Limited partnerships

A limited partnership consists of one or more:

  1. general partners; who are liable for all of the debts and obligations of the firm

  2. limited partners; who do not take part in the management of the partnership business nor have power to bind the firm

A limited partnership, like a general partnership, is not a separate legal entity (see Practice Notes: The nature of a limited partnership and its legal framework and Limited partnership agreements).

Applicable legislation

Applicable legislation includes:

  1. the Partnership Act 1890 (the PA 1890)

  2. rules of equity and common law applicable to partnerships, subject to the provisions of the Limited Partnerships Act 1907 (the LPA 1907)

  3. the Insolvent Partnerships Order 1994 SI 1994/2421 (IPO 1994)—which applies certain provisions of the Insolvency Act 1986 (IA 1986) and Insolvency Rules 2016, SI 2016/1024 to partnerships, subject to necessary modifications and treats limited partnerships like general partnerships for insolvency purposes (see General partnerships and insolvency—overview)

  4. the Company Directors Disqualification Act 1986 (CDDA) (see Practice Note: Partnerships and the disqualification regime)

The Insolvency

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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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