Updating your Partnership Deed

If you have been in partnership for a number of years, the nature of your business will probably have changed considerably over time, and the manner in which the business is managed will almost certainly have changed.

It is human nature to make ad hoc informal agreements with your business partners as to profit shares, and the contributions of each partner to the business. Even matters as fundamental as the admission of a new partner, or the retirement of an existing partner, may not be recorded in writing due to the pressures of time.

Whilst this will be the case for almost all partnerships, agreeing informally to changes in the working relationships of partners of course leaves the partners exposed in the event that disagreements subsequently arise. A good rule of thumb is that if a Partnership Deed has not been updated for 4-5 years, it will almost certainly be out of date. This is particularly the case if the partners have been making ad hoc changes to the management of the partnership during this period.

The danger from a legal perspective is that it becomes very questionable whether the terms of the original Partnership Deed then actually govern the partnership, or whether the parties have entered into a new agreement verbally or by a course of conduct that substantially replaces, or completely overrides, the original Partnership Deed.

This uncertainty is potentially alarming, as in principle all partners are liable for the debts of the partnership incurred by other partners, and if no term is agreed, the outdated default provisions of the Partnership Act apply. Even if all the partners are completely trustworthy and behaving above board, should any dispute arise it could result in expensive and protracted litigation unless the terms of the Partnership Deed are clear and updated regularly.

For these reasons, and simply as a matter of common sense and good business practice, most well-governed partnerships have their Partnership Deeds reviewed every 4-5 years at the latest. Indeed, lawyers are so aware of the dangers of not updating the Partnership Deeds governing their own practices that these tend to be the most updated and best drafted documents the firm has ever produced!

The updating and amending process need not be expensive, and we will be pleased to review your Partnership Deed and complete the amendments required for what we are sure you will agree is a surprisingly reasonable fee. This will certainly be the case when compared to the potential costs of litigating an outdated Partnership Deed that you may find to your surprise has been replaced in its entirety by an informal course of dealing.