Scottish Law Commission (Reports)

(1) A default rule should be defined as a rule which applies in relation to a partnership if the point dealt with in the rule is not dealt with in the partnership agreement;

(2) If a default rule applies in relation to a partnership it should be treated as if it were a term of the partnership agreement; and

(3) The partners may modify or exclude the application of a default rule in relation to a partnership in accordance with the partnership agreement or if all the partners agree. (Paragraph 4.58; Draft Bill, cl 5)

Separate legal personality

(1) A partnership should have legal personality separate from the partners but should not be a body corporate; (Draft Bill, cl 1(3)).

(2) A partnership should be viewed as a legal person whose characteristics are determined by (a) the draft Partnerships Bill except so far as varied by contract, (b) the terms of the partnership contract (if different from the default rules of the Bill) and (c) the rules of common law and equity so far as not inconsistent with the express provisions of the draft Partnerships Bill. (Paragraph 5.40)

The agency and liability of a partner

(1) That a partner should be the agent of the partnership and not the partners; (Draft Bill, cl 6(3))

(2) That a partnership should be bound by anything done by a partner for carrying on in the usual way business of the kind carried on by the partners; (Draft Bill, cl 16(1))

(3) But that a partnership should not be bound if the partner has no authority to do the thing on behalf of the partnership, and the person with whom he is dealing has notice of his lack of authority or does not know or believe him to be a partner in the partnership; (Draft Bill, cl 16(2))

(4) That the rules in (2) and (3) above are subject to the provisions of the draft Bill on the execution of deeds in England and Wales. (Paragraph 6.22; Draft Bill, cl 16(3))

(1) It should be provided (a) that each of the partners in a general partnership has unlimited liability and (b) that a limited partnership must have one or more general partners, each of whom has unlimited liability, and one or more limited partners, each of whom has limited liability; (Draft Bill, cl 3)

(2) Each partner who has unlimited liability is personally liable for the whole amount of the debts and obligations of the partnership and his payment in discharge of that liability discharges the firm's obligation and the personal liability of any other partner for that obligation to the same extent. (Paragraph 6.59; Draft Bill, cl 23(1), (3), (4) and (5))

(1) There should be the following default rules:

(a) That a partner should be entitled to an indemnity from the partnership in respect of (i) any payment made by him in the proper conduct of the partnership business or in connection with anything necessarily done to preserve the partnership business or property and (ii) any payment which he has made towards the discharge of his personal liability for a partnership obligation or in reasonable settlement of an alleged personal liability for a partnership obligation; (Draft Bill, cl 12(3))

(b) That the indemnity under (a) above should not affect any claim which the partnership or another partner may have against the partner; (Draft Bill, cl 12(4))

(c) That if the partnership does not pay the indemnity under (a) above, the partner should be entitled to contribution from any other liable partner on the same basis as if the amount unpaid were a debt for which he and each other liable partner were co-guarantors in the same proportions as they would be liable to pay any partnership losses; (Draft Bill, cl 12(5))

(d) That partner A may claim against partner B as an "other liable partner" under (c) above (i) in the case of A's liability (or alleged liability) for a partnership obligation, if B was a partner when the payment was made and was liable with A for the obligation (or, in the case of settlement of an alleged liability, would have been liable if the alleged liability had been established) or (ii) otherwise, if B was a partner when the payment was made; (Draft Bill, cl 12(6))

(e) That if a firm wrongly fails to pay to a partner any other amount (for example, a loan due to the partner) for which it is liable to account to him, the partner should be entitled to contribution from the other partners in the same proportions as if the amount were a partnership loss; (Draft Bill, cl 12(7))

(f) That the personal liability for a partnership obligation in respect of which a partner may claim indemnity or contribution should include not only the partner's liability under (a)(ii) above but also his liability to contribute under (c) or (e) above and his liability to indemnify or make a contribution to a former partner; (Draft Bill, cl 12(8))

(2) That in order to allow partners to agree their obligations amongst themselves, the rule that a partner is personally responsible for the whole amount of any partnership obligation incurred while he is a partner (clause 23(1) of the draft Bill) should not apply to a partnership obligation owed by a partner (A) to a partner or former partner (B) if the partnership agreement or any other agreement to which A and B are parties makes provision about whether or not B is entitled to indemnity or contribution from A in respect of the obligation; (Paragraph 6.65; Draft Bill, cl 23(2))

(1) The rule in section 17(1) of the 1890 Act that an incoming partner who joins an existing partnership does not thereby become liable to the creditors of the partnership for partnership obligations incurred before he became a partner should be re-enacted (but the capital invested by an incoming partner in an existing partnership will be available to meet prior debts); (Draft Bill, cl 23(1)) and

(2) In this context an obligation of the partnership which results from the (a) breach of a duty in tort or delict (including quasi-delict) (b) breach of trust or (c) breach of a fiduciary duty should be treated as having been incurred at the time of the act or omission which gave rise to the breach. (Paragraph 6.80; Draft Bill, cl 23(7))

(1) That a person who ceases to be a partner does not thereby cease to be liable for partnership obligations incurred while he was a partner; (Draft Bill, cl 33(1))

(2) That, for the purposes of the draft Bill, a partnership obligation which results from a breach of a duty in tort or delict (including quasi-delict), a breach of trust or breach of a fiduciary duty should be treated as having been incurred at the time of the act or omission which gave rise to the breach; (Draft Bill, cl 23(7)) and

(3) That a person who ceases to be a partner may be discharged from personal liability for a partnership obligation by an agreement between himself (or his estate), the partnership and the creditor of the partnership without requiring valuable consideration in English law. (Paragraph 6.88; Draft Bill, cl 33(3) and (4))

(1) Where a person who is not a partner ("A") represents himself, or knowingly allows himself to be represented, as one, and another person ("B") deals with the partnership in reliance on that representation, A should be liable as if he were a partner for the whole amount of any obligation which the partnership incurs to B as a result; (Draft Bill, cl 26(1), (3) and (4))

(2) Where A is a partner at the date of the representation but is no longer a partner at the time when B deals with the firm in reliance on the representation, then subject to (4) and (5) below A should be liable to B for the whole amount of any obligation which the partnership incurs to B as a result; (Draft Bill, cl 26(2))

(3) If A in (1) or (2) above pays an amount in or towards discharge of his personal liability (or what he reasonably and in good faith believes to be his liability) he should be entitled to be indemnified by the partnership in respect of that amount; (Draft Bill, cl 26(5))

(4) If A was still a partner when the representation was made ((2) above), he should not be liable if more than one year has passed since the representation before B deals with the firm in reliance on it; (Draft Bill, cl 35(1) and (2))

(5) A should not incur liability under (2) above if notice of his withdrawal from the partnership was given to B or sent to B's last known address before he dealt with the firm in reliance on the representation; (Draft Bill, cl 35(3))

(6) A should not be liable by holding out after he ceases to be a partner if the representation consists merely in the partners continuing to carry on the partnership business in the same partnership name or the partnership name continuing to include A's name after he ceased to be a partner; (Draft Bill, cl 35(4)) and

(7) In order to protect the salaried partner who is an employee, the protections in paragraphs (4) – (6) above should be available to A if he is an employee of the partnership. (Paragraph 6.106; Draft Bill, cl 35(5))

Litigation and enforcing judgments

(1) That a partnership may sue or be sued in its own name; (Draft Bill, cl 7(2))

(2) That a creditor of a partnership may pursue claims against a partner or former partner in respect of a partnership obligation only (a) after he has established the amount (or the existence and the amount) of the liability of the partnership for the obligation by obtaining a judgment or decree or arbitral award against it in the same or earlier proceedings; (b) where the court has ordered the partnership to make a payment including an interim payment in respect of the partnership obligation; or (c) in Scotland, when the partnership obligation has been constituted in a document registered for execution in the Books of Council and Session or the sheriff court books. (Paragraph 7.22; Draft Bill, cl 24)

(1) A person who deals with a partnership should be entitled, on making a request to the partnership or to any partner, to be told the full names and an address or addresses for service of all the partners; (Draft Bill, cl 74(1))

(2) A person who has a complaint against a partnership arising out of a previous dealing with the firm should be entitled, on making a request to the partnership or to any present or former partner, to be given such information as the partnership or the present or former partner is able to provide, after due inquiry, as to the names of every partner at the relevant time and an address for every partner which is either an address for service or his last known address; (Draft Bill, cl 74(2))

(3) Rules of court should be able to make provision enabling a person having a prospective claim against a partnership, or against a present or former partner after he has obtained judgment against the firm, to apply to the court before bringing proceedings in respect of the claim for an order for the supply of the information in paragraph (2) above. (Paragraph 7.31; Draft Bill, cl 74(3))

(1) That a creditor of a partnership may enforce a claim in respect of a partnership obligation against a partner or former partner by including the partner as a defendant/defender in the action against the partnership or by suing the partner or former partner in a separate action;

(2) That the creditor of a partnership may enforce his claim against the assets of the partners who have secondary liability for that claim without first exhausting enforcement remedies against the assets of the partnership.

(3) That a judgment, decree or arbitral award against a partnership should not be enforceable, by way of execution, diligence or otherwise, against the property of a partner. (Paragraph 7.64; Draft Bill, cl 25(4))

(1) That in English law, a claim against a partner in respect of his secondary liability for a partnership obligation should be subject to a special limitation period. That limitation period should end on the date of the expiration of the period of limitation (if any) applicable to an action against the partnership in respect of the relevant partnership obligation or, if later, the expiration of two years from the date of judgment against the partnership establishing the amount of the partnership's liability for the obligation; (Draft Bill, cl 25(3) and Schedule 2 paras 1-3)

(2) That in Scots law, the obligation of a partner in relation to his secondary liability for a partnership obligation should prescribe in accordance with the following special rule. The prescriptive period should begin on the date on which decree (or arbitral award) is awarded against the partnership in respect of the relevant partnership obligation and expire on whichever is the later of the following dates: (a) the date on which the prescriptive period applicable to the partnership obligation would have prescribed but for the relevant claim against the partnership which resulted in the decree (or award) and (b) the second anniversary of the date of that decree (or award). (Paragraph 7.72; Draft Bill, cl 25(3) and Schedule 2 paras 4 –10)

(1) A creditor of a partner who has arrested in execution a partner's share in the partnership should be entitled to obtain a decree of furthcoming at any time before the dissolution of the partnership;

(2) A decree of furthcoming should transfer the partner's share to the creditor;

(3) The creditor with a decree of furthcoming should be entitled to obtain payment of that share or part of it only when the share or the relevant part of it would otherwise have become payable to the partner;

(4) In particular the creditor with a decree of furthcoming should be entitled to receive the partner's share of the partnership's profits when that share of profits would otherwise have been payable to the partner; and

(5) The creditor with a decree of furthcoming may realise the share either when the partner in question withdraws from the partnership or when the partnership is wound up, by obtaining payment of the share when otherwise it would have been paid to the partner; and

(6) The arresting creditor who obtains a decree of furthcoming is not thereby entitled to take part in the management or administration of the partnership business. (Paragraph 7.75; Draft Bill, cl 37)

Continuity of partnership and the outgoing partner

(1) To be paid the value of his share in the partnership calculated on the hypothesis that the partnership had broken up and its assets were sold on the date of his withdrawal at a price equal to the greater of (i) the liquidation value and (ii) the value based on a sale of the entire business as a going concern without the outgoing partner. (Draft Bill, cl 32(1), (2)(a) and (3))

(2) To be paid interest at a commercial rate on the value of his share from the date of withdrawal. The prescribed rate of interest should initially be three per cent above the Bank of England base rate. The rate should be alterable by statutory instrument to allow for changes in economic conditions. (Draft Bill, cls 32(2)(b), 76(1))

(3) To be indemnified against partnership liabilities or payments made in reasonable settlement of an alleged personal liability for a partnership obligation but the indemnity is without prejudice to any claim of the partnership or the other partners against the outgoing partner. (Paragraph 8.75; Draft Bill, cl 34(1), (2) and (3))

(1) A partner wishing to resign from a partnership of undefined duration should give each other partner eight weeks' notice of his resignation;

(2) Each of the other partners should then have a right to resign from the partnership by giving not less than two weeks' notice, such notice taking effect on the same date as the expiry of the first partner's notice period;

(3) Partners (excluding any partner who has given notice of any resignation) should be entitled to break up a partnership at any time if not less than half of the partners vote to do so. A vote to break up a partnership at the same time as a resignation notice takes effect would supersede the resignation notice and all partners will be entitled to such sums as were due to them on settlement of accounts in the winding up. (Paragraph 8.100; Draft Bill, cls 30, 34(5) and 38(2)–(4)).

(1) If a partner dies (or if a non-natural legal person ceases to exist) or goes bankrupt (or if a non-natural person, an insolvent winding up order or an award of sequestration is made) the partner ceases to be a partner on the date of death or bankruptcy; (Draft Bill, cl 28(1)(c) and 29)

(2) The partner in question (or his estate) has the same financial rights as on voluntary withdrawal; (Draft Bill, cl 32)

(3) Where in a partnership of defined duration one or more persons has involuntarily ceased to be a partner, any other partner may resign from the partnership by giving each other partner not less than eight weeks' notice; (Draft Bill, cl 30)

(4) In response to the notice in (3) above each of the other partners should have a right to resign; (Draft Bill, cl 30(3))

(5) After the death or bankruptcy of a partner, the remaining partners should be entitled to break up the partnership as in paragraph 8.100 above; (Draft Bill, cl 38(2)–(4))

(6) In place of the existing right to dissolve the firm, the partners will have an option to expel a partner by unanimous vote (other than the offending partner) where: (a) (in English law) the partner allows his share in the partnership to be charged and (b) (in Scots law) a partner's share is arrested in execution. In each case the offending partner will have a period of grace of three months before the expulsion notice takes effect. The expulsion notice will be treated as having no effect if during the three-month period the charging order or the arrestment ceases to have effect. (Paragraph 8.110; Draft Bill, cl 31).

(a) To order the removal of a partner (other than the applicant partner) on the following grounds:-

(1) The partner is suffering from a mental or physical condition which renders him incapable of performing his duties under the partnership contract and the incapacity is likely to be permanent;

(2) The partner's conduct (which may or may not amount to breach of contract) is such as to affect adversely the carrying on of the partnership business;

(3) The partner is in serious or persistent breach of the partnership agreement or a provision of the draft Bill;

(4) The partnership agreement was entered into or modified as a result of fraud, misrepresentation or non-disclosure by the partner;

(5) An event has occurred which makes it unlawful for the partner to remain a partner;

(6) There is no reasonable prospect of the partnership business being carried on at a profit unless the partner is removed;

(7) It is just and equitable for any other reason to make the order.

(b) To order the removal of the applicant partner where any of grounds (a) (1)–(4) above apply to a partner other than the applicant or where it is just and equitable for any other reason to make the order;

(c) To order the break up of the partnership on the following grounds:

(1) Any of the grounds (a) (1) – (5) above;

(2) An event has occurred making it unlawful for the partnership business to be carried on;

(3) There is no reasonable prospect of the partnership business being carried on at a profit;

(4) It is just and equitable for any other reason to make the order. (Paragraph 8.126; Draft Bill, cl 47 and Schedule 3)

(1) That, where a partner applies for his own removal from the partnership, the court should have power to backdate the removal and give directions to put the applicant and other persons in the position they would have been in if the partner had ceased to be a partner at that date or so near that position as is just and equitable; (Draft Bill, cl 47(5) and Schedule 3 paras 1(2) and 3(2)).

(2) That where the court orders the removal of a partner, that partner will, subject to the directions of the court, have the same rights as he would have had to realise his share in the partnership on resigning from the partnership; (Draft Bill, cls 32, 47(5) and Schedule 3 para 3(1)).

(3) That where the court orders the removal of a partner or the break up of a partnership, it should have power to give such directions as it thinks fit for giving effect to its order; (Draft Bill, cl 47(5) and Schedule 3 para 3(1)).

(4) That the court may combine an order to break up a partnership with an order to appoint a liquidator to wind up the partnership's affairs or to appoint a provisional liquidator; (Draft Bill, cl 47(5) and Schedule 3 para 2).

(5) That, in an application to remove a partner, the court should have power to make an interim order prohibiting a partner from taking part in, or limiting the extent to which he may take part in the partnership business or affairs, subject to such conditions as it thinks fit and to give such directions as it thinks fit for giving effect to its interim order. (Paragraph 8.131; Draft Bill, cl 48)

(1) The applicant partner or partners should be entitled to be indemnified by the partner at fault in respect of any liabilities which are attributable to the fraud, misrepresentation or non-disclosure; and

(2) Where the court orders the break up of the partnership, any partner not at fault should be entitled on a distribution of partnership assets to be paid any money paid by him to purchase his share in the partnership and what is due to him from the partnership in respect of loans or capital before any amount is paid to the partner at fault. (Paragraph 8.136; Draft Bill, cls 10(6) and 47(5) and Schedule 3 paras 4 and 5).

Partnership property and the execution of deeds

(1) That partnerships (with separate legal personality) can own property of any kind in their own name unless statutory rules exclude them from doing so; (Draft Bill, cls 7(1) and 18(1))

(2) That property of any kind may be held in trust for such partnerships; (Draft Bill, cls 7(1) and 18(2))

(3) That partnerships should be allowed to own British ships and British fishing vessels;

(4) That the Hovercraft (General) Order 1972 be amended to allow English partnerships (with separate legal personality) to own hovercraft;

(5) That Art 4(3)(g) of the Air Navigation Order 2000 should be revoked; and

(6) That the Bodies Corporate (Joint Tenancy) Act 1899 should be extended to partnerships. (Paragraph 9.51; Draft Bill, cl 17(2))

(1) That there should be a rule that property which is held in the name of one or more of the partners and which has been acquired on behalf of the partnership or contributed as capital to the partnership is partnership property and is held on trust for the partnership; (Draft Bill, cl 18(2))

(2) That there should be a rebuttable presumption that property which is acquired with money or other assets belonging to the partnership is partnership property; (Draft Bill, cl 18(1)) but

(3) The existing rule in section 20(3) of the 1890 Act, which creates a presumption that additional land bought out of the profits of a partnership involving the use of co-owned land is not partnership property, should be re-enacted. (Paragraph 9.80; Draft Bill, cl 19)

(1) That, in English law, "partnership property" should be defined as property to which the partnership is beneficially entitled, whether or not the property is held in the partnership name; (Draft Bill cl 17(1)(a)) and

(2) That, in Scots law, "partnership property" should be defined negatively as not including property held by the partnership in trust. (Paragraph 9.83; Draft Bill, cl 17(1)(b))

(1) That, in English law, a document is validly executed by the partnership as a deed if and only if (a) it is signed by at least two partners, each of whom has authority to execute the document as a deed on behalf of the partnership and (b) it is expressed to be executed by the partnership and (c) it is delivered as a deed;

(2) The document referred to in (1) above is presumed to be delivered upon its being executed in accordance with (1) above, unless a contrary intention is shown;

(3) If a partnership is being wound up by the partners and there is only one partner remaining, the rule in paragraph (1)(a) above should be taken as satisfied if the document is signed by the partner, whether or not he had authority to execute the document;

(4) If a limited partnership has only one general partner, the rule in (a) in paragraph (1) above should be taken as satisfied if the general partner signs the document and he has authority to execute the document as a deed on behalf of the partnership;

(5) If the partner is not an individual a document should be treated (for the purposes of this provision) as signed by that partner if it is signed by an individual who has authority to sign on behalf of the partner; (Draft Bill, cl 20);

(6) In favour of a purchaser in good faith and for valuable consideration there is a presumption of due execution; (Draft Bill, cl 20(7) and (8)) and

(7) In Scots law, the formal validity of a document signed by a partnership in accordance with the Requirements of Writing (Scotland) Act 1995 is not affected by a partner's lack of authority to sign the document, but the partnership or another interested party should be able to seek the reduction of such a document if the partner had no authority or apparent authority to sign the document on behalf of the partnership. (Paragraph 9.98; Draft Bill, cl 21)

Partners' financial and management rights, expulsion and retirement

(1) The default rule (currently section 24(1) of the 1890 Act) which provides for equality between partners should be confined to profits and losses and should not refer to capital; (Draft Bill, cl 11)

(2) As a default rule, partners should be entitled to a commercial rate of interest on advances which they make to a partnership; (Draft Bill, cls 13 (1), (4) and (5) and 76(1))

(3) There should be no statutory rules providing for decision making by special majorities but the distinction between "ordinary matters" which can be decided by majority vote and other matters which require unanimity should remain the default rule and it should be clarified that the question whether a partnership should raise or defend legal proceedings is an ordinary matter; (Draft Bill, cl 14(1), (3), (4) and (5)).

(4) There should be a default rule that the agreement of all the partners is required for a partner to be entitled, or required, to contribute capital to the partnership or vary the amount of his capital contribution; (Draft Bill, cl 13(1) and (2))

(5) Other default rules of section 24 of the 1890 Act (the requirement of unanimity for a change in the nature of the partnership business, no entitlement to remuneration, no entitlement to interest on capital, entitlement to take part in the management, unanimous agreement to the introduction of a new partner) should be re-enacted. (Draft Bill, cls 6(4), 12(1) and (2), 13(1) and (3), 14(1) and (2) and 27)

(6) A partner's right to indemnity should be clarified so that he should be entitled to indemnity from the partnership where in good faith and reasonably he pays (or contributes towards) a claim made against the partnership. (Paragraph 10.30; Draft Bill, cl 12(3)(b), (5) and (8))

Partners' duties

(1) That there should be a statutory statement that a partner must act in good faith towards the partnership and each of the other partners in relation to any matter affecting the partnership; (Draft Bill, cl 9(1))

(2) That that overriding duty of good faith, not being a default rule, should not be capable of being excluded by the partnership agreement and that partners must act in good faith in the context of the particular rights and duties to which they agree in their partnership agreement; (Draft Bill, cl 9(1) and (3))

(3) That the specific duties in sections 29 and 30 of the 1890 Act (to account for private profits and not to compete with the partnership) be re-stated as default rules in the draft Bill: in each case the partnership may consent to the receipt of the profits or the competition; (Draft Bill, cl 9(2), (5) and (6))

(4) That a partner must keep each of the other partners fully informed of matters affecting the partnership of which the other partners would reasonably expect to be kept informed; (Draft Bill, cl 9(2) and (4))

(5) That any modifications of the rules in (3) and (4) above must be in ways that are compatible with the duty of good faith in (1) above. (Paragraph 11.32; Draft Bill, cl 9(3))

(1) A partner should be under a duty to ensure that proper accounting records are kept of transactions affecting the partnership in which he is involved and of which the other partners would reasonably expect such records to be kept;

(2) A partner should be under a duty to ensure that such records are made available, on request, to the partnership and each of the other partners; and

(3) A partner should be under a duty to co-operate with any person who keeps partnership records or draws up partnership accounts on behalf of the partnership. (Paragraph 11.34; Draft Bill, cl 15)

Winding up partnerships and settling partners' accounts

(1) That the winding up of a partnership should be a three-step process: (1) the break up of the partnership which commences the winding up, (2) the winding up and (3) the dissolution of the partnership on completion of the winding up. The partnership would continue as a legal entity until dissolution (Step 3); (Draft Bill, cls 38, 39(1) and (2) and 45)

(2) That a partnership should continue to exist as an entity (for certain limited purposes) when the number of partners is reduced to one; (Draft Bill, cls 39(1) and (2) and 43)

(3) That when a partnership breaks up it may be wound up by one or more of the partners but that where only one partner remains, his authority to bind the firm is limited to acts which are necessary to wind up the firm and complete any transactions begun but unfinished at the time of the break up; (Draft Bill, cl 43(1) and (4))

(4) That after a partnership breaks up (and there are two or more partners remaining) the partners may agree (unanimously) to carry on the partnership business with a view to the beneficial winding up of the partnership and to confer authority on a partner or partners for that purpose; there should be a default rule that other matters connected with the winding up may be decided by majority; (Draft Bill, cl 43(2), (3), (5) and (6)) and

(5) That the third step (dissolution) should not occur until all of the partnership property and property held by the firm on trust has been distributed and all claims and liabilities of the partnership have been discharged or extinguished through the passage of time. (Paragraph 12.23; Draft Bill, cls 39(2) and 45)

(1) Partners will continue to be able to wind up the partnership themselves;

(2) Partners will continue to be able to appoint an agent to wind up the partnership on their behalf;

(3) The courts in England and Wales will continue to have power to appoint a receiver or a receiver and manager to a partnership, and in Scotland the courts will continue to have power to appoint a judicial factor; and

(4) In addition there should be a new statutory system for winding up a solvent partnership under court supervision, involving the appointment of a partnership liquidator. (Paragraph 12.49)

(1) Only the court should have power to appoint a partnership liquidator to a partnership which has broken up; (Draft Bill, cl 50(1))

(2) The following persons should have the right to apply to the court for the appointment of a partnership liquidator:

(a) A partner,

(b) A person who ceased to be a partner on or after the break up of the partnership,

(c) The personal representative of a deceased former partner who but for his decease would have been entitled to take part in the winding up,

(d) The insolvency practitioner in relation to a former partner who but for his insolvency would have been entitled to take part in the winding up, and

(e) A creditor of the partnership. (Draft Bill, cl 50(2) and (5))

(3) In addition, the court on ordering the break up of a partnership, on the application of a former partner (or his personal representative or insolvency practitioner) who claims that the partnership affairs are being conducted in a way that is prejudicial to his interests, should be empowered to appoint a partnership liquidator, if it considers the appointment to be necessary or expedient. (Paragraph 12.53; Draft Bill, cl 53(4) and Schedule 3, para 2)

(1) The court should have power on an application to appoint a partnership liquidator to appoint a provisional liquidator; (Draft Bill, cl 51)

(2) The duty of the provisional liquidator should be to preserve partnership property and property held by the partnership on trust pending the determination of the application to appoint a partnership liquidator; and (Draft Bill, Schedule 5, para 2)

(3) The court should have discretion to confer on the provisional liquidator such of the statutory powers of a partnership liquidator (being the powers exercisable with or without sanction or approval) as it considers expedient for the performance of his duty. The provisional liquidator may also exercise such powers with the unanimous approval of the partners. (Paragraph 12.56; Draft Bill, Schedule 5, para 3)

(1) The liquidator should not be required to have a statutory qualification but the court should be given discretion to appoint a suitable person;

(2) The court should be given discretion to determine whether any and what security is to be given by a liquidator (or provisional liquidator) on his appointment; (Draft Bill, cls 50(3) and 51(4)) and

(3) Rules of court should provide for the appointment of the liquidator (or provisional liquidator) and the giving, varying and release of security. (Paragraph 12.60)

(1) All the powers of the partners cease on the appointment of the partnership liquidator, except so far as the liquidator sanctions their continuance; (Draft Bill, Schedule 4, Part 1, para 1(1))

(2) All powers of the partners should be suspended on the appointment of a provisional liquidator, except so far as the provisional liquidator sanctions their continuance; (Draft Bill, Schedule 5, para 1(1))

(3) Partnership property should not vest automatically in the partnership liquidator on his appointment;

(4) A partnership liquidator should nonetheless have a right to apply to the court to vest all or any part of the partnership property in him by his official name; (Draft Bill, Schedule 4, Part 1, para 6)

(5) The partners should be under a duty to co-operate with the partnership liquidator (or provisional liquidator) in the performance of his duties from the time of his appointment; (Draft Bill, Schedule 4, Part 1, para 1(2) and Schedule 5, para 1(2))

(6) Persons interested in the winding up (namely a person who ceased to be a partner on or after the break up, (if deceased) his personal representative or (if insolvent) an insolvency practitioner appointed in relation to him) should owe a duty of good faith towards the partnership and the partners in relation to the functions of the partnership liquidator or provisional liquidator; (Draft Bill, Schedule 4, para 1(3) and Schedule 5, para 1(3)) and

(7) The appointment of a partnership liquidator (or provisional liquidator) should not restrict the rights of creditors of, or claimants against, the partnership from pursuing and enforcing their claims against the partnership (or the partners with subsidiary liability) or from applying to wind up the partnership, or in Scotland to sequestrate the partnership's estate. (Paragraph 12.66)

(1) A contract entered into by a liquidator (or provisional liquidator) in the performance of his functions should be taken as entered into on behalf of the partnership, unless the contract provides that he should be personally liable on it; and

(2) If the liquidator (or provisional liquidator) assumes personal liability under the contract, he should be entitled to an indemnity out of partnership property in respect of that liability. (Paragraph 12.70; Draft Bill, Schedule 4, Part 1, para 5 and Schedule 5, para 4)

(1) The court should be able to give the partnership liquidator wide powers to carry out the winding up of the partnership without requiring the approval of the partners or the sanction of the court for the exercise of these powers; and

(2) The following powers should be exercisable without approval or sanction:

(a) Power to bring or defend any action or other legal proceeding in the name or on behalf of the partnership;

(b) Power to sell any partnership property by public auction or private contract;

(c) Power to do all acts and execute, in the name and on behalf of the partnership, all deeds, receipts and other documents;

(d) Power to prove, rank and claim in the bankruptcy, insolvency or sequestration of any debtor of the partnership or any partner or former partner and to receive dividends from the insolvent's estate;

(e) Power to borrow any money required on the security of the partnership's assets;

(f) Power to appoint an agent to do any business which it would be unreasonable for the liquidator to have to do himself; and

(g) Power to do all such things as may be necessary for winding up the partnership's business and affairs and distributing the proceeds of the realisation of partnership property. (Paragraph 12.74; Draft Bill, Schedule 4, Part 1, para 3 and Part 3)

(1) The partnership liquidator be empowered to exercise the following powers only with the unanimous approval of the partners or the sanction of the court:

(a) Power to carry on the partnership business for the beneficial winding up of the partnership; (Draft Bill, Schedule 4, Part 1, para 3 and Part 2, para 21)

(b) Power to make a compromise or arrangement with alleged creditors or claimants against the partnership; (Draft Bill, Schedule 4, Part 1, para 3 and Part 2, para 19)

(c) Power to compromise debts and liabilities subsisting or supposed to subsist between the partnership and other persons, including partners or former partners; (Draft Bill, Schedule 4, Part 1, para 3 and Part 2, para 20)

(2) The partnership liquidator should have power to distribute partnership property in its existing form instead of realising the property and distributing the proceeds of realisation (a) if permitted to do so in the partnership agreement, (b) with the unanimous approval of the partners or (c) with the sanction of the court. (Paragraph 12.78; Draft Bill, Schedule 4, Part 1, para 4)

(1) The draft Bill should include a power to make subordinate legislation to empower a partnership liquidator to disclaim onerous property (with the approval of the partners or the sanction of the court); (Draft Bill, Schedule 4, Part 1, para 7)

(2) In Scotland, a partnership liquidator should be empowered (with approval of the partners or sanction of the court) to terminate a lease of land or buildings of which the partnership is the tenant, where he has not disposed of the partnership's interest in the lease within one year after the date of his appointment and he is satisfied that a provision in the lease or a rule of law prevents the disposal of the interest. The liquidator should give the landlord a specified period of notice depending on the type of lease. In an agricultural lease the notice should be either a period of between one and two years ending in the term of Whitsun or Martinmas or such period as is agreed with the landlord. In any other lease the period should be six months or such shorter period of notice as is required by any other enactment. The termination should not affect any claim for compensation or damages in respect of the termination of the lease by any person (including a landlord or sub-tenant). The claim for damages or compensation should be a claim against the partnership and not the liquidator personally. (Paragraph 12.83; Draft Bill, Schedule 4, Part 1, para 8)

(1) If the winding up by the partnership liquidator continues for more than one year, he should be obliged to summon a meeting of the partners and any person interested in the winding up at the end of the first year after the date of his appointment and of each succeeding year;

(2) The partnership liquidator must lay before the meeting a full and true account of his conduct of the winding up during the preceding year; (Draft Bill, Schedule 4, Part 1, para 10)

(3) As soon as he has completed the winding up of the partnership's business, the partnership liquidator must prepare a full and true account of the winding up, summon a meeting of the partners and any person interested in the winding up and lay the account before that meeting and explain it; (Draft Bill, Schedule 4, Part 1, para 11)

(4) If the partnership liquidator fails to make up accounts or to summon a meeting, he should be guilty of an offence; (Draft Bill, Schedule 4, Part 1, paras 10(5) and 11(8)) and

(5) Any partner or person interested in the winding up who is not satisfied with the way in which the partnership liquidator is conducting the winding up may apply to the court for an order that an account be taken of the partnership's affairs. (Paragraph 12.86; Draft Bill, Schedule 4, Part 1, para 12)

(1) The partnership liquidator, a partner, a person interested in the winding up, a creditor of the partnership or a person who ceased to be a partner before the break up of the partnership may apply to the court to determine any question arising in the winding up of the partnership; and

(2) The court should have discretion whether to determine the application, to impose such terms and conditions as it thinks fit on its determination and to make any other order on the application. (Paragraph 12.88; Draft Bill, Schedule 4, Part 1, para 13)

(1) If a partnership is unable to pay its debts and there is no reasonable prospect of it becoming able to pay its debts, the partnership liquidator should be under a duty, within one month of the insolvency, to apply to the court for a winding up order (in England and Wales) or (in Scotland) for sequestration of the estate of the partnership; (Draft Bill, Schedule 4, para 9)

(2) If the partnership liquidator has reasonable grounds for believing that the court does not have jurisdiction to make the orders in (1) above, he should be under a duty to apply to the court for directions; (Draft Bill, Schedule 4, Part 1, para 9)

(3) If the partnership liquidator fails without reasonable excuse to comply with (1) or (2) above, he should be guilty of an offence; (Draft Bill, Schedule 4, Part 1, para 9)

(4) The partnership liquidator should have (in English law) standing to present an application to the court for the partnership to be wound up under the successor order to the Insolvent Partnerships Order 1994 and the existing time limit for presenting an application for winding up a partnership should not apply to a partnership liquidator; and

(5) The partnership liquidator should have title and interest (in Scots law) to apply to the court for sequestration of the partnership's estate and the estate of an insolvent partner under the Bankruptcy (Scotland) Act 1985. (Paragraph 12.94; Draft Bill, Schedule 4, Part 4)

(1) A partnership liquidator should be able to resign his office by giving notice to the court, each partner, each person interested in the winding up, and (if he was appointed on an application by a creditor) the creditor; (Draft Bill, Schedule 4, Part 1, para 14)

(2) A partnership liquidator may apply for release in the first instance by summoning a meeting of the partners and any persons interested in the winding up, which failing by application to the court; (Draft Bill, Schedule 4, Part 1, para 16) and

(3) The release should have effect to discharge the partnership liquidator of all liability to the partnership, the partners, former partners and the estates of former partners in respect of any act or omission in the exercise of his functions and otherwise in relation to his conduct as liquidator (unless the liquidator has obtained his release by fraud or deliberate concealment of wrongdoing). (Paragraph 12.99; Draft Bill, Schedule 4, Part 1, para 16)

(1) A provisional liquidator should be able to resign his office by giving notice to the court, each partner, each person interested in the winding up, and (if he was appointed on an application by a creditor) the creditor; (Draft Bill, Schedule 5, para 5)

(2) A provisional liquidator should cease to hold office on the determination of the application to the court to appoint a partnership liquidator; (Draft Bill, Schedule 5, para 7)

(3) If for any reason there is no provisional liquidator acting, the court may appoint a provisional liquidator and the court may, on cause shown, remove a provisional liquidator and appoint another; (Draft Bill, Schedule 5, para 6)

(4) A provisional liquidator (or if he has died his personal representative) should be able to apply for release to the court and the court may order his release from the time specified in the order; (Draft Bill, Schedule 5, para 8(1) and (2))

(5) On release a provisional liquidator should be discharged from all liability to the partnership, partners, former partners and the estates of former partners in respect of any act or omission in the exercise of his functions and otherwise in relation to his conduct as provisional liquidator, (unless the liquidator has obtained his release by fraud or deliberate concealment of wrongdoing). (Paragraph 12.104; Draft Bill, Schedule 5, para 8(3))

(1) First, partners are to pay any sums which they are due to the partnership.

(2) Secondly, the assets of the partnership, including the sums repaid by partners in (1) above, are to be distributed in the following manner and order:

(a) In paying the debts of the partnership to persons who are not partners;

(b) In paying to each partner what is due from the partnership to him (other than in respect of capital);

(c) In paying to each partner rateably what is due from the partnership to him in respect of capital; and

(d) In dividing the ultimate residue, if any, among the partners in the proportion in which profits are divisible.

(3) If the partnership has insufficient assets to pay sums due to third party creditors and to repay to partners the sums due to them (other than in respect of capital), the partners individually shall contribute to the partnership towards that deficiency in the proportions in which they were liable to share partnership losses;

(4) The partners who are liable to contribute under (3) above are those who are personally liable for the partnership obligations or who would be personally liable for an indemnity granted by the partnership to a former partner in respect of those obligations;

(5) If a partner is not liable or, as a result of insolvency, is not able to make his contribution to the deficiency in (3) above, the other partners shall contribute the additional amount needed to meet the deficiency in the proportions in which those partners are liable (as between themselves) to contribute to that deficiency; and

(6) In this context a "partner" includes a person who ceased to be a partner on or after the break up. (Paragraph 12.128; Draft Bill, cl 44)

Miscellaneous reforms, and proposals we have not taken forward

Transitional provisions

(1) There should be a transitional period of two years starting with the commencement date of the new Partnerships Act; (Draft Bill, cl 79(4))

(2) During the transitional period a partnership formed before the commencement date ("an old partnership") will, subject to (3) below, continue to be governed by the mandatory and default rules of the 1890 Act; (Draft Bill, cl 79(1))

(3) If during the transitional period an old partnership decides, by unanimous decision which is signed and in writing, that the provisions of the new Partnerships Act should apply to it before the end of the transitional period, the new provisions will apply from the date of, or provided for in, that decision; (Draft Bill, cl 79(3)(b))

(4) At the end of the transitional period the provisions of the new Partnerships Act will apply to all partnerships whenever formed; (Draft Bill, cl 79(3)(a))

(5) A partner in an old partnership may, during the transitional period unilaterally elect that the partnership shall after the end of the transitional period continue to be governed by the default rules of the 1890 Act. The election must be in writing and be signed by the electing partner; (Draft Bill, cl 79(3)(d))

(6) Partnerships formed after the commencement date, whether or not during the transitional period, will, from their commencement, be subject to the provisions (including, where applicable, the new default rules) of the new Partnerships Act; (Draft Bill, cl 79(1) and (2))

(7) A "new" partnership, which is created during the transitional period merely by a change in membership of an old partnership, will not be treated as formed after the commencement date (for the purposes of (6) above) provided (a) its membership is substantially the same as the old partnership and (b) it succeeds to the whole or substantially the whole of the business of the old partnership. This rule applies also to subsequent "new" partnerships so created during the transitional period; (Draft Bill, cl 79(3)(c))

(8) Neither the default scheme under the 1890 Act nor the default scheme under the new Partnerships Act will apply to a partnership whose agreement provides for different terms. (Paragraph 14.21)

Establishing and operating a limited partnership (1): registration and de-registration

(1) A limited partnership should exist from the date of registration of the limited partnership as stated in the certificate of registration; (Draft Bill, cls 54(1) and 67)

(2) The registrar should be obliged to register the partnership or proposed partnership as a limited partnership, if satisfied that the statutory requirements are complied with, and to supply it with a registration certificate. (Paragraph 15.21; Draft Bill, cl 67(1))

(1) The certificate of registration should be conclusive evidence (a) that all registration formalities have been complied with, (b) that the partnership was registered as a limited partnership on the date stated in the certificate and (c) that the partnership name is as specified in the certificate; (Draft Bill, cl 71(1))

(2) The certificate of a change in the name of a partnership should be conclusive evidence (a) that the partnership was registered as having a new name on the date specified in the certificate and (b) that its partnership name is as specified in the certificate; (Draft Bill, cl 71(2))

(3) A copy or extract from an original document sent to the registrar should if signed by the registrar be admissible in evidence in all legal proceedings as of equal validity with the original document. (Paragraph 15.25; Draft Bill, cl 71(3))

(1) The requirement for the registration of a principal place of business, initially in the United Kingdom, should be abolished and be replaced by the requirement to have a registered office in England or Wales, or in Scotland; (Draft Bill, cl 62)

(2) The register should contain the following information concerning the limited partnership:

(a) The name under which the partnership is registered;

(b) The name and address of the proposed general partner (or, if there is more than one, all of them);

(c) The name of each limited partner and the amount of any capital contribution made by him to the partnership;

(d) Whether the registered office of the partnership is in England or Wales, or in Scotland;

(e) The address of the registered office;

(f) If the partnership existed before registration, the date of formation of the partnership. (Paragraph 15.38; Draft Bill, cl 66)

(1) A person should cease to be a general partner in accordance with the rules of law in relation to general partnerships or the terms of the partnership agreement but he may incur liability to third parties by holding out until his change of status is published in the register; (Draft Bill, cls 26 and 68 and Schedule 7, para 5(5))

(2) Subject to paragraph (3) below, a person should not cease to be a limited partner until his change of status is published in the register; (Draft Bill, cls 54(2) and 68 and Schedule 7, para 4(7))

(3) A person should cease to be a limited partner on death or (if a non-natural person) dissolution and the fact that he has ceased to be a general partner or limited partner (as the case may be) should be registered within twenty-eight days after the death or dissolution. (Paragraph 15.49; Draft Bill, cls 54(3) and 68 and Schedule 7, paras 4(1) and 5)

(1) A change of name of an existing general or limited partner;

(2) A change of address of an existing general partner; and

(3) An increase or withdrawal of the capital contribution of a limited partner. (Paragraph 15.51; Draft Bill, cl 68 and Schedule 7, para 5)

(1) Impose fees in respect of (i) registration of a limited partnership or of information relating to such a partnership, (ii) the inspection of the register or any documents or information relating to a limited partnership or (iii) the provision of a certificate or an extract or copy of any document;

(2) Provide for the performance by the assistant registrar or other officers of acts which the registrar is required to perform in relation to limited partnerships; and

(3) Make provision for the translation of documents delivered to the registrar which relate to limited partnerships whose registered office is in Wales. (Paragraph 15.63; Draft Bill, cl 68 and Schedule 9, para 4)

(1) Which is the same as a name appearing in the registrar's index of company and corporate names, unless the person whose name appears in the index consents;

(2) The use of which as the name of the partnership would in the opinion of the Secretary of State constitute an offence; or

(3) Which in the opinion of the Secretary of State is offensive. (Paragraph 15.66; Draft Bill, cl 63(3) – (5))

(1) The name of a limited partnership must end with either "limited partnership" or the abbreviation "lp" or "LP" ; (Draft Bill, cl 63(1))

(2) If the registered office of the limited partnership is in Wales the alternative suffix may be "partneriaeth cyfyngedig" or the abbreviation "pc" or "PC"; (Draft Bill, cl 63(2))

(3) The name of the limited partnership (which includes the suffix) and the address of its registered office must be stated on any partnership document. (Paragraph 15.71; Draft Bill, cl 65(1) and (2))

(1) The registrar should have power to de-register a limited partnership:

(a) If the registrar receives an application for de-registration after all the partners of the limited partnership (or former partners of a dissolved limited partnership) have agreed; (Draft Bill, cl 68 and Schedule 8, para 1) or

(b) If after inquiry the registrar has reasonable grounds for believing that one of the grounds for doing so exists; (Draft Bill, cl 68 and Schedule 8, para 2)

(2) The grounds for de-registering a limited partnership referred to in paragraph (1)(b) above are (a) that it has been dissolved, (b) that it does not have one or more general partners and one or more limited partners, (c) that it does not have a registered office and (d) that where a limited partnership, which was not previously a general partnership, has been formed by registration, the partners have not begun to carry on business together during a period of at least two years immediately after registration; (Draft Bill, cl 68 and Schedule 8, para 2(2) and (4))

(3) Before the registrar de-registers a limited partnership under paragraph (1)(b) above, the registrar must have made preliminary inquiries by sending two letters to the registered office of the limited partnership, the second letter following six weeks after the first letter. In the letters the registrar should state his belief that a ground for de-registering exists and invite a reply showing why the partnership should not be de-registered. Where there are reasonable grounds for believing that the partnership does not have a registered office the letters of inquiry may be sent to the general partner or partners and to any limited partner whose address is known to the registrar; (Draft Bill, cl 68 and Schedule 8, para 3)

(4) In addition, before de-registering under either of paragraph (1)(a) or (b) above, the registrar must publish a de-registration warning in the Gazette at least three months before he de-registers a limited partnership; (Draft Bill, cl 68 and Schedule 8, paras 1(1)(b), 2(1)(c) and 4)

(5) If the registrar de-registers a limited partnership, he must publish notice of the fact in the Gazette and de-registration takes effect on the date specified in the notice; (Draft Bill, cl 68 and Schedule 8, para 5)

(6) If the de-registered partnership re-registers itself as a limited partnership, the court should be able on the application of the partnership or any partner, within 3 years of de-registration, to make an order to backdate the limited liability of the limited partners to the date of de-registration and otherwise to put the limited partnership and other persons in the position they would have been in if the limited partnership had not been de-registered; (Draft Bill, cl 68 and Schedule 8 para 6(1), (5) and (6))

(7) The court may make the order in paragraph (6) above if it is satisfied (a) either that the application for de-registration had not been properly authorised or that none of the grounds for de-registering the partnership existed when it was de-registered and (b) that it is just and equitable to do so. (Paragraph 15.83; Draft Bill, cl 68 and Schedule 8, para 6(2), (3) and (4))

Establishing and operating a limited partnership (2): the general partner and other matters

(1) General partners should be fully responsible for the registration formalities and (subject to (4) below) should have authority to sign the original registered particulars and any amendments, and where applicable authorised managers should have the same responsibility and authority except for signing the original application for registration;

(2) Where there is default of registration formalities, the general partner or general partners, or where applicable the authorised manager, should be liable for daily fines similar to those which apply to companies;

(3) Default in registration formalities should not of itself remove the limited liability of the limited partners; and

(4) A limited partner should sign a notice of a person ceasing to be a limited partner only if (a) he is the person ceasing to be a limited partner and is to become a general partner and (b) the partnership does not have one or more general partners and limited partners should sign an application to de-register a limited partnership only if there are no general partners. (Paragraph 16.14; Draft Bill, cls 66(2) and 68; Schedule 7, paras 1(3), 2(3), 3(4), 4(4), 4(5), 5(2), 5(7), 6(1); Schedule 8, paras 1(4) and (5))

(1) There should be a default rule that any difference arising as to ordinary matters connected with the partnership business may be decided by the general partner, or if there is more than one general partner, by a majority of them. (Draft Bill, cl 59(4))

(2) There should be a default rule that differences about other matters relating to the partnership must be decided by the general partner, or if there is more than one general partner, all of them; (Draft Bill, cl 59(5))

(3) There should be a default rule that a decision whether a limited partner should be given authority to act on behalf of the partnership is not an ordinary matter; (Draft Bill, cl 59(6))

(4) There should be a default rule that a person may become a partner in a limited partnership only with the consent of the general partner, or if there is more than one general partner, all of them, or, if there are no general partners, all the limited partners; (Draft Bill, cl 60(1) and (3))

(5) A general partner who without reasonable excuse fails to ensure that the name of the limited partnership and the address of its registered office are stated on any partnership document should be guilty of an offence and liable to a fine; (Draft Bill, cl 65(3))

(6) There should be a default rule that, unless the court orders otherwise or there are no general partners, the general partner, or if there is more than one general partner, all of them are responsible for winding up the partnership. (Paragraph 16.19; Draft Bill, cl 61(2))

(1) A person should be guilty of an offence if, when he makes an application to register or de-register a limited partnership, he knows that information in it is false or is aware that the information may be false;

(2) A person who is guilty of an offence under (1) above should be liable on summary conviction to imprisonment for up to six months or a fine not exceeding the statutory maximum, or both, or on conviction on indictment, to imprisonment for up to two years or a fine, or both;

(3) A person should be guilty of an offence if, when he delivers a notice to the registrar of a change in the particulars of a limited partnership, he knows that information in it is false or is aware that the information may be false; and

(4) A person who is guilty of an offence under (3) above should be liable on summary conviction to imprisonment for a period not exceeding six months or a fine not exceeding level five on the standard scale, or both. (Paragraph 16.32; Draft Bill, cl 69)

The liability of the limited partner

(1) Taking part in a decision about the variation of the partnership agreement;

(2) Taking part in a decision about whether to approve, or veto, a class of investment by the limited partnership;

(3) Taking part in a decision about whether the general nature of the partnership business should change;

(4) Taking part in a decision about whether to dispose of the partnership business or to acquire another business;

(5) Taking part in a decision about whether a person should become or cease to be a partner;

(6) Taking part in a decision about whether the partnership should end;

(7) Taking part in a decision about how the partnership should be wound up;

(8) Enforcing his rights under the partnership agreement (unless those rights are to carry out management functions);

(9) Approving the accounts of the limited partnership;

(10) Being engaged under a contract by the limited partnership or by a general partner in the limited partnership (unless the contract is to carry out management functions);

(11) Acting in his capacity as a director or employee of, or a shareholder in, a corporate general partner;

(12) Taking part in a decision which involves an actual or potential conflict of interest between a limited partner (or limited partners) and a general partner (or general partners);

(13) Discussing the prospects of the partnership business;

(14) Consulting or advising a general partner, or general partners, about the activities of the limited partnership or about its accounts (including doing so as a member of an advisory committee of a limited partnership). (Draft Bill, cl 55(1) and (2) and Schedule 6)

(1) That a limited partner is not personally liable (whether to third parties or by contribution to the liability of the general partner) for any partnership obligation incurred while he is a limited partner, unless he receives back all or part of his capital contribution; (Draft Bill, cl 56)

(2) Where a limited partner takes part in the management of the partnership business he is personally liable for any partnership obligation incurred as a result of his taking part in management and for any other partnership obligation during the period when he takes part in management. (Paragraph 17.23; Draft Bill, cl 57)

(1) While a person remains a limited partner he is not entitled either directly or indirectly to withdraw or receive back any part of his agreed capital contribution ("the relevant capital contribution") to the partnership; (Draft Bill, cl 56(2))

(2) A partner's "relevant capital contribution" should mean a capital contribution consisting of either or both of a sum or sums of money and property which has an agreed capital value. (Paragraph 17.31; Draft Bill, cl 56(4))

The rights and obligations of partners in a limited partnership

(1) In the absence of an agreement to the contrary, a limited partner should not be under a duty to keep the other partners fully informed of partnership matters or a duty to account to the partnership for profits made by him in a competing business; and

(2) In the absence of an agreement to the contrary, a limited partner should not be under duties to ensure that accounting records are maintained and to co-operate with persons keeping partnership records. (Paragraph 18.12; Draft Bill, cl 59(1))

(1) The general partner or general partners should have responsibility for winding up the partnership business and affairs, unless the court orders otherwise or there are no general partners; (Draft Bill, cl 61(2))

(2) A limited partner should not have the right to take part in a decision by the partners to approve the exercise by the liquidator or partnership liquidator of powers which require the approval of partners, unless the partnership agreement provides otherwise or the partnership has no general partners; (Draft Bill, cl 61(3) and (4))

(3) Unless the partnership agreement provides otherwise or there are no general partners, the persons entitled to attend meetings to consider the liquidator's annual accounts or final accounts should not include a limited partner, former limited partner or personal representatives of, or insolvency practitioners for, former limited partners. (Paragraph 18.27; Draft Bill, cl 61(3) and (5))

Special limited partnerships

(Signed) ROGER TOULSON, Chairman, Law Commission
HUGH BEALE
STUART BRIDGE
MARTIN PARTINGTON
ALAN WILKIE

MICHAEL SAYERS, Chief Executive

RONALD D MACKAY, Chairman, Scottish Law Commission
GERARD MAHER
KENNETH G C REID
JOSEPH M THOMSON
COLIN J TYRE

JANE L MCLEOD, Secretary
10 October 2003