Question Tag: Partnership Law

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  • 7 Marks

BCL – May 2017 – L1 – Q6a – Sources of Law

Explain a partner's right to claim reimbursement for personal expenses incurred during authorized duties.

a) A partner in a firm in the course of an authorized duty incurred liability of which he/she made personal payment. The partner later made claims of reimbursement of expenses incurred. At a meeting of the partners of the firm, the reimbursement was declined.

Required: Explain whether the partner has any rights to claim reimbursement. (7 marks)

 

Under the Incorporated Private Partnerships Act, 1962 ACT 152:

  • From the date of registration and incorporation, a firm is a body corporate under the firm name, distinct from the partners of whom it is composed and capable of a natural person of full capacity in so far as those powers can be exercised by a body corporate. (2 Marks)
  • Although the firm is a body corporate, each partner in the firm is liable, without limitation, for the debts and obligations of the firm. A partner is entitled to an indemnity from the firm and to contribute from the co-partners in accordance with the rights of that partner under the partnership agreement. (5 Marks)

(Total: 7 marks)

 

  • 10 Marks

BCL – May 2020 – L2 – Q2a – Agency

Advise on whether a firm should bear the cost of an expenditure incurred by a partner during an assignment.

Jabi is a partner of an Accounting Firm. The firm’s office is located in Accra. In May 2019, Jabi was assigned an approved accounting duty outside Accra with the use of the Firm’s car. During the journey, the car had a burst tyre. The driver of the car, for unexplained reasons, had no spare tyre on the car. He therefore recommended the purchase of a brand new tyre, which Jabi bought with his personal money. He obtained a receipt in the name of the Firm.

Jabi sought for a refund of his money amounting to GH¢1,280 for the tyres bought. The Managing Partner refused the refund, saying it was the sole responsibility of Jabi to bear the expenditure.

Required:

i) Advise the Manager as to why the Firm should bear the full or part of the cost and not only Jabi.
(4 marks)

ii) Advise Jabi why it is not the sole responsibility of the firm to bear the cost.
(6 marks)

i) Advise the Manager:

  • Sections 4, 10, and 14 of the Incorporated Private Partnerships Act, 1962, Act 152 provide the relevant legal framework.
  • Section 4: Upon registration, a firm becomes a corporate entity, and the certificate states that the partners’ liability is not limited.
  • Section 10: A registered firm has the powers of a natural person and full capacity. While the firm is a corporate entity, each partner is liable for the firm’s debts and obligations, with an entitlement to indemnity from the firm.
  • Section 14: Partners are jointly and severally liable with the firm and other partners for the firm’s debts and obligations incurred while they remain partners.
  • Therefore, the firm, being a corporate entity with shared responsibilities, should bear the full or part of the cost.

(4 marks)

ii) Advise Jabi:

  • Section 10: The firm has a corporate nature and full capacity, making it responsible for the reimbursement of the expenditure on the tyres. However, Jabi, as a partner, shares responsibility with the firm and other partners.
  • Under Section 4: Jabi, as a partner, has liability towards the firm’s obligations and is entitled to indemnity from the firm.
  • Section 14: Jabi is jointly and severally liable with other partners for the firm’s debts, indicating a shared responsibility for the incurred cost.

(6 marks)

  • 8 Marks

BCL – Mar 2024 – L1 – Q4b – Alternative Forms and Constitutions of Business Organisations

Discuss the existence of a partnership in the provided scenario and the liabilities associated with partnership actions.

Three persons, Booker, Weah, and Makafui agreed to set up a restaurant. The finance was provided almost entirely by one of them, Booker. Before the restaurant opened, furniture and equipment were purchased and a laundry contract was entered into. Advertisements were placed in the newspapers and on television, apart from the fact that premises were acquired by the person who supplied the money. The parties then fell out and the business did not proceed as planned.

Required:

i) Explain whether in the circumstances of the facts, there is a Partnership in terms of the provisions of the Incorporated Private Partnership Act, 1962 (Act 152). (5 marks)

ii) State TWO (2) liabilities of Partnership for action or transaction done in the course of a Partnership business.

(3 marks)

i) Existence of a Partnership:

Section 1 of the Incorporated Private Partnerships Act, 1962 (Act 152) defines a partnership as the association of two or more individuals carrying on business jointly for the purpose of making profits.

Section 3(1) of Act 152 requires a copy of the partnership agreement to be submitted to the Registrar upon registration of the partnership.

Based on the facts provided, there was an association of two or more individuals who agreed to set up a restaurant. The individuals agreed on the kind of business they intended to carry on. Implied in the facts is that there was a partnership agreement, with each partner contributing financially or in kind. However, from the facts, only one of them, Booker, contributed substantially, and the parties fell out before the business could proceed as planned.

The substantive requirement of a partnership under Section 1 is the carrying on of business jointly for the purpose of profit. Since the business did not proceed as planned, one cannot conclusively say that the parties were in a partnership for business.

(5 marks)

ii) Liabilities of Partnership for Actions or Transactions Done in the Course of Partnership Business:

Section 12 of the Incorporated Private Partnerships Act, 1962 (Act 152) provides that a partner is an agent of the firm for the purposes of the business of the firm. The acts of the partners bind the firm if:

  • The acts were authorized, expressly or impliedly, by the other partners or were subsequently ratified by them;
  • The acts were done for carrying on in the usual way business of the kind carried by the firm.

Where the acts of a partner are for a purpose apparently not connected with the firm’s ordinary course of business, the firm is not bound unless the partner is in fact authorized by other partners or the act is subsequently ratified by them.

When a tort is committed by a partner in the course of business approved by the partners, all the partners become jointly and severally liable to the person who has suffered a loss as a result.

(Any 2 points @ 1.5 marks each = 3 marks)

  • 8 Marks

BCL – Nov 2018 – L1 – Q4b – Public Sector Entities

State two reasons why a partnership firm should reimburse a partner's expenses.

Apina is a partner in an accounting firm known as Dtd & Associates. On 3rd October 2018, he went out to execute an approved course of duty for the firm. Instead of being assigned an official car, the supervising partner asked that he should use his own car and provision was made for his fuel. In the course of duty, he burst a tire. He brought the receipt of the replaced tire bought to the supervising manager for a refund. The supervising manager, however, refused to reimburse Apina.

Required:
State TWO (2) reasons why the firm should reimburse Apina. (8 marks)

  • From the date of registration of the firm, the firm becomes a body corporate under the firm name, distinct from the partners of whom it is composed, and capable of exercising the powers of a natural person and of full capacity insofar as those powers can be exercised by a body corporate.
    (3 marks)
  • Although the firm is a body corporate, each partner in the firm is liable, without limitation, for the debts and obligations of the firm; but is entitled to an indemnity from the firm and to contribution from the co-partners in accordance with the rights of that partner under the partnership agreement. (Section 10 of the Incorporated Private Partnerships Act, 1962 ACT 152)
    Apina is therefore entitled to the reimbursement with contributions from the firm and co-partners.
    (5 marks)
  • 8 Marks

BCL – May 2018 – L1 – Q5a – Alternative Forms and Constitutions of Business Organization

Explain the position of a registered firm and the rights and liabilities of its members.

a) Azonto, Seamajolly, and Araba registered a firm of quantity surveyors under the name King & Associates.

Required:
Explain the position of the firm after registration and the rights and liabilities of the members of the firm towards each other. (8 marks)

  • Section 10 of the Incorporated Private Partnerships Act, 1962 ACT 152 recognizes the fact that a firm is a body corporate, distinct from the partners of whom it is composed and capable of exercising the powers of a natural person. (2 marks)
  • Despite the corporate nature of the firm, each partner of the firm is liable, without limitation, for the debts and obligations of the firm. A partner of the firm is entitled to an indemnity from the firm and to contribution from the co-partners in accordance with the rights of the partners under the partnership agreement. (3 marks)
  • The limitless nature of the liability of the firm is indeed captured from the onset of registration of the firm—section 4 of Act 152. This is further buttressed by section 14 that states that a partner in a firm is jointly and severally liable with the firm and other partners for the debts and obligations of the firm incurred while that partner remains a partner. (3 marks)
  • 10 Marks

BCL – Mar 2023 – L1 – Q4b – Alternative Forms and Constitutions of Business Organisations

Identify issues and requirements for establishing a partnership under the Incorporated Private Partnership Act, 1962 (Act 152).

b) Jane, Ama, and twenty-two other individuals agreed to incorporate a private partnership, which they simply referred to as Partnership. The individuals neither stated any registered address of the partnership nor the nature of the firm’s business. The individuals, however, stated the names of the foundation partners. The amount and percentage of contribution of each partner to the capital of the firm was also not stated. Even though the individuals stated the periodic and monthly drawings of funds, they failed to indicate any profit-sharing arrangements.

Required:
i) Identify TWO (2) issues that may arise in the above scenario.
(4 marks)

ii) State SIX (6) requirements for partnerships to be established under the Incorporated Private Partnership Act, 1962 (Act 152).
(6 marks)

i) Issues in the Partnership Scenario:
The question has to do with the legal requirements for the incorporation of a private partnership pursuant to the provisions of the Incorporated Private Partnership Act, 1962 (Act 152).

Section 1(1) of Act 152, provides as follows:
“Partnership means the association of two or more individuals carrying on a business jointly for the purpose of making a profit.”

Issues arising from the case:

  • It should be noted that the membership of the partnership should not be more than twenty (20) persons.
  • In the facts of the instant case, the number of persons is more than twenty (20) as required by the law.
  • There is no firm name because they referred to it only as Partnership.
  • The individuals neither stated any registered address nor the nature of the business of the so-called Partnership.
  • There is no statement on the amount and percentage of contribution of each partner to the capital of the firm.
  • There is nothing on the admission to the partnership and exit from the Partnership.
  • There is no statement on the management and administration of the firm.
  • The so-called Partnership Agreement or Deed of Partnership did not contain provisions that are required by law.

(Any 2 points @ 2 marks each = 4 marks)

ii) Requirements for Partnership Establishment under Act 152:
The requirements of registration pursuant to Section 3(1) of Act 152 are as follows:

  • The firm name of the Partnership.
  • The general nature of the business.
  • Address, which includes an electronic address, and Post Office box number of:
    • The principal place of the Partnership, and
    • Any other places in the Republic of which the jurisdiction is carried on.
  • The names and former residential address and business occupation of the partners.
  • The date of commencement of business.
  • Particulars of changes on Partnership assets or a statement that there are no charges.

(6 marks)

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