cobden v Cobden acts as a reminder that if you don’t write down what you intend, getting what you want is the exception rather than the rule.
In this case the Partners had set up a Farming Partnership, and one Partner had relied on a verbal agreement that if the Partnership was to be wound-up he would be able to buy out the other Partner’s interest in the business. The Partnership Act sets out that when a Partnership is wound-up, the assets of the Partnership are to be sold and the proceeds divided equally between the Partners, so the verbal agreement went against this position.
After careful consideration, the Court allowed the purchase of the other Partner’s share by granting a relatively rare order to allow the Partner to buy out the other, but this outcome was not certain and both parties ended up with the cost, and associated stresses and uncertainty, of going to court.
If the Partners had a Partnership Agreement clearly setting out their intentions, the process could have been significantly quicker and cheaper, with much more certainty as to the outcome.
If you are considering a Partnership Agreement, or have any concerns you would like to discuss relating to your Partnership, please contact the Corporate and Commercial Team at BHW on 0116 289 7000.
Categorised in: Case Updates, Corporate and Commercial, Dispute Resolution, News
Tags: Company Law, Dispute Resolution, Farming & Agriculture, Partnership Agreements