What is the main source of law authorising this entity form?

Partnership Act 1890

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

Has no separate legal personality.

(Maximum) period of existence

Has no maximum period of existence. Most partnerships are “at will” and have no set duration. It will continue until dissolved, unless other agreed.

Liability of incorporators / shareholders

Partners have unlimited liability for a partnership’s debts.

(Governing) bodies

Is usually governed by a partnership agreement, but a written agreement is not required. If no partnership agreement exists, default rules in the Partnership Act 1890 apply.

Other particularities

Exists where persons are carrying on a business in common with a view to profit (whether it exists is a matter of fact and the parties cannot simply determine this for themselves).

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

No.

Can this type of entity be publicly listed or held?

No.

Can this type of entity be used for a non-profit or charitable organization?

No – the definition of a partnership under UK law includes the requirement that the people involved have a “view to profit”.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

Partnership agreement is usually the main document – but there is no requirement for one.

Involvement of notary, company register, governmental authorities

No incorporation.

Main costs, including registration and similar fees (excluding legal fees)

No registration is required at Companies House so no registration fees.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

A partnership agreement will usually detail the description/activities of the partnership.

Minimum number of incorporators / shareholders and residency requirements

Minimum of 2 partners. No residency requirements.

Minimum number of directors (or other applicable officers) and residency requirements

Not applicable.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

No minimum capital but the amount of a partner’s capital contribution should be stated in the partnership agreement.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

Not applicable.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

Not applicable - a partnership is not a taxable entity. The partners are taxed in their personal capacity for any profits or losses arising.

What is the title of the applicable company registry?

Not applicable.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:

There is no obligation to file anything.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

Partners’ rights/responsibilities/duties are set out by statute (but are subject to contrary agreement as among themselves only in the partnership agreement) and include unless otherwise agreed by the partners:

Rights:

• An entitlement to share capital and profits equally;
• An obligation on the partnership to indemnify every partner in respect of payments made and liabilities incurred in the course of its business; and
• An entitlement to interest on advances to the partnership.

(No partner is entitled to remuneration for acting in the partnership business)

Responsibilities:

• Requirement to take part in the management of the partnership;
• All actions carried out by a partner in the ordinary course of business (including wrongful acts or omissions) bind the partnership and all the partners (who are liable jointly); and
• Partners are liable jointly with the other partners for all debts and obligations of the partnership.

Duties:

• To render true accounts and full information to any partner;
• To account to the partnership for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership; and
• To disclose any information about the business to each other;
• Not to compete with the firm.

In equity, partners owe to each other fiduciary duties (that is a duty of utmost good faith).

How are the members of the executive body appointed, dismissed and replaced?

Unless otherwise agreed in the partnership agreement:

Appointment

• Admission of new partners requires unanimous consent of the other partners; and
• If a new partner is admitted, the new partnership is a partnership at will (unless the existing agreement caters for the admission of new partners who agree to be bound by its terms).

Leaving a partnership

• Retirement;
• Other partners exercising an express right to expel in a partnership agreement (otherwise must reach agreement with partner in question or apply to dissolve or wind up the partnership);
• Death; or
• Bankruptcy.

Is it possible to appoint corporate directors or must all directors be natural persons?

A partnership can have corporate partners.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

Not applicable.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The partners are the owners who are entitled to both manage and own the partnership.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

Subject to contrary agreement:

• Decisions are taken by a majority of the partners except that no change can be made in the nature of the partnership business without the consent of all the existing partners.
• No specific quorum requirements – usually set out in the partnership agreement.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

No.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

Subject to contrary agreement:

• There is no express requirement to prepare accounts.
• There is a duty to render true accounts and full information to any partner.
• There is a reference in the Partnership Act 1890 to partnership books being kept at the place of business of the partnership.

Is the entity permitted to determine its own financial year?

Yes – governed by partnership agreement.

Is the entity subject to any statutory (external) auditor obligations?

No.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

No.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

There is no specific designated title but usually “interest” is used.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

The partnership agreement usually sets out any different interests as to profit and capital allocations. If there is no partnership agreement in place, the default provision is that partners are entitled to share equally in the capital and profits of the partnership.

What documentation is required for the transfer of ownership interests?

Governed by partnership agreement.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

No. Incoming and outgoing partners will usually be governed by a deed of retirement or deed of accession (as applicable). Alternatively, partnership assets can be sold as an asset sale.

Are there any applicable stamp duties imposed when transferring ownership interests?

Only if the partnership holds stock or marketable securities or if it is a property investment partnership.

How are shares issued? (including information on payment obligations, registration requirements)

Not applicable.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

There are no shares issued so this is not applicable.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

Not applicable.

Any requirements with respect to distributions to shareholders?

Governed by partnership agreement. Generally, profits are calculated annually but partners may take out money periodically against expected profits (called drawings).

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes – partnership agreement.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The activities of a partnership are treated as carried on by the individual partners and not by the partnership as a body – so the partnership as a whole is not liable to pay tax.

Partners are taxed separately on their share of the profits or losses and where assets are disposed of each partner is treated as owning a share in every partnership asset so that each is liable to capital gains tax on the proceeds apportioned to them.

A partnership can apply in its own name to register for value added tax (VAT) purposes.

A partnership is required to file a partnership tax return on behalf of all the partners showing the profits of the partnership.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

No corporation tax as a partnership is not a taxable entity. Partners are taxed on their own profits and losses.

Summary of any specific matters, e.g. recent or prospective major legal developments

N/A.