Partner Contribution – The Ramifications of External Investment on Traditional Partner Reward Structures

UK law firm CM Murray have made available a recording of their recent panel discussion on ‘Partner Contribution – The Ramifications of External Investment on Traditional Partner Reward Structures’. It is available at:
https://www.cm-murray.com/knowledge/partner-contribution-the-ramifications-of-external-investment-on-traditional-partner-reward-structures/#page=1

New article on the use of UK partnerships for criminal purposes

Elspeth Berry, ‘Partnership Law: Used, Misused or Abused?’ (2021) 32(2) European Business Law Review 207-250

This article analyses the increasing use of UK partnerships for criminal purposes, often in other jurisdictions, and argues that the regulatory responses are inadequate, and must be supplemented by a comprehensive ethical framework.

It first argues that partnerships offer substantial benefits for a variety of businesses, but that they also have vulnerabilities which have led to their misuse and even abuse through criminal activities. It then analyses the deficiencies of the regulatory measures designed to tackle the abuses, including requirements to disclose participant identity and accounts, and anti-money laundering and tax evasion measures. Finally, it evaluates the use of a supplementary ethical framework to reduce the abuses, and examines how such a framework could be created. The analysis provides an understanding of the causes and consequences of partnership abuses and of how they can be overcome. 

If you do not have access to the European Business Law Review and would like to read the article, please contact the author at elspeth.berry@ntu.ac.uk.

Book Review: Capitalism before Corporations

Capitalism before Corporations, Andreas Televantos (OUP 2020), 224pp., hardback, ISBN: 9780198870340. Also available as an e-book.

This book considers the ways in which English organisational law facilitated commerce before incorporation became common. It focuses on the period 1790-1822 and is part of the Oxford Legal History series. In particular, it considers the extent to which partnership, trust and agency law developed to reflect the demands of traders and the need to protect third parties and society from the adverse effects of the behaviour of traders.

The book is divided into three broad thematic parts. The first part introduces and analyses partnership and trust structures and their use in the Regency period. Chapter 1 considers the definition of a partnership, and the ease with which a partnership could be dissolved, both of which issues continue to give rise to disputes today. It also considers the use of partnership assets and the ‘jingle rule’ whereby partnership assets are available to partnership creditors in priority to partners’ personal creditors. Although the title of Chapter 2 refers only to trusts, it includes a substantial section on joint stock companies (though labelled ‘The Deed of Settlement Company’) which the author describes as ‘unincorporated partnerships which made use of trusts to emulate some of the benefits of incorporation’, and this section examines the joint antecedents of both modern partnerships and modern companies.

The second part explains the authority of agents and trustees in relation to business assets. Chapter 3 discusses some of the economic theories and economic history underlying the development of agency law generally, and partners as agents in particular. It includes a discussion of the scope of partners’ agency, and the availability of set-off as between principal and third party, including where the principal is undisclosed. Chapter 4 considers in more detail the attitude of the courts to the development of agency law. Chapter 5, though focusing on trustees and executors, draws some interesting parallels between the rights of partnership creditors and those of trust creditors.

The third part discusses business failure and the distribution of risk. Chapter 6 focuses on trusts, but Chapter 7 considers the rules governing the distribution of a bankrupt partnership’s assets. It examines the development of the jingle rule, the priority of third-party creditors over partners in the distribution of partnership assets, the requirement for partners to return assets removed by them from an insolvent partnership, and the rights of creditors against the partners jointly rather than the partnership. Although the chapter title refers to dissolution and bankruptcy, and the early material focusses on bankruptcy, there is also an extensive discussion of the liability issues which arise when a partner leaves a continuing partnership, for both the departing and the continuing partners. While this situation is of course one of partnership dissolution, it is commonly regarded as a ‘partial’ or ‘technical’ dissolution, and very different to the complete dissolution which will occur on bankruptcy.

The substantive material finishes with a concluding chapter, although several of the other chapters also include a concluding section. The book includes an Appendix explaining the use of archival sources, and providing a glossary of terms and an extensive bibliography. There are ample footnotes throughout the chapters, directing the reader to important primary and secondary sources.

The rationale for the division of material between chapters is sometimes a little unclear, and both the chapters and the sections within them are sometimes given titles which do not fully reflect their content, with the result that this is a book to read as a narrative rather than a reference work.

However, it is a thought-provoking text which will be of interest to academics and postgraduate students in partnership law, the law of trusts, or the history of commercial and company law in England.

Save the date - 4th Annual Conference - Thursday 9th September 2021 in Nottingham

In conjunction with the Centre for Business and Insolvency Law at Nottingham Law School, the Partnership, LLP and LLC Law Forum is pleased to host its 4th Annual Conference.

The Conference will be held on Thursday 9 September 2021 at Nottingham Trent University (assuming Covid-19 restrictions allow for this - otherwise it will be online as in 2020).

As ever, the Conference aims to bring together all those with an interest in partnerships, LLPs, LLCs and other alternative forms of business organisation in the UK and overseas - including practitioners, academics and policymakers - and to provide a welcoming and inclusive forum in which to share and develop ideas.

A formal Call for Papers will be issued shortly.

Series of short articles on lateral hires of partners - final article

Law firm CM Murray have now published the third in their series of articles on the lateral hiring of partners.

'Partner Lateral Hires – Part 3 of 3: The Current Firm’s Perspective' (18 March 2021) is available at: https://www.cm-murray.com/knowledge/partner-lateral-hires-part-3-of-3-the-current-firms-perspective/?utm_source=rss&utm_medium=rss&utm_campaign=partner-lateral-hires-part-3-of-3-the-current-firms-perspective

Partner Lateral Hires – Part 2 of 3: The Partner’s Perspective' (2 March 2021) is available at:
https://www.cm-murray.com/knowledge/partner-lateral-hires-part-2-of-3-the-partners-perspective/?utm_source=rss&utm_medium=rss&utm_campaign=partner-lateral-hires-part-2-of-3-the-partners-perspective

'Partner Lateral Hires – Part 1 of 3: The Hiring Firm’s Perspective' (9 March 2021) is available at:
https://www.cm-murray.com/knowledge/partner-lateral-hires-part-1-of-3-the-hiring-firms-perspective/?utm_source=rss&utm_medium=rss&utm_campaign=partner-lateral-hires-part-1-of-3-the-hiring-firms-perspective 

Proposed reforms to partnership law in Gibraltar

Gibraltar has proposed a number of reforms in relation to partnership law, including replacing its Limited Partnerships Act 1927 with a new Limited Partnerships Bill, and enacting a Protected Cell Limited Partnership Bill. It also proposes to make compliance by funds with the Alternative Investment Fund Managers Directive (AIFMD) optional, now that Gibraltar and the UK have left the EU.

James Lasry of law firm Hassans has published a brief article on this, 'Brexit, Limited Partnerships, and the new opportunities for Gibraltar Funds' (23 February 2021). It is available at:

https://www.gibraltarlaw.com/insights/brexit-limited-partnerships-and-the-new-opportunities-for-gibraltar-funds/

Short article on recent UK LLP member expulsion case

Claire Plumb and Ivor Adair of law firm Fox & Partners have written a short article on the recent UK Court of Appeal judgment in Joseph v Deloitte. 'The price of certainty' (2021) LS Gaz, 22 Feb, 29, is available at: https://www.lawgazette.co.uk/practice-points/the-high-price-of-certainty/5107482.article

A summary of the judgment is available in an earlier post on this website - 'Recent UK cases on expulsion of an LLP member, liability of a partnership for a partner's wrongful acts, and the existence of a partnership', posted on 29 January 2021.

Agricultural Holdings (Relinquishment and Assignation) (Application to Relevant Partnerships) (Scotland) Regulations 2021 (SSI 2021/106)

These Regulations were adopted on 23 February and will come into force on 28 February 2021. They allow certain tenants to relinquish their tenancy and receive compensation from the landlord or, if the landlord refuses, to assign the tenancy. The full text is at: https://www.legislation.gov.uk/ssi/2021/106/contents/made

There is obviously a very short period between adoption of these Regulations and their coming into force, but the draft Regulations have been available for some time; see further law firm Turcan Connell's summary at: https://www.turcanconnell.com/media/blog/2021/01/land-reform-scotland-act-2016-relinquishment-and-assignation/

More on wrongdoing LPs and LLPs from the International Consortium of Investigative Journalists

Reports on the wrongdoing of UK LPs and LLPs have been published by members of the ICIJ:

 

https://www.icij.org/investigations/fincen-files/inside-scandal-rocked-danske-estonia-and-the-shell-company-factories-that-served-it/

and 

https://www.icij.org/investigations/fincen-files/how-signatures-in-public-data-helped-expose-the-uks-dirty-money-cottage-industry/?utm_campaign=Sprout&utm_content=fincen+files&utm_medium=social&utm_source=twitter (continuing the long-running story on Danske Bank).

Earlier media reports of similar wrongdoing prompted a consultation by the UK's Department for Business, Energy and Industrial Strategy (BEIS) on Limited Partnerships in 2017-2018 (see https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/762849/government-response-limited-partnerships.pdf), the final conclusions of which are awaited. 

Both LPs and LLPs also feature in the ongoing BEIS consultation on corporate transparency (see most recently https://www.gov.uk/government/consultations/corporate-transparency-and-register-reform-powers-of-the-registrar).

 

Article on wrongdoing limited partnerships in the context of Ukrainian litigation against a Welsh limited partnership

Journalist Graham Leask has published an interesting article on current litigation in the Ukrainian courts against a Welsh limited partnership, arising out of the sinking of a tanker (and consequent oil pollution) allegedly owned by the partnership. The case has once again highlighted the role of UK limited partnerships operating overseas in suspected wrongdoing, exploiting both their lack of transparency of ownership and their ability to remain as 'zombie' partnerships on the register at Companies House in the absence of any legal power to strike them off. 'A Ukrainian tanker mystery continues - and leads back to the UK' (12 February 2021) is available at: https://www.opendemocracy.net/en/odr/ukrainian-tanker-mystery-delfi-odesa/

Those Forum members who attended the Second Annual Conference in 2019 may recall journalist Richard Smith's excellent paper on 'Abuse of UK limited partnerships and the outlook for reform'.

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