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Management and Decision Making

Document Cited authorities 4 Cited in Related
Vincent
AuthorElspeth Berry
Pages77-80

Chapter 6


Management and Decision Making

6.1 GENERAL PARTNERSHIPS
6.1.1 The right to manage

In default of contrary agreement, every partner has the right to take part in the management of the business (s 24(5) of the Partnership Act). As this is fundamental to partnership, and given the risk of personal liability, a partner, at least in a smaller firm, is unlikely to accept an agreement which excludes it.

6.1.2 The decision-making process

In default of contrary agreement, decisions as to ‘ordinary matters connected with the partnership business’ are to be taken by a majority of the partners, but unanimity is required to change the nature of the business (s 24(8) of the Partnership Act). Unanimity is also required to introduce a new partner (s 24(7)), to vary the mutual rights and obligations of the partners as laid down in the Partnership Act or the partnership agreement (s 19), or to confer a power of expulsion (s 25) (see further 9.1.6).

It may be advisable to alter these provisions to counter the possibility of an equality of votes, to provide for some degree of delegation and/or to make provision for extraordinary decisions other than those referred to in the Partnership Act. Provision for a casting vote, proxy voting and the exclusion from voting of a partner whose interests as an individual are affected by it (for example, expulsion; see further 9.1.6) should also be considered. If a majority is required for particular decisions, the agreement should specify whether this means a majority by number or on some other basis, for example by capital contribution. It is possible to provide for weighted voting (so that greater

78 Partnership and LLP Law
weight is accorded to the longest serving partners, or those whose capital contribution is greatest).

Details of how often partners’ meetings will be held, how they will be called, and the quorum should also be specified.

6.1.3 Time devoted to business

The amount of time to be devoted to the business is not dealt with by the Partnership Act and therefore needs to be specified in the partnership agreement.

6.2 LIMITED PARTNERSHIPS
6.2.1 The right to manage

The default position is the same as for general partnerships except that limited partners have no right to manage the partnership business and, if they do so, they become personally liable for partnership debts and obligations incurred during their period of management (s 6(1) of the Limited Partnerships Act) (see also Chapter 7). However, a limited...

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