Law of Partnership and Company Law Problem Question

August 27, 2017 Law

Coursework Question

Fred and Anne have been runing in partnership for several old ages,running a concern that renovates flats for rental. Occasionally Fred, who isresponsible for fixs, has failed to acquire pressing fixscarried out when they are notified by renters. One of the renters, Lisa, has announced thatshe intends to raise a legal action against Fred, Anne and the partnership on the land that the floor of her life room was allowed to go icky and she fell through it and injured her leg. Inspection confirms the floor is rotten, and Lisa has grounds that she notified this to Fred many months before. When Fred heard about this legal action, andin an attempt to get away liability,he instantly gave notice to Anne that he wished to end the partnership. Anne says that the job wasFred’s mistake and she and the partnership are hence non apt.

Anne spends a batch of her clip at societal maps where she does a batch of networking. Recently she heard about an chance to buy a edifice for transition to flats. Anne soinstantly formed a private company,Cheap and Cheerful Ltd,with her hubby as the exclusive stockholder and manager, and without Anne stating anything to Fred, Cheap and Cheerful Ltd has now bought this edifice at a good monetary value and renovated it and has let it at a good net income.Much later, Fred has found out about this and wishes to do a legal challenge.

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For his following venture, Fred is inquiringwhether a private limited company would be a safer concern vehicle than a partnership, for a level redevelopment concern, and would welcome information on how to organize such a company.

Advise Fred and Anne on all the legal issues associating tothe jurisprudence of partnershipandcompany jurisprudencethat arise in this inquiry.


Partnership harmonizing to thePartnership Act of 1890 ( S.1 )is the relationship that subsists between the spouses transporting out the concern with the position of net income. ‘A partnership arises when a figure of persons are in concern together, instead than in an employer-employee relationship. The statute law regulating partnerships is the Partnership Act 1890.’( Rati Shah MBE, 2011 )

Here, we see that Fred and Anne have been engaged in a partnership for many old ages. They run a concern of restituting flats to be given on rent to the people. Fred being the spouse in the concern would normally take up the duty to make the fixs in the rented flats, if any. But he failed to do the pressing fixs when notified by the renters. Lisa, being one such renter, said that she would register a instance against Fred, Anne, and the Partnership for non carry throughing their duty of doing the fixs on the floor of her house which was rotten and due to which she fell and injured herself. Fred sent a missive to Anne to end the partnership ( because he didn’t want to confront the liability all by himself ) . Anne clearly told that the mistake lies in the custodies of Fred and that neither the partnership nor she herself can be held apt. Anne subsequently started off a private company, Cheap and Cheerful Ltd. with her hubby.Without informing Fred about the new company, Anne through Cheap and Cheerful Ltd has now bought this edifice at a good monetary value and renovated it and has let it at a good net income.

Fred wants to do a legal challenge against Anne. He is besides confused as to which would be a safer signifier of concern for his following venture. A partnership or a private limited company? Well, there are many differences between a partnership and a private limited company.

A company hasmore complexness in its constructionwhen compared to a partnership. More people are involved in the determination devising procedure. The stockholders decide as to how they can pull off and run the company. Where as in the partnership, the whole concern including the liabilities and net incomes are shared among the two or more spouses of the partnership house andits construction is simple. In a partnership, the spouses areheld lawfully responsiblefor all the debts and liabilities of the house. On the other manus, in a company, the stockholders are non held accountable for the company’s debts. The company is aseparate legal entity. Thus it holds itself apt for all the legal fees and the stockholders of the company are non hazards of losing their assets. A company isan unreal individual. This makes the company in a place to do legal actions for and against those making legal actions in favour of or otherwise of the company. While, partnershipisn’t considered to be a legal individualand the spouses own the belongingss of the house and will be held apt for all the actions undertaken by the house. Theliabilities of the stockholders in a company are limitedmerely to the extent of the portions that he holds. While in the instance of partnership, thespouses liabilities in limitless. That is the ground why the partners’ personal assets can be taken to pay off the liabilities and debts of the partnership house. Insolvencies of the companydo non do the members of the company bankrupt. But in a partnership, if the house is insolvent, the spouses are besides considered bankrupt.Partnership haslesser formalities and is simple. Whereas, a company ismore formal and complex. Like for illustration, when a company is to be dissolved, rigorous formal regulations are to be heeded while in the instance of a partnership, disintegration can take topographic point even by common consent. There is aBoard of Directors who is electedby the stockholders of the company. But in a partnership, it is different. The house is looked after by one or a group or by all the spouses of the house.No electiontakes topographic point.Ageless sequenceis present in a company. This means that if a stockholder of a company passes off or is considered insolvent, the company doesn’t cease to be. It continues. This is in contrast to a partnership house where if a spouse dies or is considered insolvent, the partnership ends and there isno such ageless sequence. For a company to come into being, it has toget registeredwith the Companies Act, 1956. But in a partnership,that isn’t necessary. In a company at that place must be a lower limit oftwo members( in a private company ) andseven members( in instance of a public company ) . But in a partnership there is ademand of merely two spouses. In a public company themaximal figure of members can be infinite and in a private company, they can hold non more than 50 members. Contrastingly, in a partnership, the maximal figure of members is20 in a trading house and ten in a banking house. A stockholder in a companycan reassign his portionsbut a spousecan’t reassign his portion of the portionswithout the acquiescence of the other spouses of the house. In a partnership, the net incomes can be distributedevery bit or in proportionsdecided by the spouses but in a company, the net incomes are distributed on thefooting of the articles provided by the managers.Auditingplays a critical function in a company. But it isnon necessaryin a partnership.

One the footing of the above differences between a private limited company and a partnership, I would advice Fred that aprivate limited companywould be safer to be established for his following venture. They can get down their concern every bit shortly as they receive the Certificate of Incorporation. There is no demand of a minimal capital. A private limited company needs merely a individual manager even though more can be elected. But, it is non allowed to hold its portions listed on the Stock Exchange. It has lesser obligatory functionary processs. All these do a private limited company more advantageous than a partnership house. Particularly when it is a level redevelopment concern, the hazards can be minimized as formalities are less and the liabilities are merely to the extent of portions held by the member ( s ) .

  • Excellent designation of relevant facts, doing premises where appropriate and application of relevant jurisprudence, covering all legal issues.
  • Excellent usage of primary and secondary beginnings ( primary: legislative acts, instances, secondary: text editions, journal articles )
  • Answer is good structured with a clear debut and decision, and logical development of statement.

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