Dealing with a partnership in a finance transaction—investigating capacity and authority
Dealing with a partnership in a finance transaction—investigating capacity and authority

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Dealing with a partnership in a finance transaction—investigating capacity and authority
  • Why is it important to understand the acts a partnership will perform in a finance transaction?
  • Acts of a partnership in a finance transaction
  • Taking security from a partnership
  • What is meant by 'capacity and authority'?
  • Investigating the capacity of a partnership
  • Investigating the authority of a partnership
  • Authority of partners to bind the partnership
  • Authority of others to bind the partnership
  • Authority of a partner to bind the partnership arising by 'holding out'

This Practice Note considers the of acts typically carried out by English law partnerships in the context of finance transactions and covers the steps which can be taken to investigate the capacity and authority of an English law partnership.

There are two different types of partnerships in English law—a general partnership and a limited partnership (LP). Each is governed by legislation:

  1. partnerships are governed by the Partnership Act 1890 (PA 1890)—see Practice Note: The nature of a general partnership and its legal framework, and

  2. limited partnerships are governed by the Limited Partnerships Act 1907 (LPA 1907)—see Practice Note: The nature of a limited partnership and its legal framework

These are distinct from limited liability partnerships (LLPs) which are corporate bodies established under the Limited Liability Partnerships Act 2000 (LLPA 2000). See Practice Note: The nature of a limited liability partnership and its legal framework and for information on investigating the capacity and authority of LLPs in the context of finance transactions, see Practice Note: Dealing with limited liability partnerships in a finance transaction—investigating capacity and authority.

A partnership is recognised as a body for carrying on business which is often used for small businesses, professional services or for trading businesses.

This Practice Note deals with the first type of partnership, which is governed by the PA 1890.

Why