5/8/2011 Company Law I Lecture 2:Business Vehicles(con't) Partnerships-meaning Partnership Ordinance(Cap 38). Definition of partnership:"Partnership is the relation which subsists between persons carrying on a business in common with a view of profit."(s 3) 1
5/8/2011 1 Company Law I Lecture 2: Business Vehicles (con’t) 2 Partnerships - meaning • Partnership Ordinance (Cap 38). • Definition of partnership: “Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.” (s 3)
5/8/2011 Partnerships-meaning ·Elements: -Agreement -Business carried on -Partners share profits -Partners have mutual rights and obligations as principals Partnerships-creation Implications:whether partnership law principles apply. Test:objective intention of parties(Cox v Hickman). ·See also P0s4 When is there a partnership? ·Khan v Miah(2001) .Keith Spicer Ltd v Mansell 2
5/8/2011 2 3 Partnerships - meaning • Elements: - Agreement - Business carried on - Partners share profits - Partners have mutual rights and obligations as principals 4 Partnerships - creation • Implications: whether partnership law principles apply. • Test: objective intention of parties (Cox v Hickman). • See also PO s 4 • When is there a partnership? Khan v Miah (2001) Keith Spicer Ltd v Mansell
5/8/2011 Partnerships-creation Chan Sau-kut v Gray Iron Construction and Engineering Co(a firm) Gray and Ng were partners undertaking drainage works as a contractor at Shatin New Town Stage They obtained money from Yen and n Chan to fund the project. The project failed,and Yen and Chan sued Gray and Ng for the repayment of the unpaid amounts. Issue:were they entitled to sue? This depended on whether Yen and Chan were partners with Gray and Ng,or whether Yen and Chan were simply creditors. 5 Clauses in the agreement suggesting partnership: -Parties were to cooperate in the project. -Parties were to observe the terms in the sub-contract. Joint bank account was to be established. Joint management and control over use of the money. Regular meetings to discuss progress. -Sharing of profits. Which clauses suggested a creditor-debtor relationship? Held:there was a partnership,on the basis of the written agreement between the parties. 6 0
5/8/2011 3 5 Partnerships - creation Chan Sau-kut v Gray & Iron Construction and Engineering Co (a firm) • Gray and Ng were partners undertaking drainage works as a contractor at Shatin New Town Stage II. • They obtained money from Yen and Chan to fund the project. • The project failed, and Yen and Chan sued Gray and Ng for the repayment of the unpaid amounts. • Issue: were they entitled to sue? • This depended on whether Yen and Chan were partners with Gray and Ng, or whether Yen and Chan were simply creditors. 6 • Clauses in the agreement suggesting partnership: - Parties were to cooperate in the project. - Parties were to observe the terms in the sub-contract. - Joint bank account was to be established. - Joint management and control over use of the money. - Regular meetings to discuss progress. - Sharing of profits. • Which clauses suggested a creditor-debtor relationship? • Held: there was a partnership, on the basis of the written agreement between the parties
5/8/2011 Partnerships-firm name Firm name:Business Registration Ordinance (Cap310). Partnership property Distinction between partnership property and property separately owned by the partners. Importance of the distinction. Test:express or implied agreement of the partners. General factors(not necessarily decisive on their own): -Treatment of asset in firm's accounts. -Who paid for the asset? Is asset used for the firm or for private purposes? ·See Law v Chow. 4
5/8/2011 4 7 Partnerships - firm name • Firm name: Business Registration Ordinance (Cap 310). 8 Partnership property • Distinction between partnership property and property separately owned by the partners. • Importance of the distinction. • Test: express or implied agreement of the partners. • General factors (not necessarily decisive on their own): - Treatment of asset in firm’s accounts. - Who paid for the asset? - Is asset used for the firm or for private purposes? • See Law v Chow
5/8/2011 Partnership property:Miles v Clarke Def ran fashion photography business: obtained lease and hired employees. Pl(professional photographer)was recruited as a partner. When partnership was to be dissolved, what was partnership property? No express agreement. Property: -Stock in trade (eg film) -Lease -Equipment,furniture etc -Goodwill in studio name Goodwill brought by pl ·Held: -Only stock in trade was partnership property -to give business efficacy to the arrangement. Relationship between partners ·Contract -see also POs 26 Fiduciary relationship arises due to relationship of trust and confidence. Fiduciary duties imposed in equity. ·Also reflected in PO: -s 31(1):Account to firm for benefits obtained concerning or using property of the firm -s 32:Competing partner must pay all profits over to firm 6
5/8/2011 5 9 Partnership property: Miles v Clarke • Def ran fashion photography business: obtained lease and hired employees. • PI (professional photographer) was recruited as a partner. • When partnership was to be dissolved, what was partnership property? • No express agreement. • Property: - Stock in trade (eg film) - Lease - Equipment, furniture etc - Goodwill in studio name - Goodwill brought by pl • Held: - Only stock in trade was partnership property - to give business efficacy to the arrangement. 10 Relationship between partners • Contract - see also PO s 26 • Fiduciary relationship arises due to relationship of trust and confidence. • Fiduciary duties imposed in equity. • Also reflected in PO: - s 31 (1): Account to firm for benefits obtained concerning or using property of the firm - s 32: Competing partner must pay all profits over to firm
5/8/2011 Liabilities of partners to third parties Liability in contract: -joinly liable for firm debts while a partner:s 11. How does a partner bind the partnership to contracts? Authority: Actual (express or implied) -Apparent ostensible PO s 7:Every partner is agent for the firm and for other partners. Mercantile Credit Ltd v Garrod whether sale of car by a partner in a partnership operating motor garage business was an act done for carrying on in the usual way business of the kind carried on by the firm -ie,whether within apparent authority of partner. 11 Liabilities of partners to third parties 。Liability in tort. PO s 12:firm liable for torts committed in the ordinary course of business of the firm or with the authority of the partners. PO s 14:liability is joint and several Limited Partnerships Ordinance(Cap 37). 6
5/8/2011 6 11 Liabilities of partners to third parties • Liability in contract: - joinly liable for firm debts while a partner: s 11. • How does a partner bind the partnership to contracts? • Authority: - Actual (express or implied) - Apparent I ostensible • PO s 7: Every partner is agent for the firm and for other partners. • Mercantile Credit Ltd v Garrod - whether sale of car by a partner in a partnership operating motor garage business was an act done for carrying on in the usual way business of the kind carried on by the firm - ie, whether within apparent authority of partner. 12 Liabilities of partners to third parties • Liability in tort. • PO s 12: firm liable for torts committed in the ordinary course of business of the firm or with the authority of the partners. • PO s 14: liability is joint and several • Limited Partnerships Ordinance (Cap 37)
5/8/2011 Termination of partnership Dissolution:see PO ss 34-37. Winding up and final settlement of accounts. 13 Joint ventures A commercial concept but not an established legal concept. Often(but not necessarily)used for a single business venture ·Joint venture can be: -a contractual JV -a partnership JV,or an equity JV(i.e.,company). 14 7
5/8/2011 7 13 Termination of partnership • Dissolution: see PO ss 34-37. • Winding up and final settlement of accounts. 14 Joint ventures • A commercial concept but not an established legal concept. • Often (but not necessarily) used for a single business venture. • Joint venture can be: - a contractual JV - a partnership JV, or - an equity JV (i.e., company)
5/8/2011 Comparison between Partnerships and Companies Key Aspects Partnerships Companies Legal Status Formation Formalities Transfer of ownership Size Management Agency Liability Financing Tax 15 8
5/8/2011 8 15 Comparison between Partnerships and Companies Key Aspects Partnerships Companies Legal Status Formation Formalities Transfer of ownership Size Management Agency Liability Financing Tax
