LPC Notes BLP Procedure Plans (High Distinction) 2023 BPP,
ULaw 2023 update
BLP – All chapters – Revision notes | Page 1 of 58
Notes on BLP
... [Show More] Procedure plans for the
LPC at BPP University. While original
prepared for BPP University students,
some of my friends have used these
notes to prepare for their exams at Ulaw
and City University and achieved a
distinction. These notes only contain
procedure plans, if you are interested in
BLP revision notes, I have separate
notes for that. Why to waste money on
notes that simply replicate the materials
you receive in class? These Revision
notes have been restructured and
optimised for exams. I have spent
months simplifying the material to make
sure that they are easy to understand
using a structured step-by-step guide
and clear table formats. These notes are
as concise as they can possibly be to
make studying for exams quicker while
summarising all SGS course content so
you don't have to when you are already
pressed for time. You will also find these
notes extremely helpful when you begin
your term - you can use them as a guide
so you know which points to focus on
before you even begin. WS1 -
PARTNERSHIPS AND OTHER BUSINESS MEDIA
PARTNERSHIPS:
What is a partnership?
s.1(1) Partnership Act 1890 Partnership = persons carrying on
business with a view to profit. – May form a partnership
irrespective of contrary intention. A partnership is formed once
the definition is satisfied, not when a decision to form a
partnership is made.
Existence of partnerships:
s.1(1) PA 1890 No formality is needed to establish a partnership
so a partnership can be formed without the specific intent of the
parties to form one.
s.2(3) PA 1890 Profit sharing is prima facie evidence of a
partnership.
The partners will carry on business in common:
This means that they will share responsibility for the business
and all decisions that affect it.
No separate legal identity:
The partnership is unable to own property or enter into
contracts. Instead, it is the individual partners who will sue, own
property jointly, and enter into contracts jointly. If partnership
goes insolvent, creditors can enforce debt against the partners
personally.
How to avoid entering into a partnership?
- Avoid merging your business
- If the business is a Joint Venture: All members will retain
legal and beneficial ownership of their assets. Exclude the
JV being a partnership in the JV contract.
- Instead of sharing profit, share gross returns
- Make sure you regulate your venture with a written
agreement
Characteristics of a partnership:
s.2 PA 1890 Badges of a partnership:
- Profit sharing
- Mutual decision-making powers
- Right of all partners to examine accounts and veto the
introduction of new partners
- Sharing responsibility of loss of business
Key considerations:
Tax transparency
- Allows for a high degree of confidentiality
- Min 2 people needed
- PA 1890 does not distinguish between actual and legal
persons, so a company could be a partner.
Care needed:
- If no Partnership Agreement, PA 1890 default provisions
(also known as fall-back provisions) will apply. Default
provisions are disadvantageous and must set up a
Partnership Agreement.
- Very easy to create unintentionally
- Unlimited joint liability
- s.5 PA 1890 Each partner is an agent of the firm and will
bind the firm and other partners by contracting with third
parties.
- s.6 PA 1890 The firm will be bound by the actions of
anyone authorised to act on the firm’s behalf.
- s.30 PA 1890 All partners share a fiduciary relationship
and have a duty not to compete with the firm by carrying
out a similar business without the permission of the other
partners
Advantages:
- it costs nothing to create a partnership.
- May start as partnership before converting to limited
company
- Many partnerships are professional partnerships such as
lawyers, accountants, surveyors and architects.
- Cheaper administrative costs as no need to file profits
- Tax transparency – taxes flow through to the partners
Formalities required for partnerships:
Formalities:
1. Requirements on naming the partnership
2. No limitation on size
3. s.1203 CA 2006 Partnership may include a statement on
stationery listing all partners.
4. Partners must pay income tax, VAT and NI
5. Must notify HMRC of the partners’ identity
Partners’ responsibilities:
Utmost good faith – s.28-30 PA 1980:
Partners must divulge to one another all relevant info
connected with the business and their relationship.
they must be prepared to share with their fellow partners
any profit or benefit they receive that is connected with
or derived from the partnership, the business or its
property without the consent of the other partners; and
they must be prepared to share with their fellow partners
any profits they make from carrying on a competing
business without the consent of the other partners.
Responsibilities implied by the act – s.24(1)-(2) PA 1980:
The responsibility for bearing a share of any loss made by
the business.
The obligation as a firm to indemnify fellow partners
against bearing more than their share of any liability or
expense connected with the business.
LPC Notes BLP Procedure Plans (High Distinction) 2023 BPP,
ULaw 2023 update
BLP – All chapters – Revision notes | Page 2 of 58
Liability for firm’s debts problem question:
Starting point:
s.9 PA 1980 Every partner is liable jointly with all partners:
* Each partner is liable for 100% of the money and if other
partners can’t pay for it, the partner that is able to pay
must pay for 100% of the money.
* Each partner could be sued by a creditor for the whole
debt.
Liability of partners:
s.17(1) A new partner will not automatically be liable in relation
to any debts incurred by the partnership before he joined.
s.17(2) A partner will still be liable after he retires in respect of
debts incurred by the partnership whilst he was a partner.
s.17(3) unless:
1) The creditor agrees
2) You specifically absolve them
3) You novate the contract
Civil Liability (Contribution) Act 1978 Partners are also
severally liable for any civil liabilities, so partners can be sole
or joint Defendants.
Is the partnership liable?
Actual authority:
The partnership will always be liable for actions carried out
under actual authorisation such as where:
* Partners have acted jointly
* Express actual authority if the partners express on
partner to represent the firm in a transaction
* Implied actual authority if the partners accept that one of
more of them have authority to represent the firm in a
particular way.
s.5 Thus, all of those who were partners at the same time will
be jointly liable even if one of the partners was acting as an
agent for the firm.
Apparent authority:
Partners may be liable for actions that were not actually
authorised but that another party to the transaction believed
were authorised (ostensible authority).
Subjective test:
* Other party did not know partner did not have authority
to act
* Other party then proceeds to deal with the persons
whom he believes to have authority.
In this case all partners will be liable, but the partner will need
to indemnify the other partners for the damaged.
Tortious Liability:
s.10 PA 1980 Firm is liable for tortious liability of a partner who
acts in the ordinary course of the firm’s business or acts with the
authority of the other partners.
s.12 PA 1980 All partners will be jointly and severally liable.
Which partners are liable?
s.8-9 PA 1980 If the partnership agreement has been breached
by acting without authority, the firm is not liable but the
individual partner will be.
The partner who entered into the contract can be sued by the
creditor due to privity of contract rules.
s.12 PA 1980 If the partnership is sued and loses litigation, all
partners will be jointly and severally liable. If one of the partners
is sued but all are liable, the one in litigation can claim indemnity
from the other partners.
Persons who are not partners:
1. s.14 Holding oneself out as a partner:
Nationwide Building Society v Lewis - Person can be
liable even if not partner. Test: holding oneself out as a
partner, the other party relied on the misrepresentation
and consequently acted on in.
2. s.36 Partner need not give notice when leaving the
partnership but if they do not, they could be sued even
after leaving the partnership. – letter to clients is actual
notice, London Gazette ad is constructive notice.
3. No need for notice if you are bankrupt/pass away
Liability under a novation agreement:
1. Between creditor, partners at the time when contract
was made, and the new partnership
2. Agreed that the creditor will release the contracted
partners and hold the new partnership liable
3. A retiring partner could be released from debt in place of
a new partner. – If no new partner, then for retiring
partner must give consideration in return for being
released from the contract.
4. Can still sue the retired partner.
THE PARTNERSHIP AGREEMENT CLAUSES:
The Partnership Act is not beneficial for partners, so it is
common for partners to draw up and sign a partnership
agreement.
Commencement:
PA 1980 implied terms:
s.1(1) PA 1890 No formality is needed to establish a partnership
so a partnership can be formed without the specific intent of the
parties to form one.
Partnership Agreement potential clause:
Agreement can specify commencement date.
Financial input:
PA 1980 implied terms:
s.24(3) Payments above partner’s capital contribution attracts a
5% interest rate per annum.
Partnership Agreement potential clause:
Could specify how much input/how often/when.
Shares in income/profits and losses:
PA 1980 implied terms:
s.24(1) All partners share equally in capital and profits and divide
losses equally.
s.24(4) No partner is entitled to interest on capital prior the
ascertainment of profits.
s.24(6) No partner is entitled to remuneration.
Partnership Agreement potential clause:
Salary entitlement could be divided to reflect time/skill. Could
add interest on the partner’s contributions. Could introduce a
ratio of sharing based on the % of capital contribution which
should take into account any losses.
Withdrawals:
PA 1980 implied terms:
None
Partnership Agreement potential clause:
Could set out a monthly limit or prevent withdrawals if no
profits.
LPC Notes BLP Procedure Plans (High Distinction) 2023 BPP,
ULaw 2023 update
BLP – All chapters – Revision notes | Page 3 of 58
Work input:
PA 1980 implied terms:
s.24(5) Every partner must take part in the partnership
Partnership Agreement potential clause:
Should state degree of commitment – can bar anyone from
acting.
Add clauses regarding maternity leave, sick pay, holiday
entitlement.
Increase/ decrease in asset value:
PA 1980 implied terms:
Profits and capital is shared equally.
Partnership Agreement potential clause:
Entitlement could reflect the capital contribution % of each
partner – asset-surplus sharing ratio.
Assets:
PA 1980 implied terms:
None
Partnership Agreement potential clause:
Who owns what? Is it owned in equal shares? Are there any
trusts? Clarifying ownership will help on dissolution.
Decision-making:
PA 1980 implied terms:
s.24(7) Unanimity is needed to introduce new partner
s.24(8) Unanimity is needed to change nature of business
s.24(8) All other decisions are made by a simple majority
Partnership Agreement potential clause:
Include a clause about expulsion of a partner. Could change
majority/unanimity required for different types of decisions.
Could designate partners to deal with decisions based on
expertise. If you want to allow partners to vary the partnership
agreement, add specific clause for this.
Duration:
PA 1980 implied terms:
s.26 If no fixed term has been agreed, the retirement of one
partner will dissolve the partnership. Retirement notice doesn’t
need to be in writing.
s.32 Partnership ends if fixed term expires, purpose has been
completed or one of the partners has given notice.
s.33 Partnership dissolved if any partner goes bankrupt/dies.
s.35 Court may order dissolution on grounds (a)-(f).
Partnership Agreement potential clause:
Limit the partners’ rights to terminate so s.26 won’t apply.
Include terms on retirement and payment of exiting partner’s
shares. May include a minimum notice period for partners.
Add a clause setting out that partnership should continue as long
as there are at least 2 partners. Also include provisions for
buying the other partners’ shares/keeping their money.
Payment of outgoing partner’s share:
PA 1980 implied terms:
s.42 If partner leaves and there is a delay on payment of his
share, partner is entitled to 5% interest on the amount of his
share.
Partnership Agreement potential clause:
Should include:
a) Whether there is an obligation for partners to buy the
share
b) Valuation of shares
c) A clause on professional valuation if partners disagree
d) Date payment will be due
e) An indemnity for liabilities of the firm
Restraint of trade following departure:
PA 1980 implied terms:
s.30 Partner cannot compete during partnership without the
consent of other partners. Must pay all profits that he has made
back to the firm.
Partnership Agreement potential clause:
Include a non-compete clause to protect confidentiality and
business connections. This clause must be reasonable,
otherwise could be invalidate by the court. Reasonable if
reasonable for the protection of a legitimate business aim. Must
also be reasonable as to geographical area and in duration – e.g.:
cannot go on forever and cannot limit partner from setting up a
business outside the local area where the partnership operates.
Potential clauses to add:
Non-dealing clause: prevents partner from entering into
contracts with customers/employees.
Non-solicitation clause: prevents partner from soliciting
contracts with customers/employees.
CHOICE OF BUSINESS MEDIA:
When the client is choosing business media, consider the below:
Sole trader
• Number of persons needed for set up: 1 person. Cannot
form sole trader business for less/more than 1.
• Control and management: Sole trader has complete
control over the running of the business. This gives sole
traders flexibility but pressure if working without
support.
• Liability: Not limited - Unlimited personal liability.
• Expenses when setting up: No formalities so no setting
up costs
• On-going expenses after the business is set up: None
necessary, although usually accountants will be involved
in keeping accounts
• Methods of financing: No quick options. Sole trader can
borrow from a bank but cannot create floating charges
not raise finance by share issue.
• Profits: All profits go to the owner.
• Tax: Owner pays tax on the business profits as an
individual (income tax + capital gains tax)
• Regulation: None
• Publicity: Fewer requirements, easy to maintain
privacy.
• May trade immediately? Yes.
Partnership
s.1(1) Partnership Act 1890 Partnership = persons carrying on
business with a view of profit. – May form a partnership
irrespective of contrary intention.
No separate legal identity. The partnership is unable to own
property or enter into contracts. Instead, it is the individual
partners who will sue, own property jointly, and enter into
contracts jointly. If partnership goes insolvent, creditors can
enforce debt against the partners personally.
• Number of persons needed for set up: Min. 2 persons
• Expenses when setting up: None, although it is
beneficial to have a Partnership Agreement drawn up by
lawyers (this may be expensive).
• On-going expenses after the business is set up: None
necessary, although must pay for accountants
• Management structure of the business: In accordance
with the Partnership Agreement, however if no
agreement, the default provisions in the PA 1890 step in.
• Methods of financing: Partners can borrow but cannot
create floating charges. In addition, they also cannot
raise finance by issuing shares. [Show Less]