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Partner entitled to share partnership assets despite her resignation

June 5th 2024
 

A woman who resigned from her family’s business partnership is still entitled to a share in the partnership assets, the Court of Appeal has ruled.

Mark Aspin Director and Head of Dispute Resolution reports on this recent case.

The case of Procter v Procter involved a 600-acre farm.

The partnership consisted of two brothers, their sister, and their father. Each partner was entitled to one quarter of the profits.

The partnership agreement had no provisions to enable a partner to unilaterally resign, and there is no such automatic right in law.

The sister played no part in running the business and became concerned that she remained liable for its debts, especially after it made a loss in two consecutive years.

She therefore wrote to the other partners in 2010 to say that she was resigning with immediate effect.

The other partners did not realise that a partner had no legal right to unilaterally resign in that way and so carried on without her. There was no discussion or agreement about the financial terms on which she should leave.

The partnership later discovered that it had an asset which had not been recorded in the partnership’s accounts.

This led the sister to claim she was entitled to a quarter of the newly discovered asset.

The case went all the way to the Court of Appeal, which ruled in her favour.

It rejected the partnership submission that a partner who resigns without an agreement as to whether a payment should be paid is effectively surrendering their interest in the business for no payment at all.

It held that not having an agreement as to what should be paid is not the same as agreeing that nothing should be paid.

The partnership had used the sister’s interest in the partnership assets following her resignation. She was now entitled to her quarter share of the value of those assets.

If you would like more information about the issues raised in this article or any aspect of partnership and company law please contact contact Mark on 01228 516666 or click here to send him an email.

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