FORM OF LIMITATION OF PARTNERSHIP PROPERTY. 285 limitation property. Various forms of limitation of property conveyed to a Form of firm as part of their partnership property have been pro- of partnerposed (1), the object being to enable the continuing partners to ship dispose of it after the death or retirement of a partner. So far as death alone is concerned this can be effected by limiting the property to the partners as joint tenants in trust for the partners as part of their co-partnership property, with power to the trustees to deal with the property without the concurrence of the beneficiaries, the result being that on the death of a partner the surviving partners take the legal estate and can sell, etc., without the concurrence of the representatives of the deceased partner. It is obvious, however, that where the limitation is in this form the concurrence of a partner who has retired will be necessary for the purpose of conveying the legal estate. In order to obviate this difficulty it is suggested (1 K. & E. 405) that power should be given to the surviving or continuing partners to appoint new trustees and in particular to appoint a new trustee in the place of any trustee who ceases to be a member of the firm. Where the limitation is in this form the continuing partners can deal with the legal estate in most cases by means of a vesting declaration, (as to which see post, p. 362). &c. It should be stated whether the premium taken by any Premiums, partner for an apprentice, or the salary or profits of any official position (m) or directorship that he holds (n) or may obtain, is to belong to him or the firm, and if to the firm, whether it is to be treated as capital or profits. If the partnership is formed for the purpose of working a secret (1) See 33 Sol. J. 102, 119. (m) See as to arrangements by solicitors for sharing profits of offices with other solicitors or unqualified persons, Sterry v. Clifton, 9 C. B. 110; Candler v. Candler, 6 Mad. 141, S. C. Jac. 225; Gordon v. Dalzell, 15 Beav. 351; Aubin v. Holt, 2 K. & J. 66; Ex parte Harper, 1 De G. & J. 180; Collins (n) See Aas v. Benham (1891), Interest on capital. Banking account. Outgoings and profits. and unpatented invention, it should be stated who is to have the right of using it after dissolution; for, if this be not done, all the partners will, after dissolution, have the right to work it. It is generally provided by the Articles that the capital is to be employed in the business. Unless the partners contribute the capital and are to be entitled to the profits in equal shares, it is proper to state at what rate interest is to be allowed to each partner on his share of the capital; for, in the absence of an agreement, partners are not entitled to interest unless they are in the habit of allowing it in their accounts (Cooke v. Benbow, 3 De G. J. & S. 1; Millar v. Craig, 6 Beav. 433 (0); and to provide that the interest is to be paid (usually yearly on the day for taking the annual general account) before any division of profits. Occasionally one of the partners has the option of purchasing a further share in the business from the others. The price is generally made to be so many years' purchase of the average yearly net profits from the commencement of the partnership up to the then last general annual account. 3. It is usual to state who are to be the bankers of the firm; and that all moneys belonging to the firm shall be paid into the bank. Sometimes it is also declared that all cheques, &c., received by the firm shall be paid into the bank, and that all outgoings shall be paid by cheque; and occasionally, where a young man is taken into partnership by an established firm, it is provided that he is not to be allowed to draw cheques during a specified term without the consent of the other partners. 4. Provisions should be made for the payment of all outgoings (the principal heads of which should be specified) (0) But in the absence of agreement, a partner is entitled to interest at per cent, on advances made by him for the purposes of the partnership. Partnership Act, 1890, s. 24 (3); Ex parte Chippendale, 4 De G. M. & G. 36; see Lindley, Partn. 390. OUTGOINGS AND PROFITS. out of the receipts and earnings of the business; or, in case of deficiency, by the partners, generally in the proportions in which they are entitled to the profits. This clause only states what the rule is in the absence of any special agreement, and may therefore be omitted where brevity is of importance. Where any partner holds an office the emoluments of which are not to belong to the firm, but in the performance of the duties of which he may need the assistance of the other partners or of the clerks of the firm, it should be stated what remuneration, if any, or that no remuneration, is to be paid by him to the firm in respect of such assistance. It is proper to mention any special outgoings that may have to be paid by the firm, although they might appear to be incurred for the benefit of one only of the partners; as, for instance, where it is agreed that the managing partner shall reside in a house to be kept up at the expense of the firm; or that the managing partner of a firm of wine merchants shall entertain their customers at dinner parties at the expense of the firm. In the absence of special agreement, profits are divisible between the partners equally, though they may be entitled to unequal shares in the capital (Robinson v. Anderson, 7 De G. M. & G. 239; Peacock v. Peacock, 16 Ves. 49; Partnership Act, 1890, s. 24). If this is not intended, a clause should be inserted, stating in what proportions profits are to be divided. The clause should also state when they are to be paid. They are generally made payable yearly, immediately after the taking of the annual general account. Occasionally a minimum sum for yearly profits is guaranteed to one of the partners by the others. When one of the partners has the option of purchasing an additional share in the business from the others, provisions should be inserted as to altering the proportion of profits payable to him in case he exercises his option of purchasing. 287 Management of business. It is generally provided that the partners shall be allowed to draw out monthly sums in anticipation of their shares in the profits. If this is done, it should be provided that in case the amount drawn out by any partner in any year exceeds his share of the profits, the excess shall be refunded immediately after the annual general account for the year is taken. 5. In the absence of special stipulation, each partner has a right to take part in the management of (Rowe v. Wood, 2 J. & W. 553; Partnership Act, 1890, s. 24 (5)), and is bound to attend diligently to, the business of the partnership. It is therefore of importance to state how much time and attention each partner is to give to the business, and whether any one of the partners is to be bound to give the whole of his time to the business or to be exempt from attending to the business, or prohibited from attending to any particular branch of it. It is not easy at first sight to see why one partner should be prohibited from doing a particular part of the work; but the reason is that, if he did it, he might be brought under the notice of persons who have at their disposal the patronage of some place which one of the other partners hopes to obtain for himself; or he might form connections which would enable him to secure part of the business after a dissolution of the partnership. If it is intended that every partner is to give all his time and attention to the business, it may be desirable to insert a provision as to the time and duration of holidays. It is advisable to prohibit the partners from engaging in any business other than that of the firm. This is sometimes. extended so as to prohibit them from becoming directors of a company. Stipulations of this nature can be enforced by injunction; Whitwood Chemical Co. v. Hardman (1891), 2 Ch. 416. In the absence of express stipulation a partner must account for profits made by him in a competing business carried on without the consent of his copartners, or for the use by him of the name or connection of the firm MANAGEMENT OF BUSINESS. (Partnership Act, 1890, ss. 29, 30; and see Aas v. Benham, (1891), 2 Ch. 244). It is customary to prohibit any partner from hiring, or, except in case of gross misconduct, dismissing any clerk, 2 and from becoming surety; and, if the nature of the business requires it, from engaging in transactions of more than a specified amount without the previous consent of the other partners. 6. Although, without stipulations to that effect, each partner is bound to be true and just in all his dealings with the others (Blisset v. Daniel, 10 Ha. 493 (see p. 522); Maddeford v. Austwick, 1 Sim. 89; 2 Myl. & K. 279), and may not, without the sanction of the other partners, employ the partnership assets, or engage the credit of the firm, except in carrying on the business of the firm, or allow the assets to be taken in execution, or release any debts due to the firm, it is not uncommon to insert provisions to this effect. 289 Not acting so as to injure 7. "Partners are bound to render true accounts and full Accounts. information of all things affecting the partnership to any partner or his legal representatives; " Partnership Act, 1890, s. 28; Rowe v. Wood, 2 J. & W. 558. The matter, however, is of such importance that it is the practice to insert express provisions for taking the accounts so as to show the position of the firm (a) as regards strangers, (B) as regards the partners. The provision for the first of these objects consists of a stipulation that proper accounts shall be kept, such as are usually kept by persons engaged in similar businesses. Sometimes it is stated that they are to be posted up under the personal superintendence of one of the partners. The books, are, in the absence of express agreement, to be kept at the place (or principal place) of business; Partnership Act, 1890, s. 24 (9). In order to ascertain the position of the firm as regards each of the partners, provision should be made for taking an annual general account. This should state the transactions of the firm during, and the assets and liabilities of 19 E.I.C. |