chapter 11.09 partnership act -...

MONTSERRAT

CHAPTER 11.09CHAPTER 11.09CHAPTER 11.09CHAPTER 11.09

PARTNERSHIP ACTPARTNERSHIP ACTPARTNERSHIP ACTPARTNERSHIP ACT

Revised Editionshowing the law as at 1 January 2002

This is a revised edition of the law, prepared by the Law Revision Commissioner underthe authority of the Revised Edition of the Laws Act.

This edition contains a consolidation of the following laws—

Page

PARTNERSHIP ACTAct 20 of 1998 .. in force 17 January 2000 (S.R.O. 10/2000) 3

Partnership CAP. 11.09 3Revision Date: 1 Jan 2002

LAWS OFMONTSERRAT

CHAPTER 11.09

PARTNERSHIP ACT

ARRANGEMENT OF SECTIONS

SECTION

1. Short title2. Interpretation

PART I

NATURE OF PARTNERSHIP

3. Definition of partnership4. Rules for determining existence of partnership5. Postponement of rights of person lending or selling in consideration of

share of profits in case of insolvency6. Meaning of firm

PART II

RELATIONS OF PARTNERS TO PERSONS DEALING WITH THEM

7. Power of partner to bind the firm8. Partners bound by acts on behalf of firm9. Partner using credit of firm for private purposes

10. Effect of notice that firm will not be bound by acts of partner11. Liability of partners12. Liability of the firm for wrongs13. Misapplication of money or property received for or in custody of the

firm14. Liability for wrongs joint and several15. Improper employment of trust property for partnership purposes16. Persons liable by “holding out”17. Admission and representation of partners18. Notice to acting partner to be notice to the firm19. Liabilities of incoming and outgoing partners20. Revocation of continuing guarantee by change in firm

4 CAP. 11.09 PartnershipRevision Date: 1 Jan 2002

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PART III

RELATIONS OF PARTNERS TO ONE ANOTHER

21. Variation by consent of terms of partnership22. Partnership property23. Property bought with partnership money24. Procedure against partnership property for a partner’s separate judgment

debt25. Rules as to interests and duties of partners subject to special agreement26. Expulsion of partner27. Retirement from partnership at will28. Where partnership for terms is continued over, continuance on old terms

presumed29. Duty of partners to render accounts, etc30. Accountability of partner for private profits31. Duty of partners not to compete with firm32. Rights of assignee of share in partnership

PART IV

DISSOLUTION OF PARTNERSHIP AND ITS CONSEQUENCES

33. Dissolution by expiration of notice34. Dissolution by bankruptcy, death or charge35. Dissolution by illegality of partnership36. Dissolution by the Court37. Rights of persons dealing with firm against apparent members of firm38. Right of partners to notify dissolution39. Continuing authority of partners for purposes of winding up40. Rights of partners as to application of partnership property41. Apportionment of premium where partnership prematurely dissolved42. Rights where partnership dissolved for fraud or misrepresentation43. Right of outgoing partner in certain cases to share profits made after

dissolution44. Retiring or deceased partner’s share to be a debt45. Rules for distribution of assets on final settlement of accounts

PART V

SUPPLEMENTAL

46. Saving for rules of equity and common law


LAWS OFMONTSERRAT

CHAPTER 11.09

PARTNERSHIP ACT

(Act 20 of 1998)

AN ACT TO DECLARE THE LAW OF PARTNERSHIP.

Commencement

[17 January 2000]

Short title

1. This Act may be cited as the Partnership Act.

Interpretation

2. In this Act, unless the contrary intention appears—

“business” includes every trade, occupation or profession;

“competent authority” means the Registrar;

“Court” means the High Court of the Eastern Caribbean Court or a Judgethereof;

“foreign regulatory authority” has the same meaning as in section 2 ofthe Exchange of Information Act;

“partnership property” has the meaning assigned to it by section 22(1).

PART I

NATURE OF PARTNERSHIP

Definition of partnership

3. (1) Partnership is the relationship which subsists between personscarrying on a business in common with a view to profit.

(2) Notwithstanding subsection (1), the relation between members ofany company or association which is—

(a) registered as a company under the Companies Act or anyother Act for the time being in force and relating to theregistration of companies; or

(b) formed or incorporated by or in pursuance of any Act orletter patent, or Royal Charter,


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is not a partnership within the meaning of this Act.

Rules for determining existence of partnership

4. In determining whether a partnership does or does not exist, regardshall be had to the following rules—

(a) joint tenancy, tenancy in common, joint property, commonproperty or part ownership does not of itself create apartnership as to anything so held or owned, whether thetenants or owners do or do not share any profits made by theuse thereof;

(b) the sharing of gross returns does not of itself create apartnership, whether the persons sharing such returns have orhave not a joint or common right or interest in any propertyfrom which or from the use of which the returns are derived;

(c) the receipt by a person of a share of the profits of a businessis prima facie evidence that he is a partner in the business,but the receipt of such a share, or of a payment contingent ona varying with the profits of a business, does not of itselfmake him a partner in the business, and in particular—

(i) the receipt by a person of a debt or other liquidatedamount by instalments or otherwise out of the accruingprofits of business does not of itself make him a partnerin the business or liable as such;

(ii) a contract for the remuneration of a servant or agent of aperson engaged in a business by a share of the profits ofthe business does not of itself make the servant or agent apartner in the business or liable as such;

(iii) a person being the widow or child of a deceased partnerand receiving by way of annuity a portion of the profitsmade in the business in which the deceased person was apartner, is not by reason only of such receipt a partner inthe business or liable as such;

(iv) the advance of money by way of loan to a personengaged or about to engage in any business on a contractin writing with that person, signed by or on behalf of allthe parties thereto, that the lender shall receive a rate ofinterest varying with the profits arising from carrying onthe business, does not itself make the lender a partnerwith the person or persons carrying on the business orliable as such;

(v) a person receiving by way of annuity or otherwise aportion of the profits of a business in consideration of thesale by him of the goodwill of the business is not by


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reason only of such receipt a partner in the business orliable as such.

Postponement of rights of person lending or selling in consideration ofshare of profits in case of insolvency

5. In the event of any person to whom has been advanced by way ofloan upon such a contract as is mentioned in section 4, or of any buyer of agoodwill in consideration of a share of the profits of the business, beingadjudged a bankrupt, entering into an arrangement to pay his creditors lessthan 100 cents in the dollar, or dying in insolvent circumstances, the lenderof the loan shall not be entitled to recover anything in respect of his loan,and the seller of the goodwill shall not be entitled to recover anything inrespect of the share of profit contracted for, until the claims of the othercreditors of the borrower or buyer for valuable consideration in money ormoney’s worth have been satisfied.

Meaning of firm

6. Persons who have entered into partnership with one another are forthe purposes of this Act called collectively a firm, and the name underwhich their business is carried on is called the firm-name.

PART II

RELATIONS OF PARTNERS TO PERSONS DEALING WITH THEM

Power of partner to bind the firm

7. Every partner is an agent of the firm and his other partners for thepurpose of the business of the partnership; and the acts of every partnerwho does any act for carrying on in the usual way business of the kindcarried on by the firm of which he is a member binds the firm and hispartners, unless the partner so acting has in fact no authority to act for thefirm in the particular matter, and the person with whom he is dealing eitherknows that he has no authority, or does not know or believe him to be apartner.

Partners bound by acts on behalf of firm

8. An act or instrument relating to the business of the firm done orexecuted in the firm-name, or in any other manner showing an intention tobind the firm, by any person thereto authorised, whether a partner or not, isbinding on the firm and all the partners:

Provided that this section shall not affect any general rule of lawrelating to the execution of deeds or negotiable instruments.


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Partner using credit of firm for private purposes

9. Where one partner pledges the credit of the firm for a purposeapparently not connected with the firm’s ordinary course of business, thefirm is not bound, unless he is in fact specially authorised by the otherpartners; but this section does not affect any personal liability incurred byan individual partner.

Effect of notice that firm will not be bound by acts of partner

10. If it has been agreed between the partners that any restriction shall beplaced on the power of any one or more of them to bind the firm, no actdone in contravention of the agreement is binding on the firm with respectto persons having notice of the agreement.

Liability of partners

11. Every partner in a firm is liable jointly with the other partners for alldebts and obligations of the firm incurred while he is a partner; and afterhis death his estate is also severally liable in the due course ofadministration for such debts and obligations, so far as they remainunsatisfied, but subject to the prior payment of his separate debts.

Liability of the firm for wrongs

12. Where, by any wrongful act or omission of any partner acting in theordinary course of the business of the firm, or with the authority of his co-partners, loss or injury is caused to any person not being a partner in thefirm, or any penalty is incurred, the firm is liable therefor to the sameextent as the partner so acting or omitting to act.

Misapplication of money or property received for or in custody of thefirm

13. In the following cases—

(a) where one partner acting within the scope of his apparentauthority receives the money or property of a third personand misapplies it; and

(b) where a firm in the course of its business receives money orproperty of a third person, and the money or property soreceived is misapplied by one or more of the partners while itis in the custody of the firm,

the firm is liable to make good the loss.

Liability for wrongs joint and several

14. Every partner is liable jointly with his co-partners and also severallyfor everything for which the firm while he is a partner therein becomesliable under either section 12 or 13.


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Improper employment of trust property for partnership purposes

15. If a partner, being a trustee, improperly employs trust-property in thebusiness or on the account of the partnership, no other partner is liable forthe trust property to the persons beneficially interested therein:

Provided that—

(a) this section shall not affect any liability incurred by anypartner by reason of his having notice of a breach of trust;and

(b) nothing in this section shall prevent trust money from beingfollowed and recovered from the firm if still in its possessionor under its control.

Persons liable by “holding out”

16. Everyone who by words spoken or written or by conduct representshimself, or who knowingly suffers himself to be represented, as a partner ina particular firm is liable as a partner to any one who has, on the faith ofany such representation, given credit to the firm, whether the representationhas or has not been made or communicated to the person so giving creditby or with the knowledge of the apparent partner making the representationor suffering it to be made:

Provided that where after a partner’s death the partnership businessis continued in the old firm’s name, the continued use of that name or of thedeceased partner’s name as part thereof shall not of itself make hisexecutors or administrators or his estate liable for any partnership debtscontracted after his death.

Admission and representation of partners

17. An admission or representation made by any partner concerning thepartnership affairs, and in the ordinary course of its business, is evidenceagainst the firm.

Notice to acting partner to be notice to the firm

18. Notice to any partner who habitually acts in the partnership businessoperates as notice to the firm, except in the case of a fraud on the firmcommitted by or with the consent of that partner.

Liabilities of incoming and outgoing partners

19. (1) A person who is admitted as a partner into an existing firm doesnot thereby become liable to the creditors of the firm for anything donebefore he became a partner.

(2) A partner who retires from a firm does not thereby cease to beliable for partnership debts or obligations incurred before his retirement.


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(3) A retiring partner may be discharged from any existing liabilitiesby an agreement to that effect between himself and the members of the firmas newly constituted and the creditors, and this agreement may be eitherexpressed or inferred as a fact from the course of dealing between thecreditors and the firm as newly constituted.

Revocation of continuing guarantee by change in firm

20. A continuing guarantee given either to a firm or to a third person inrespect of the transactions of a firm is, in the absence of agreement to thecontrary, revoked as to future transactions by any change in the constitutionof the firm to which, or of the firm in respect of the transactions of which,the guarantee was given.

PART III

RELATIONS OF PARTNERS TO ONE ANOTHER

Variation by consent of terms of partnership

21. The mutual rights and duties of partners, whether ascertained byagreement or defined by this Act, may be varied by the consent of all thepartners and such consent may be either expressed or inferred from acourse of dealing.

Partnership property

22. (1) All property and rights and interests in property originallybrought into the partnership stock or acquired, whether by purchase orotherwise, on account of the firm, or for the purposes and in the course ofthe partnership business, are called in this Act partnership property, andmust be held and applied by the partners exclusively for the purposes of thepartnership and in accordance with the partnership agreement:

Provided that the legal estate or interest in any land which belongs tothe partnership shall devolve according to the general rules of law theretoapplicable, but in trust, so far as necessary, for the person beneficiallyinterested in the land under this section.

(2) Where co-owners of an estate or interest in any land, not beingitself partnership property, are partners as to profits made by the use of thatland, and purchase other land out of the said profits, the land so purchasedbelongs to them, in the absence of an agreement to the contrary, not aspartners, but as co-owners for the same respective estates and interests asare held by them in the land first mentioned at the date of the purchase.


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Property bought with partnership money

23. Unless the contrary intention appears, property bought with moneybelonging to the firm is deemed to have been bought on account of thefirm.

Procedure against partnership property for a partner’s separatejudgment debt

24. (1) A writ of execution shall not issue against any partnershipproperty except on a judgment against the firm.

(2) A court may, on the application by summons of any judgmentcreditor of a partner, make an order charging that partner’s interest in thepartnership property and profits with payment of the amount of thejudgment debt interest thereon, and may by the same or a subsequent orderappoint a receiver of that partners share of profits (whether already declaredor accruing) and of any other money which may be coming to him inrespect of the partnership, and direct all accounts and inquiries, and give allother orders and directions which might have been directed or given if thecharge had been made in favour of the judgment creditor by the partner, orwhich the circumstance of the case may require.

(3) The other partner or partners shall be at liberty at any time toredeem the interest charged, or in case of a sale being directed, to purchasethe same.

Rules as to interest and duties of partners subject to special agreement

25. The interests of partners in the partnership property and their rightsand duties in relation to the partnership shall be determined, subject to anyagreement express or implied by the following rules—

(a) all the partners are entitled to share equally in the capital andprofits of the business and must contribute equally towardsthe losses, whether of capital or otherwise, sustained by thefirm;

(b) the firm must indemnify every partner in respect of paymentsmade and personal liabilities incurred by him—

(i) in the ordinary and proper conduct of the business of thefirm; or

(ii) in or about anything necessarily done for the preservationof the business or property of the firm;

(c) a partner making, for the purpose of the partnership, anyactual payment or advance beyond the amount of capitalwhich he has agreed to subscribe, is entitled to interest at therate of ten per centum per annum from the date of thepayment or advance;


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(d) a partner is not entitled, before the ascertainment of profits,to interest on the capital subscribed by him;

(e) every partner may take part in the management of thepartnership business;

(f) no partner shall be entitled to remuneration for acting in thepartnership business;

(g) no person may be introduced as a partner without the consentof all existing partners;

(h) any difference arising as to ordinary matters connected withthe partnership business may be decided by a majority of thepartners, but no change may be made in the nature of thepartnership business without the consent of all existingpartners;

(i) the partnership books are to be kept at the place of businessof the partnership (or the principal place, if there is more thanone); and every partner may, when he thinks fit, have accessto and inspect and copy any of them.

Expulsion of partner

26. No majority of the partners can expel any partner unless a power todo so has been conferred by express agreement between the partners.

Retirement from partnership at will

27. (1) Where no fixed term has been agreed upon for the duration of thepartnership, any partner may determine the partnership at any time ongiving reasonable notice of his intention so to do to all the other partners.

(2) Where the partnership has originally been constituted by deed, anotice in writing, signed by the partner giving it, shall be sufficient for thispurpose.

Where partnership for term is continued over, continuance on oldterms presumed

28. (1) Where a partnership entered into a fixed term is continued afterthe term has expired, and without any express new agreement, the rightsand duties of the partners remain the same as they were at the expiration ofthe term, so far as is consistent with the incidents of a partnership at will.

(2) A continuance of the business by the partners or such of them ashabitually acted therein during the term, without any settlement orliquidation of the partnership affairs, is presumed until the contrary isshown to be a continuance of the partnership.


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Duty of partners to render accounts, etc.

29. Partners are bound to render true accounts and full information of allthings affecting the partnership to any partner or his agents.

Accountability of partners for private profits

30. (1) Every partner must account to the firm for any benefit derived byhim without the consent of the other partners from any transactionconcerning the partnership, or from any use by him of the partnershipproperty, name or business connection.

(2) This section applies also to transactions undertaken after apartnership has been dissolved by the death of a partner, and before theaffairs thereof have been completely wound up, either by any survivingpartner or by the executors.

Duty of partners not to compete with firm

31. If a partner, without the consent of the other partners, carries on anybusiness of the same nature as and competing with that of the firm, he mustaccount for and pay over to the firm all profits made by him in thatbusiness.

Rights of assignee of share in partnership

32. (1) An assignment by any partner of his share in the partnership,either absolute or by way of mortgage or redeemable charge, does not, asagainst the other partners, entitle the assignee, during the continuance of thepartnership, to interfere in the management or administration of thepartnership business or affairs, or to require any accounts of the partnershiptransactions, or to inspect the partnership books, but entitles the assigneeonly to receive the share of profits to which the assigning partner wouldotherwise be entitled, and the assignee must accept the account of profitsagreed to by the partners.

(2) In case of dissolution of the partnership, whether as respects allthe partners or as respects the assigning partner, the assignee is entitled toreceive the share of the partnership assets to which the assigning partner isentitled as between himself and the other partners, and, for the purpose ofascertaining that share, to an account as from the date of the dissolution.


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PART IV

DISSOLUTION OF PARTNERSHIP AND ITS CONSEQUENCES

Dissolution by expiration of notice

33. Subject to any agreement between the partners, a partnership isdissolved—

(a) if entered into for a fixed term, by the expiration of that term;

(b) if entered into for a single adventure or undertaking, by thetermination of that adventure or undertaking;

(c) if entered into for an undefined time, by any partner givingreasonable notice to the other or others of his intention todissolve the partnership:

Provided that in this case the partnership is dissolved as from thedate mentioned in the notice as the date of dissolution, or, if no date is somentioned, as from the date of the communication of the notice.

Dissolution by bankruptcy, death or charge

34. (1) Subject to any agreement between the partners, every partnershipis dissolved as regards all the partners by the death or bankruptcy(including a foreign bankruptcy) of any partner.

(2) A partnership may, at the option of the other partners, bedissolved if any partner suffers his share of the partnership property to becharged under this Act for his separate debt.

Dissolution by illegality of partnership

35. A partnership is in every case dissolved by the happening of anyevent which makes it unlawful for the business of the firm to be carried onor for the members of the firm to carry it on in partnership.

Dissolution by the Court

36. On application by a partner the Court may decree a dissolution of thepartnership in any of the following cases—

(a) when a partner, other than the partner suing, becomes in anyway permanently incapable of performing his part of thepartnership contract;

(b) when a partner, other than the partner suing, has been guiltyof such conduct as, in the opinion of the court, regard beinghad to the nature of the business, is calculated toprejudicially affect the carrying on of the business;

(c) when a partner, other than the partner suing, wilfully orpersistently commits a breach of the partnership agreement,


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or otherwise so conducts himself in matters relating to thepartnership business that it is not reasonably practicable forthe other partner or partners to carry on the business inpartnership with him;

(d) when the business of the partnership can only be carried on ata loss;

(e) whenever in any case circumstances have arisen which, in theopinion of the Court, render it just and equitable that thepartnership be dissolved.

Rights of persons dealing with firm against apparent members of firm

37. (1) Where a person deals with a firm after a change in itsconstitution he is entitled to treat all apparent members of the old firm asstill being members of the firm until he has notice of the change.

(2) An advertisement in the Gazette shall be notice as to personswho had dealings with the firm before the date of the dissolution or changeso advertised.

(3) The estate of a partner who dies, or who becomes bankrupt, or ofa partner who, not having been known to the person dealing with the firmto be a partner, retires from the firm, is not liable for partnership debtscontracted after the date of such death, bankruptcy or retirement.

Right of partners to notify dissolution

38. On the dissolution of a partnership or retirement of a partner anypartner may publicly notify the same, and may require the other partner orpartners to concur for that purpose in all necessary or proper acts, if any,which cannot be done without his or their concurrence.

Continuing authority of partners for purposes of winding up

39. After the dissolution of a partnership the authority of each partner tobind the firm and other rights and obligations of the partners continuenotwithstanding the dissolution so far as may be necessary to wind up theaffairs of the partnership, and to complete transactions begun butunfinished at the time of the dissolution, but not otherwise:

Provided that the firm is in no case bound by the acts of a partnerwho has become bankrupt but this proviso does not affect the liability ofany person who has after the bankruptcy represented himself or knowinglysuffered himself to be represented as a partner of the bankrupt.

Rights of partners as to application of partnership property

40. On the dissolution of a partnership, every partner is entitled, asagainst the other partners in the firm and all persons claiming through themin respect of their interests as partners, to have the property of thepartnership applied in payment of the debts and liabilities of the firm and to


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have the surplus assets after such payment applied in payment of what maybe due to the partners respectively after deducting what may be due fromthem as partners to the firm; and for that purpose any partner or hisexecutors or administrators may on the termination of the partnership applyto the court to wind up the business and affairs of the firm.

Apportionment of premium where partnership prematurely dissolved

41. Where one partner has paid a premium to another on entering into apartnership for a fixed term, and the partnership is dissolved before theexpiration of that term otherwise than by the death of a partner, the courtmay order the repayment of the premium, or of such a part thereof as itthinks just, having regard to the terms of the partnership contract and to thelength of time during which the partnership has continued, unless—

(a) the dissolution is, in the judgment of the court, wholly orchiefly due to the misconduct of the partner who paid thepremium; or

(b) the partnership has been dissolved by an agreementcontaining no provision for a return of any part of thepremium.

Rights where partnership dissolved for fraud or misrepresentation

42. Where a partnership contract is rescinded on the ground of the fraudor misrepresentation of one of the parties thereto, the party entitled torescind is, without prejudice to any other right, entitled—

(a) to a lien on, or right of retention of, the surplus of thepartnership assets after satisfying the partnership liabilities,for any sum of money paid by him for the purchase of ashare in the partnership and for any capital contributed byhim.

(b) to be indemnified by the person guilty of the fraud or makingthe representation against all the debts and liabilities of thefirm.

Right of outgoing partner in certain cases to share profits made afterdissolution

43. Where any member of a firm has died or otherwise ceased to be apartner, and the surviving or continuing partners carry on the business ofthe firm with its capital or assets without any final settlement of accounts asbetween the firm and the outgoing partner or his estate, then, in the absenceof any agreement to the contrary, the outgoing partner or his estate isentitled at the option of himself or his executors or administrators to suchshare of the profits made since the dissolution as the court may find to beattributable to the use of his share of the partnership assets, or to interest atthe prevailing rate on the amount of his share of the partnership assets:


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Provided that where by the partnership contract an option is given tosurviving or continuing partners to purchase the interest of a deceased oroutgoing partner, and that option is duly exercised, the estate of thedeceased partner or the outgoing partner or his estate (as the case may be)is not entitled to any further share of profits; but if the partner assuming toact in exercise of the option does not in all material respects comply withthe terms thereof, he is liable to account under the foregoing provisions ofthis section.

Retiring or deceased partner’s share to be a debt

44. Subject to any agreement between the partners, the amount due fromsurviving or continuing partners to an outgoing partner, or the executors oradministrators of a deceased partner, in respect of the outgoing or deceasedpartner’s share is a debt accruing at the date respectively of the dissolutionor death.

Rules for distribution of assets on final settlement of accounts

45. In settling accounts between the partners after a dissolution ofpartnership, the following rules shall, subject to any agreement, beobserved—

(a) losses, including losses and deficiencies of capital, shall bepaid first out of profits, next out of capital, and lastly ifnecessary, by the partners individually in the proportion inwhich they were entitled to share profits;

(b) the assets of the firm including the sums, if any, contributedby the partners to make up losses or deficiencies of capital,shall be applied in the following manner and order—

(i) in paying the debts and liabilities of the firm to personswho are not partners therein;

(ii) in paying to each partner rateably what is due from thefirm to him for advances as distinguished from capital;

(iii) in paying to each partner rateably what is due from thefirm to him in respect of capital;

(iv) the ultimate residue (if any) shall be divided among thepartners in the proportion in which profits are divisiblebetween them.


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PART V

SUPPLEMENTAL

Saving for rules of equity and common law

46. The rules of equity and of common law applicable to partnershipsshall continue in force so far as they are not inconsistent with the expressprovisions of this Act.

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Printed by the Law Revision Unit of the Government of Montserrat Authorised Printers for this revised edition

chapter 11.09 partnership act -...

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