Partnership Act 1890

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- Printing Press vendor v Mary

As explained in Shady Deals v Mary, Mary cannot be held liable for repayment (S17 (1) of PA 1890) because she was not a partner when entering into the agreement.

- XYZ Ltd v Partnership

As per S6 “An act or instrument relating to the business …………..binding on the firm and all partners “. Clearly the partnership is liable to repay XYZ Ltd for the goods delivered. Partnership has breached the contract in terms of payment.

- XYZ Ltd v Ben

As mentioned above the partnership is bound by the contract towards XYZ Ltd. As a result of which Ben too is bound in accordance with S6. Ben will be jointly liable by S9. Ben was a partner when on 1 February and only retired on after 1 may. Just because he is currently retired his liability is not ceased. This evident from S17 (2), stating “A partner who retires from ……incurred before his retirement”

Ben was however required to notify the existing customers of his leave from the partnership. He should have also advertised the fact in the London Gazette, to alert those individuals who have not traded with entity yet, but were aware of his status as a partner (Kelly et al., 2011).

- XYZ Ltd v Ann

Ann as a copartner will be bound and jointly liable towards XYZ Ltd by S6 and S9 respectively.

- XYZ Ltd v Mary

Mary as an incoming partner who joined the partnership on 1 March 2016 will not be liable for a contract signed on 1 February 2016 as explained by S17 (1)

- Advise to Ben regarding his new business

If Ben is planning to open a new printing business he should pay notice to S30, which states “If a partner, without consent …………….made by him in that business”. Ben must consult both Ann and Mary before competing with them in the same field of business and must account for all such profits.

Glassington v Thwaites [1828] E.R. 57 (1 Sim. & St. 124), p.50.

A partner of a morning paper printing partnership was also involved in an evening paper publishing. Copartners of the morning paper alleged, the evening paper was posing competition to its own publication. It was decided that the partner was to account for profit made through his evening publication.

Ben’s decision to incorporate a private limited company is safer than engaging in a partnership. Incorporating a private limited company creates a separate legal entity. This gives companies the advantage of entering into contracts in its own name; and perpetual succession (Clayton, 2008) . The driving force to create a company is its characteristic veil of incorporation. The veil of incorporation stresses that the company’s acts are not the acts of its shareholders, directors and agents, as a result of which the mentioned parties are exempt from being liable for the company’s acts (Bello and Michael, 2014). The veil allows individuals to possess limited liability, i.e., liability to the extent of their unpaid shares. However the veil may be lifted under necessary situations, even though the courts may be reluctant, this is commonly referred to as piercing of the veil. Theories include agency theory, single economic unit, Façade Company and in the interest of justice (Nyombi, 2014).

There are several procedures required for Ben to set up Private Limited Company. To register he must incorporate his company with the Companies house. The companies’ house incorporates, dissolves limited companies, registers information and makes them viewable to the public (gov.uk, 2017). Ben is required to submit the following documents to the companies’ house:

Memorandum of Association: According to S9 of Companies Act 2006, it is a document in which members agree to be shareholders of a company, agree to be members and if provided shares agree to take at least a share each.

Articles of Association: It is the constitution of the company; setting out rules and regulations of the company. The articles binds the company and the members’ .The companies’ house alternatively provides a model articles of association

The Application Form provides pertinent details such as the proposed name of the company and its location. It will also state the choice for limited or unlimited liability along with the choice to go private or public. Ben will have to take a choice between limiting by guarantee or by share. A statement with the name and location of proposed directors and their consent is to be provided.

A statement of compliance is to be submitted. The document asserts that registration is done in accordance to the Companies act 2006. S13 CA 2006, states that I must be signed by all subscribers.

Once the company has submitted the mentioned document with an incorporation fee, it will obtain a Certificate of Incorporation, provided that the companies’ house finds no issue with the documents. It is the proof of creation of a company and the evidence of proper registration.

A Private limited company may start business once it has received the certificate of incorporation and does not need a certificate of trading.

References

Case laws

Glassington v Thwaites [1828] E.R. 57 (1 Sim. & St. 124), p.50.

JJ Coughlan Ltd v Ruparelia [2003]EWCA 1057 (Court of Appeal (Civil Division).

Law v Law [1904]CH 1 (Court of Appeal), p.140.

Mercantile Credit Co Ltd v Garrod [1962][1962] 3 All E.R. 1103 (Queen's Bench Division).

Books

Clayton, P. (2008). Forming a Limited Company. 10th ed. London: Kegan page, pp.1-3.

Kelly, D., Hayward, R., Hammer, R. and Hendy, J. (2011). Business Law. 6th ed. USA: Routledge, p.133.

Jones, L. (2011). Introduction to Business Law. 3rd ed. Oxford University Press, p.496.

Slorach, J. and Ellis, J. (2016). Business Law 2016-2017. 24th ed. New York: Oxford University Press, p.16.

Journals

Bello, S. and Michael, O. (2014). Piercing the Veil of Business Incorporation: An Overview