General partnerships

A general partnership is the relation between persons carrying on a business in common with a view of profit. However, it is not a separate legal entity. It cannot give a floating charge (except that an agricultural floating charge can be granted by farming partnerships). For general details, see Practice Note: The nature of a general partnership and its legal framework.

Applicable legislation

Applicable legislation includes:

  1. the Insolvent Partnerships Order 1994 SI 1994/2421 (IPO 1994)—which applies certain provisions of the Insolvency Act 1986 (IA 1986) and Insolvency (England and Wales) Rules 2016, SI 2016/1024 (IR 2016) to partnerships, subject to necessary modifications and prevails over the IR 2016 in the event of conflict

  2. the Insolvent Partnerships (Amendment) Order 2005 SI 2005/1516 (IPAO 2005)—which applies administration to partnerships

  3. the Insolvent Partnerships (Amendment) Order 2006 SI 2006/622 (IPAO 2006)—which applies administration to partnerships

  4. the Partnership Act 1890 (PA 1890)

  5. the Company Directors Disqualification Act 1986 (CDDA 1986), as modified—which applies to partnerships which are wound up as unregistered companies (see Practice Note: Partnerships and the disqualification regime)

The

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Insolvency–fraudulent trading and dishonest assistance (Bilta and others v Tradition Financial Services)

Restructuring & Insolvency analysis: The Supreme Court held that liability for fraudulent trading under section 213 of the Insolvency Act 1986 (IA 1986) is not limited to directors or other persons exercising management or control over the company in question. Rather, liability can attach (as the natural meaning of section 213 admits) to any person who is knowingly party to the carrying on of the company's business in a fraudulent manner. The Supreme Court further restated that an isolated act of fraud in an otherwise legitimate business would not amount to fraudulent trading. The Supreme Court was also asked to determine whether claims in dishonest assistance, parasitic on the directors' breaches of their fiduciary duties, were statute barred under the Limitation Act 1980 (LA 1980). The claims were issued more than six years from the dates of those breaches. The claimants sought to postpone the accrual of the limitation period under the LA 1980, s 32, ie until the time the claimants either discovered the fraud or could with reasonable diligence have discovered it. On the assumed facts, and notwithstanding the intermediate dissolution and restoration of the companies, the claimants could not rely on LA 1980, s 32 and were consequently stature barred. Written by Sam Fenwick, partner, Suleika Horrocks, trainee solicitor, and Isabelle Burnett, solicitor apprentice at Wedlake Bell LLP.

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