The Partnership Influence Upon Corporate Law

David Milman, Professor of Law, University of Lancaster, UK

David Milman will examine how Partnership Law has had, and continues to have, an impact on the development of Corporate Law.  The primary focus will be placed upon the Quasi Partnership, with consideration being given to recent case law in the UK and overseas.  The criteria for a finding of quasi partnership will be considered, together with the consequences of such a judicial finding.  Questions will be asked as to why the courts have modified Corporate Law through the device of Quasi Partnership and whether it is appropriate for them to continue to use this methodology.

The Application of Corporate and Individual Insolvency Law to Partnerships and LLPs
Elspeth Berry, Associate Professor, Nottingham Law School and Professor Rebecca Parry, Nottingham Law School

The courts have described the Insolvent Partnerships Order 1994 as ‘far from straightforward even for those familiar with insolvency law’, and the insolvency provisions of the LLP Regulations 2001 are similarly deficient. They are based on IA 1986 and CDDA 1986, which were designed for companies and individuals and which themselves suffer from substantial defects. Thus, a shaky legislative foundation has been used for business vehicles very different from those for which it was intended, without any thought given to whether this is appropriate.  Indeed, as this paper demonstrates, it is often inappropriate. This problem parallels that of small private companies suffering regulation designed for large public companies, but the distinctions between partnerships or LLPs, and companies, are even greater.

First, partnerships and LLPs have very different decisionmaking processes, based on one vote per person in a single decisionmaking tier, and significant problems are caused by the failure of the legislation to recognise this. Second, a partnership is an aggregate, and the application of concepts designed for an entity is often meaningless.  Third, partners are personally liable for business debts, which necessitates a different approach to debt priorities and sanctions for wrongdoing.

These differences lead to manifold problems, as discussed in the paper. They also mean that that the theories underpinning company insolvency law dictate different outcomes for the content of partnership and LLP insolvency laws. Consequently, the Order and the Regulations require substantial reform as set out in this paper.

The Shifting Balance of Power in UK Insolvencies

Professor Rebecca Parry, Nottingham Law School

Formal insolvency laws in the UK have undergone a shifting balance of power in recent decades, notably following the virtual abolition of administrative receivership under the Enterprise Act 2002, together with the modifications to administration under that Act, which reduced the influence of secured creditors and emphasised the collective interests of creditors.  The 2002 reforms also sought to boost the rescue culture.  The phenomenon of a rescue culture, although first legislatively addressed under the Insolvency Act 1986, was slow to establish and was not fully realised under the 1986 Act, as first enacted.  However following the 2002 reforms the usage of administration altered, notably with the rise of prepacks, which in part developed in response to the expense of the sort of trading administration envisaged under the 1986 Act. As a result a different sort of rescue culture, that of business rescue, dominated, rather than corporate rescue, leading to creditor dissatisfaction.  Recently announced reform proposals stand to alter the balance again, however, with firstly, the introduction of a self-standing moratorium, secondly a restructuring plan and thirdly restrictions on the use of ipso facto clauses, which allow for contractual termination in the event of insolvency.  These reforms potentially offer the prospect of a revived rescue culture, with greater powers for company managers to restructure companies in a simple and cost effective way and this paper and they will be evaluated in this paper.

Issues that arise in partner/LLP member exits: a practitioner’s eye view - Jeremy Callman (Ten Old Square, Lincoln’s Inn)

This paper will include:

•    An overview of terminating partnership/membership in practice.
•    How do expulsion and compulsory retirement differ?
•    Is compulsory retirement an unfettered right to remove? Do you need to give reasons?
•    Is there a right to be heard?
•    How does good faith apply in the context of exits?
•    How might Braganza principles apply to partner/member exits?

Scottish partnerships and how they differ from English partnerships - Stephen Chan (Harper Macleod LLP, Edinburgh; author of A Practical Guide to Partnership Law in Scotland)

"In Scotland a firm is a legal person…" This short sentence from section 4(1) of the Partnership Act 1890 underpins the main difference between Scottish partnerships and English partnerships. Stephen will discuss the concept of Scottish legal personality, and what this means for a Scottish partnership as opposed to an English partnership. Amongst the points being covered are the differences in the agency principle, entering into contracts and bankruptcy of the partnership.

Bovill’s Act 1865: much ado about nothing? - Gary Wilson (Nottingham Law School)

“The moral ambiguity of corporate capitalism in late-Victorian Britain was not a conscious construct. At no point in Victoria’s reign did politicians, judges, businessmen, financiers or political economists devise a master plan in which the institutional building blocks of this capitalist system were sketched out.” (Johnson, Making the Market, 2010)

It is trite that in the early nineteenth century business in Britain was only exceptionally carried on through a corporate entity and, indeed, that the partnership remained for the majority of the nineteenth century the organisational form employed by most businesses. Despite the way in which many contemporaries throughout the century contrasted the statutory development of the company with the ‘natural law’ underpinning the partnership it is clear that the latter was also subject to considerable flux and divergence of understanding. In this light this paper seeks to examine the contemporary discourses surrounding the passage and reception of The Partnership Amendment Act 1865 (commonly, though misleadingly, known as Bovill’s Act) as an interesting vignette of the complex interactions involved in the regulation of nascent industrial capitalism. It is remarkable as to the variance of understanding of its effect at the time. In the words of Lord St. Leonards during the second reading of the Bill, it was “the most important law in reference to the law of debtor and creditor that had ever been presented to their Lordships for consideration” due to its supposed facilitation of sleeping partners and the extension of limited liability to the partnership form thereby involved. However, subsequent judicial construction of the Act, rendered it simply declaratory of the existing common law position set out in Cox v Hickman (1860). Was Bovill’s Act thus an opportunity lost or simply much ado about nothing.

Abuse of UK Limited Partnerships and the Outlook for Reform - Richard Smith (freelance journalist)

An overview of the abuse of SLPs in several giant international fraud, grand corruption and money laundering cases, including

• The billion-dollar Moldovan bank fraud of 2014
• The “Russian Laundromat” ($20-$80Bn, 2011-2014)
• The “Azeri Laundromat” ($4Bn, 2011-2015)
• The “Lava Jato” (Odebrecht) corruption scandal.
• Last but far from least, an emerging role in the Danske Bank Estonia scandal  ($300Bn, 2007-2015).

How to identify potentially abusive SLP registrations
Reforms so far and why they are inadequate
The outlook for effective reforms