T: 051 401 9111 [email protected] LAW OF PARTNERSHIPS Dissolution of partnerships.

T: 051 401 9111 [email protected]

LAW OF PARTNERSHIPS

Dissolution of partnerships


GROUNDS FOR DISSOLUTION

• Mutual agreement • Effluxion of time • Completeion of partnership business• Death of partner • Retirement • Admittance of new partner • Order of Court • War • Sequestration

MUTUAL AGREEMENT

• Termination agreement

• Expressly or tacidly

• Formalities according to partnership agreement

• Can deviate from procedure – mutual agreement

EFFLUXION OF TIME

• Partnership agreement

• May extent, short or waive initial term – agreement

• Retain same trights and obligations, unless agreement to the contrary

COMPLETION OF PARTNERSHIP BUSINESS

• Established for a specific project

• What happens when purpose partnership was established for falls away

DEATH OF A PARTNER

• Dissolves immediately

• Surviving partners can continue

Agreement

New partnership agreement

• Appointment of successor not valid

• Partnership can temporarily continue for benefit of deceased estate

Agreement

Liquidation is postponed

Detrimental effect of unexpected and immediate liquidation is

limited

RETIREMENT OPF A PARTNER

• Unilateral notice

• Can be restricted in partnership agreement

• Good faith, reasonable, inopportune time

Consequences – partnership dissolves

- breach of fidiciary duties

- damages

- share in benefits

ADMITTANCE OF A NEW PARTNER

• Agreement between existing partners and new partner

• Not necessarily the same rights and obligations

• Strictly applied - may change in future (Berco Sameday Express 1996)

ORDER OF THE COURT

• Partner apply to court to dissolve partnership

• Dissolution fair and just

• Court will consider following circumstances:

- Breach of fiduciary relationship

Irreparable breach

Undermining; adultery; partnership agreement

- Change in personal circumstances

Long-term illness, certification mentally ill;

long-term imprisonment

WAR

• One of partners is an alien, living in enemy terrotory – dissolves automatic

• Not living in enemeny territory – court for dissolution order

SEQUESTRATION

• Partnership estate sequestrated

• Partnership’s estate sequestrated ,CC or Co liquidated

• Procedure: Estate of every partner is sequestrated (except extraordinary partners)

• Insolvency Act can prevent sequestration of apartner’s estate

Undertaking to pay debts ; en

Provide security


FORMALITIES FOR DISSOLUTION

• No statutory formalities • Wide publication required • Estoppel • Old partnership dissolved – new partnership formed – goodwill transferred

Insolvency Act requires publication in Government Gazette

Two editions of Afrikaans and English newspaper

At least 30 days before and not longer that 60 days before assets are

transferred • Failure


CONSEQUENCES OF DISSOLUTION

• Relationship between partners • Relationship between partners and third parties

RELATIONSHIP BETWEEN PARTIES

• Relationship of good faith continues

• Partnership agreement terminates

May determine the relationship after dissolution

• Termination of mutual mandate

unless required to complete uncompleteed business

or to have business liquidated

RELATIONSHIP BETWEEN THIRD PARTIES

• Rights and obligations remains valid

Debtors have to perform – all partners must jointly claim

More practical arrangement – one person has authority

• Liable to perform i.t.o. its obligations

Jointly and severally liable

Any of the partners can be held liable

Can be recovered from other partners

LIQUIDATION

• Liquidation? ( 2 ways)• Partnership agreement can provide for procedure to follow • Partners can conduct liquidation themselves• Court can be requested to appoint – if partners cannot agree • Liquidator fidiciary duty • Liquidator to be dischaged • Process to be followed

Nothing left – loss share

Assets left – capital repayed

- then they share in terms of contract

Action pro socio

Actio communi dividundo

• Berco Sameday Express v McNeil [1996] 4 All SA 100 (W)

• Goodricke’s v Hall [1978] 4 SA 208 [N]

• Geldenhuys v East and West Investments (Pty) Ltd 2005 (2) SA 74 (HHA)

• Wegner v Surgeson 1910 TDP 571

• Curtis and Curtis v Beart 1909 TH 141

• Koekemoer v Langeberg Stene BK 1999 (1) SA 361 (N)

COURT CASES FOR NEXT WEEK

T: 051 401 9111 [email protected] LAW OF PARTNERSHIPS Dissolution of partnerships.

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