General partnership?

[The Organiser]

Quite complex, I'll try to explain as best as I can.

A relative set up a general partnership with no partnership agreements with his wife approx 1977. The wife then retired in 2010 and they employed a couple to work for them as the wife's intention was for them both to retire. The husband was not ready to retire at this point and they employed a local married couple to work for them, the lady replaced the wife who retired and the man was employed by them originally on a salary and since 2010 is now known to be a general partner due to no formal partnership agreements. The husband died in 2023. The retired wife is still receiving monthly payments from the business for herself (even though she retired in 2010) and doesn't even answer a phone. She also forced the lady to pay her dead husbands money directly to her account and this is current until Dec 2023 when they initiated redundancies for the lady and another employee. The man (partner) has not been dealt with yet, company being dissolved/wound up, accountant involved and solicitors on stand by. A very messy situation all round

1. When the wife retired should the company have been dissolved?

2. If the wife is retired, why is she still receiving a monthly payment from the business and now her dead husbands money too?

3. The wife still perceives that she is a director or the senior partner of the general partnership and the man is only a salaried partner with no capital account or share of any partnership assets, a solicitor has stated he's a general partner according to current law

4. The wife has tried to sell the general partnership to the man when he already owns it, the husband said when he made the man a partner that when he died the partnership would solely belong to the man, theyve been partners now for 13+ years. The man has refused to pay anything for the partnership to date and the wife has written to him to dissolve it. However, the partnership should dissolve with the death of her husband anyway.

5. The wife or her children have since emptied all partnership bank accounts, there has been no consultation, agreement or involvement between the wife (retiree) or the man (current general partner)

6. The wife has made 2 x employees redundant, no contracts, no pensions, no consultation etc

7. There are 3 x executors involved. 2 x executors are the wife's children and one is the husbands child. The husband's will states that the 3 x executors act as the deceased partner in running the partnership. However, there is very little communication at all between anyone involved to date, nearly 12 x months. Decisions are supposed to be joint by all 3 x executors but 2 x children of the wife have taken charge of everything to date. The husbands child has been excluded from any duties and is being kept in the dark. The wife has disposed of historical general partnership documents for some reason and all paperwork for the deceased husband has been removed from the home

My main question is - Is his wife still a general partner if she retired and where could I get proof of this?

Thanks in advance, all advice is appreciated

 

[eteb3]

On what basis is Man said to be a partner? Does he get a salary only? Or does he get a share of the profits?

The wife then retired in 2010

Above all you need to sort out what you mean by “retired”. In partnership law it generally means “withdrew from the partnership”. If you just mean she stopped working, then as long as she had no intention to leave the partnership then yes she continues as a partner.

should the company have been dissolved?

I thought this was a partnership?

the man was employed by them originally on a salary and since 2010 is now known to be a general partner due to no formal partnership agreements.

What do you mean exactly? And how is it "due to no formal partnership agreements" that he's a partner? He can't be a partner due to (= because of) a lack of a partnership agreement. If he's a partner, he's a partner for some other reason.

1. When the wife retired should the company have been dissolved?

If you mean the partnership, there will have been a technical dissolution on Husband's death. A new partnership formed immediately the remaining partners (by word or deed) indicated they intended to carry the business on further. But if Man was not in fact a partner at date of death, then the partnership ceases completely, because a partnership must subsist between persons, and one of the two persons is no more. What happens if the biz continues in that situation I'm not sure: I imagine Wife is a sole trader employing Man & Lady.

EDIT Sorry this is about Wife’s retirement. If “retire” means withdraw, and if biz continues, it’s a technical dissolution as per H’s death. If she merely ceases to work, no, no dissolution necessary, she just becomes a non-working partner

2. If the wife is retired, (a) why is she still receiving a monthly payment from the business (b) and now her dead husbands money too?

a) Because (probably) she remains a partner. b) Because (probably) she inherited her husband's interest in the partnership. But only if Man was in fact a third partner (see above at 1); if not, she's a sole trader and entitled to all the profits.

3. a solicitor has stated he's a general partner according to current law

Who's instructing the solicitor? "Current law" would be the Partnerships Act 1890, lol. But I can see the argument: if she maintains a partnership continued after Husband's death, then she can't deny that Man is a partner. On the other hand, it may be she is really a sole trader employing him sole.

the wife has written to him to dissolve it.

Then the partnership is dissolved and must be wound up. And if she wrote "dissolving the partnership", she will have a hard time denying that Man was a partner. But if she wrote dismissing him, she will be on stronger ground.

However, the partnership should dissolve with the death of her husband anyway.

It did: see above

5. The wife or her children have since emptied all partnership bank accounts, there has been no consultation, agreement or involvement between the wife (retiree) or the man (current general partner)

On the face of it that's a breach of her fiduciary duties to her partner, the Man, and recoverable in equity (including tracing, which may be useful to Man). Ending the partnership does not end partners' fiduciary duties to each other. But maybe he's not a partner, only an employee, so she can do what she likes.

6. The wife has made 2 x employees redundant, no contracts, no pensions, no consultation etc

No consultation with whom? No contracts of employment? There always is one, or there's no employment. It may not be written down, though.

4. The wife has tried to sell the general partnership to the man when he already owns it

If you say so: that would seem to be in dispute. You may mean she has tried to sell her interest in the partnership to him, so that he can continue as a sole trader.

solicitors on stand by

They must be salivating.

 

[eteb3]

PS there may be an inheritance aspect I’m not competent to comment on: eg, possibly executors are now partners (with Wife - and Man?) in what is technically a new partnership

 

[WaveJumper]

I can hear the lawyers lining up for this as I type I’ll doubt there will be much left in the kitty once they are through unless of course we are talking about substantial sums of money here

 

[The Organiser]

On what basis is Man said to be a partner? Does he get a salary only? Or does he get a share of the profits?


Above all you need to sort out what you mean by “retired”. In partnership law it generally means “withdrew from the partnership”. If you just mean she stopped working, then as long as she had no intention to leave the partnership then yes she continues as a partner.


I thought this was a partnership?


What do you mean exactly? And how is it "due to no formal partnership agreements" that he's a partner? He can't be a partner due to (= because of) a lack of a partnership agreement. If he's a partner, he's a partner for some other reason.


If you mean the partnership, there will have been a technical dissolution on Husband's death. A new partnership formed immediately the remaining partners (by word or deed) indicated they intended to carry the business on further. But if Man was not in fact a partner at date of death, then the partnership ceases completely, because a partnership must subsist between persons, and one of the two persons is no more. What happens if the biz continues in that situation I'm not sure: I imagine Wife is a sole trader employing Man & Lady.

EDIT Sorry this is about Wife’s retirement. If “retire” means withdraw, and if biz continues, it’s a technical dissolution as per H’s death. If she merely ceases to work, no, no dissolution necessary, she just becomes a non-working partner


a) Because (probably) she remains a partner. b) Because (probably) she inherited her husband's interest in the partnership. But only if Man was in fact a third partner (see above at 1); if not, she's a sole trader and entitled to all the profits.


Who's instructing the solicitor? "Current law" would be the Partnerships Act 1890, lol. But I can see the argument: if she maintains a partnership continued after Husband's death, then she can't deny that Man is a partner. On the other hand, it may be she is really a sole trader employing him sole.


Then the partnership is dissolved and must be wound up. And if she wrote "dissolving the partnership", she will have a hard time denying that Man was a partner. But if she wrote dismissing him, she will be on stronger ground.


It did: see above


On the face of it that's a breach of her fiduciary duties to her partner, the Man, and recoverable in equity (including tracing, which may be useful to Man). Ending the partnership does not end partners' fiduciary duties to each other. But maybe he's not a partner, only an employee, so she can do what she likes.


No consultation with whom? No contracts of employment? There always is one, or there's no employment. It may not be written down, though.


If you say so: that would seem to be in dispute. You may mean she has tried to sell her interest in the partnership to him, so that he can continue as a sole trader.


They must be salivating.

Hi Thanks for the reply. I'll try to respond as best as possible

1. He was originally PAYE when he 1st started, then became a salaried partner and when the wife retired from the business he became a general partner in 2010, there have never been any agreements on profit shares, etc. Plus the man and his wife carry out all of the work. So as a result last year he was awarded profits in addition to a wage as accounts were completed by another firm.

2. Yes, the wife retired in 2010, she perceives she is still a partner, yet she does no work or consultation in the company whatsoever and has claimed 50% profits, instead of 33%, and also has a company car.

3. Yes it's a general partnership, not a company, my typo error sorry.

4. The man is a general partner because the husband wrote to the accountant and instructed them to notify HMRC and the Biz bank that the man has been a partner since 2010. However, this was only completed with HMRC in May 2022 via the accountant. Other than that there are no other written partnership agreements. Hence, I understand that the man is a legitimate partner in this general partnership as of May 2022, when HMRC was notified. Before this date, the man was always told that he was a partner but only verbally.

5. Yes I agree with you that there should have been a technical dissolution at death. However, this was not carried out due to the wife looking to sell all of the Biz assets to the man (partner) for him to carry on as this was the husband's wish after his death, albeit the understanding was that no money should change hands. So after the husband's death wife and man are both partners and continue to employ 2 x employees (PAYE)

6. If the wife is classed as a non-working partner, how does this work from a tax point of view? Why would she be claiming a company car for 13+ years if non-working and why would she claim her husband's monies from the Biz after death?

7. The wife has not inherited her husband's share of the Biz at this stage, probate has not been applied for at this date. The wife is not a sole trader.

8. Who's instructing the solicitor? "Current law" would be the Partnerships Act 1890, lol. But I can see the argument: if she maintains a partnership continued after Husband's death, then she can't deny that Man is a partner. On the other hand, it may be she is really a sole trader employing him sole.

Reply: The wife would have been a sole trader after her husband's death if her husband had not informed HMRC via the accountant that the man was a partner in May 2022. The wife allowed the Biz to continue as she thought the man (partner) would buy the Biz assets. The man has a solicitor as per current law. The wife has had 5 x solicitors to date, now acting alone with 2 x POA to try to ineffectively dissolve the Biz, which is now being wound up. Hence where it's getting complicated about who's entitled to what. The wife has also emptied all bank accounts to the tune of £300k+ without the Biz assets.

9. The wife originally tried to dismiss the man (partner) in Nov 2023, with no consultation etc. The man (partner) sought legal advice, as discussed above to determine he is a general partner based on current law and nothing to say otherwise as no other agreements are known based on profit sharing etc just the notification to HMRC to say he is a partner. The wife has now agreed that the man (partner) is a general partner thinking he would buy Biz assets to get rid of Biz ASAP, but the man (partner) has refused, now no other option than to wind up the BIZ, even though the wife tried to dissolve the Biz Dec 2023 in writing to the man (partner) due to bad advice from her family.

10.
It did: see above


On the face of it that's a breach of her fiduciary duties to her partner, the Man, and recoverable in equity (including tracing, which may be useful to Man). Ending the partnership does not end partners' fiduciary duties to each other. But maybe he's not a partner, only an employee, so she can do what she likes.

Reply: sorry I'm confused about your reply, please reiterate ty

11. 2 x employees have never received any employment contract, pension, or consultation ref redundancy, which leaves Biz open to employment disputes

12. The wife has no interest now in what happens to the Biz, she just wants rid for as much cash as she can get as she is in her mid-80s and won't give anything for nothing, even to their loyal man (partner) or their staff who have worked for them for 20+ years. The wife and the husband have had a very good income from the business for 50+ years, it's a niche Biz, with no real competition. The issue is the husband's share does not currently belong to the wife as no probate, not even applied for as yet due to many issues like this and others.

I'm unsure if the wife ever withdrew from the partnership, all I know is that she physically retired once the man (now partner) and the lady were employed by them and trained up around 2010.

Questions: Man (partner) wants his capital account backdated to May 2022 when HMRC was informed he was a (general partner), and has never drawn down any payments from Biz. The wife has now taken all of the cash from all Biz accounts Dec 2023, plus it has come to light that other cash taken from Biz, was put into other accounts in the name of husband and wife only when the husband was still alive, how can the man (partner) reclaim it? Should he report to the police, just to be told it's a Civil matter?

The wife claimed her husband's money from the Biz before and after his death to be paid into her bank account I don't perceive this is correct, what would you do about this, as the man (partner) would have claimed this as partly his after the husband's death due to the partnership being between the man (partner) and the wife now?

Also, the non-working partner issue doesn't sit well, could this be explained, please? Not sure how the wife could claim so much money for being inactive in the business for 13+ years?

 

[The Organiser]

PS there may be an inheritance aspect I’m not competent to comment on: eg, possibly executors are now partners (with Wife - and Man?) in what is technically a new partnersh

I can hear the lawyers lining up for this as I type I’ll doubt there will be much left in the kitty once they are through unless of course we are talking about substantial sums of money here

TBH, the issues are down to the husband's wife refusing to communicate effectively, greed and a lack of acceptance of all of the facts and the current law, this is the key to everything, and without communication, yes it will cost all involved.

 

[The Organiser]

PS there may be an inheritance aspect I’m not competent to comment on: eg, possibly executors are now partners (with Wife - and Man?) in what is technically a new partnership

Yes, there is an element of this so now 5 x partners, 3 being executors acting on behalf of the deceased husband. It doesn't help that 2 x executors are the wife's children and biased and the husband's child has been excluded from everything to date. The wife and the husband's child are both beneficiaries too.

 

[Newchodge]

He was originally PAYE when he 1st started, then became a salaried partner and when the wife retired from the business he became a general partner in 2010, there have never been any agreements on profit shares, etc. Plus the man and his wife carry out all of the work. So as a result last year he was awarded profits in addition to a wage as accounts were completed by another firm.

How exactly did he become a general partner? Who awarded him profits last year, and why?

 

[Newchodge]

Yes, there is an element of this so now 5 x partners, 3 being executors acting on behalf of the deceased husband. It doesn't help that 2 x executors are the wife's children and biased and the husband's child has been excluded from everything to date. The wife and the husband's child are both beneficiaries too.

May I suggest that you will get nowhere by using (and thinking) the terms greed and bias.

You need a forensic analysis of the available evidence to prove the status of everyone both before and after husband's death. Until you have that you can get nowhere. Diven the (obviously) inflamed feelings about this, I would suggest this should be done by somneone independent, not, for example, the current or past accountant or any of the 5 'partners'.

 

[The Organiser]

How exactly did he become a general partner? Who awarded him profits last year, and why?

The husband made the man a partner via the accountant and hmrc from 2010, not sure when accountant notified hmrc think may 2022. The new accounts firm awarded him profits last year as nothing in writing to say hes not a general partner as previous accountant retired.

 

[The Organiser]

May I suggest that you will get nowhere by using (and thinking) the terms greed and bias.

You need a forensic analysis of the available evidence to prove the status of everyone both before and after husband's death. Until you have that you can get nowhere. Diven the (obviously) inflamed feelings about this, I would suggest this should be done by somneone independent, not, for example, the current or past accountant or any of the 5 'partners'.

I agree with most of your comments. It's very hard though when there is no comms between all parties involved. I entirely agree on this being dealt with impartially and independently but to do so all 3 x executors plus the wife and the man need to agree to do so and to date the wife and her 2 x poa's plus the 2 x poa's being executors are not in agreement to do so

 

[eteb3]

The new accounts firm awarded him profits last year as nothing in writing to say hes not a general partner as previous accountant retired.


there have never been any agreements on profit shares, etc. Plus the man and his wife carry out all of the work. So as a result last year he was awarded profits in addition to a wage as accounts were completed by another firm.

So the accountant awarded him the profits? I'm sure there's more to it but that is just bizarre. nm, it's all loopy anyway.

You say there was no agreement as to profit shares, but 10 years of him being given just his salary, or a fixed profit share equivalent to the salary, can amount to an agreement. the accountant sounds to be resting far to much on written documents, whereas contracts through long usage are just as valid (even if more difficult to prove and so to enforce). Wife looks to have a reasonable case that Man is salaried partner, not capital-gain-and-profits partner.

non-working partner issue doesn't sit well, could this be explained, please? Not sure how the wife could claim so much money for being inactive in the business for 13+ years?

Same way a shareholder doesn't have to be a director of a company. She carried the risk with Husband, possibly put capital in, and therefore has her share of the goodwill of the partnership and its future profits. Ultimately whether it sits well is (mostly) irrelevant - the question is what she's entitled to in law, and the courts will not re-make agreements just because someone (Man?) has made a bad bargain.

On the face of it that's a breach of her fiduciary duties to her partner, the Man, and recoverable in equity (including tracing, which may be useful to Man). Ending the partnership does not end partners' fiduciary duties to each other. But maybe he's not a partner, only an employee, so she can do what she likes.

Reply: sorry I'm confused about your reply, please reiterate ty

fiduciary duties = duty of utmost good faith = no partner can act for herself, only for all partners collectively, as a trustee. If she's dissolved the partnership by notice to Man, the assets are still partnership assets until it's fully wound up: i.e., the "accounts are taken", assets divided, and then distributed to their proper destinations. If she's saying Man is entitled to nothing, then I guess she's just wound up the partnership on behalf of everyone. But it looks dodgy to me, and if she's had 5 solicitors, I'd suggest legal minds may agree with that assessment (bargepole rules). Recoverable in equity = it's not a breach of contract but a breach of trust, which entitles Man to recover his assets through tracing = if she buys a yacht with the cash, Man can sieze the yacht; if she gives the £ to others, can be claimed back off them.

5. Yes I agree with you that there should have been a technical dissolution at death. However, this was not carried out

There was no need to carry one out. There was a technical dissolution = there was no "real" dissolution at all. Imagine a wedding table where A B & C are eating. C goes off for a smoke and D sits. Food remains exactly as it was, just different ppl eating it: that's a technical dissolution. Usually has serious legal consequences (eg, property is still held in A B & C's names, albeit on trust for A B & D) but it rarely has economic consequences. It's as if the partnership continues with a different makeup of partners; albeit in a strict legal sense ABC partnership ended and ABD partnership began. If all are happy with C & D swapping seats, there's no need to clear the plates - if you're still following! You would expect "the accounts to be taken" (send C off with a doggy bag), but if no one insists on that it's messy but still a valid partnership.

Questions: Man (partner) wants his capital account backdated to May 2022 when HMRC was informed he was a (general partner), and has never drawn down any payments from Biz.

The key thing is not whether he's a partner (=liable for biz debts and has a right to participate in the management) but what capital and profits he's entitled to under the partnership agreement. Ok, there's no written agreement, but long usage (= the way we've done things for years) is just as capable of displacing Partnership Act default terms as a written document. In law he could indeed be a salaried partner (that in itself is a legally contested term, btw) - and his inaction in demanding capital distributions or profits until now suggests (at the least) acquiescence in an agreement that he wasn't entitled to any. But it's clearly madly complicated and impoossible to say on this forum.

The wife has now taken all of the cash from all Biz accounts Dec 2023, plus it has come to light that other cash taken from Biz, was put into other accounts in the name of husband and wife only when the husband was still alive, how can the man (partner) reclaim it? Should he report to the police, just to be told it's a Civil matter?

Imho he should speak to solicitors to investigate an action for a breach of the partnership agreement - whether breach of contract, or trust, or both would be for the lawyer to determine. I recommend he find partnership specialist, they're bonkers complicated even at the best of times. Strap in: litigating unwritten agreements is always £££, and litigating against the moving targets of executors, POAs, etc, must be even more so.

 

[The Organiser]

So the accountant awarded him the profits? I'm sure there's more to it but that is just bizarre. nm, it's all loopy anyway.

**Thanks again for your replies, this is very helpful.

The man's solicitor has advised the wife that the man is a general partner in current law as there was no written partner agreement and any verbal agreements or common practice is debatable as the wife had nothing to do with the Biz for the last 13+ years, paperwork has been destroyed by the wife and an accounts firm has provided him his legitimate profits for 2022-23, after speaking with the previous accountant (retired) before that the man received some profits but not as much as he was probably entitled to, some were payment in kind like a company car, or classed as bonuses, etc it's very messy

You say there was no agreement as to profit shares, but 10 years of him being given just his salary, or a fixed profit share equivalent to the salary, can amount to an agreement. the accountant sounds to be resting far to much on written documents, whereas contracts through long usage are just as valid (even if more difficult to prove and so to enforce). Wife looks to have a reasonable case that Man is salaried partner, not capital-gain-and-profits partner.

Possibly yes, but the wife has since agreed with the man's solicitor that he is a general partner to enable the general partnership to be wound up we will stick with that for now.

Same way a shareholder doesn't have to be a director of a company. She carried the risk with Husband, possibly put capital in, and therefore has her share of the goodwill of the partnership and its future profits. Ultimately whether it sits well is (mostly) irrelevant - the question is what she's entitled to in law, and the courts will not re-make agreements just because someone (Man?) has made a bad bargain.

The man was hoodwinked and naive as to his partnership status originally and was always promised the partnership would be passed to the man and his wife after the death of the husband. However, the wife has been a silent and or non-managing partner since she ceased to work 13+ years ago. The wife's capital was returned many years ago and she continued to receive profits and a monthly salary from the partnership until Dec 2023, when she then gave notice to dissolve the partnership as the man refused to purchase the partnership assets as too expensive.

fiduciary duties = duty of utmost good faith = no partner can act for herself, only for all partners collectively, as a trustee. If she's dissolved the partnership by notice to Man, the assets are still partnership assets until it's fully wound up: i.e., the "accounts are taken", assets divided, and then distributed to their proper destinations. If she's saying Man is entitled to nothing, then I guess she's just wound up the partnership on behalf of everyone. But it looks dodgy to me, and if she's had 5 solicitors, I'd suggest legal minds may agree with that assessment (bargepole rules). Recoverable in equity = it's not a breach of contract but a breach of trust, which entitles Man to recover his assets through tracing = if she buys a yacht with the cash, Man can sieze the yacht; if she gives the £ to others, can be claimed back off them.

The wife still perceives the whole partnership to be 'hers' alone. The man's solicitors have instructed her that the assets are shared partnership assets as per current law. The wife currently has no solicitor, and the wife and her children who are also now her POA's and executors to her husband's estate have emptied all the partnership bank accounts. The partnership can be wound up before probate. However, the husband's assets from the partnership do not belong to the wife until after probate, yet it appears that all partnership monies have been withdrawn and taken by the wife. The wife made redundancy payments to 2 x employees Dec 2023 with no consultation to employees or the man (partner) which opens up a risk of employment disputes. The wife has just the man (partner) to sort out now and wind up the partnership which was her choice as the man was not even consulted. The wife instructed the man to return all partnership assets, he still has possession of these (vehicles etc) for the moment as they are shared assets, and the wife has taken all of the cash from bank accounts and her company car (even though she has no working role in the partnership). The wife and her POA's are not consulting with the man at all, or the 3rd executor, just the new accountant firm who is winding up the firm at her request. The wife has also disposed of all historical financial information for the partnership and her deceased husband which was held in storage and at their home, which seems a strange thing to do.

There was no need to carry one out. There was a technical dissolution = there was no "real" dissolution at all. Imagine a wedding table where A B & C are eating. C goes off for a smoke and D sits. Food remains exactly as it was, just different ppl eating it: that's a technical dissolution. Usually has serious legal consequences (eg, property is still held in A B & C's names, albeit on trust for A B & D) but it rarely has economic consequences. It's as if the partnership continues with a different makeup of partners; albeit in a strict legal sense ABC partnership ended and ABD partnership began. If all are happy with C & D swapping seats, there's no need to clear the plates - if you're still following! You would expect "the accounts to be taken" (send C off with a doggy bag), but if no one insists on that it's messy but still a valid partnership.

I understand the partners are now the wife, the man, and 3 x joint executors, 2 x executors are acting in the wife's interest only, excluding the 3rd executor completely and not acting as instructed to do so (jointly) in the deceased husband's will. This action alone is causing problems.

The key thing is not whether he's a partner (=liable for biz debts and has a right to participate in the management) but what capital and profits he's entitled to under the partnership agreement. Ok, there's no written agreement, but long usage (= the way we've done things for years) is just as capable of displacing Partnership Act default terms as a written document. In law he could indeed be a salaried partner (that in itself is a legally contested term, btw) - and his inaction in demanding capital distributions or profits until now suggests (at the least) acquiescence in an agreement that he wasn't entitled to any. But it's clearly madly complicated and impoossible to say on this forum.

Yes, the man and lady were extremely naive, to say the least when he was originally made a partner and she was an employee. There were no contracts, pensions, agreements, etc. The man assumed everything was all above board and that it was a promotion, all self-assessments were completed by an individual accountant who has now retired, and all tax & ins, etc were paid by the partnership. The deceased husband dealt with ALL of the finances via the individual accountant, the man had no direct involvement except to sign off the accounts and submit any expenses via a digital accounts package Xero. If the wife wants to contest the man's status she will need to get a 6th solicitor to do so and the legal costs will stack up further.

Imho he should speak to solicitors to investigate an action for a breach of the partnership agreement - whether breach of contract, or trust, or both would be for the lawyer to determine. I recommend he find partnership specialist, they're bonkers complicated even at the best of times. Strap in: litigating unwritten agreements is always £££, and litigating against the moving targets of executors, POAs, etc, must be even more so.

The man is awaiting final figures from the new accountant firm before he takes any further steps, he needs to weigh up legal costs against what is due from the partnership which is currently solvent. His solicitors are on standby but don't want to incur any unnecessary further legal costs as the ball game changes daily as more information materialises day by day and the lack of comms with the wife and all 3 x joint executors. The wife and her family have tried to sell the partnership assets to the man for nearly 2 years now, before the death of the husband and thereafter. The man tried to work something out with her but the price was far too high and has only now just set up his own limited company, which he wants to concentrate on and put this issue to bed. However, he is unable to do so properly until he receives his share of the partnership assets and what is owed to him, and then he can focus properly on his future.

 

[Newchodge]

**Thanks again for your replies, this is very helpful.

The man's solicitor has advised the wife that the man is a general partner in current law as there was no written partner agreement and any verbal agreements or common practice is debatable as the wife had nothing to do with the Biz for the last 13+ years, paperwork has been destroyed by the wife and an accounts firm has provided him his legitimate profits for 2022-23, after speaking with the previous accountant (retired) before that the man received some profits but not as much as he was probably entitled to, some were payment in kind like a company car, or classed as bonuses, etc it's very messy

Possibly yes, but the wife has since agreed with the man's solicitor that he is a general partner to enable the general partnership to be wound up we will stick with that for now.

The man was hoodwinked and naive as to his partnership status originally and was always promised the partnership would be passed to the man and his wife after the death of the husband. However, the wife has been a silent and or non-managing partner since she ceased to work 13+ years ago. The wife's capital was returned many years ago and she continued to receive profits and a monthly salary from the partnership until Dec 2023, when she then gave notice to dissolve the partnership as the man refused to purchase the partnership assets as too expensive.

The wife still perceives the whole partnership to be 'hers' alone. The man's solicitors have instructed her that the assets are shared partnership assets as per current law. The wife currently has no solicitor, and the wife and her children who are also now her POA's and executors to her husband's estate have emptied all the partnership bank accounts. The partnership can be wound up before probate. However, the husband's assets from the partnership do not belong to the wife until after probate, yet it appears that all partnership monies have been withdrawn and taken by the wife. The wife made redundancy payments to 2 x employees Dec 2023 with no consultation to employees or the man (partner) which opens up a risk of employment disputes. The wife has just the man (partner) to sort out now and wind up the partnership which was her choice as the man was not even consulted. The wife instructed the man to return all partnership assets, he still has possession of these (vehicles etc) for the moment as they are shared assets, and the wife has taken all of the cash from bank accounts and her company car (even though she has no working role in the partnership). The wife and her POA's are not consulting with the man at all, or the 3rd executor, just the new accountant firm who is winding up the firm at her request. The wife has also disposed of all historical financial information for the partnership and her deceased husband which was held in storage and at their home, which seems a strange thing to do.


I understand the partners are now the wife, the man, and 3 x joint executors, 2 x executors are acting in the wife's interest only, excluding the 3rd executor completely and not acting as instructed to do so (jointly) in the deceased husband's will. This action alone is causing problems.

Yes, the man and lady were extremely naive, to say the least when he was originally made a partner and she was an employee. There were no contracts, pensions, agreements, etc. The man assumed everything was all above board and that it was a promotion, all self-assessments were completed by an individual accountant who has now retired, and all tax & ins, etc were paid by the partnership. The deceased husband dealt with ALL of the finances via the individual accountant, the man had no direct involvement except to sign off the accounts and submit any expenses via a digital accounts package Xero. If the wife wants to contest the man's status she will need to get a 6th solicitor to do so and the legal costs will stack up further.

The man is awaiting final figures from the new accountant firm before he takes any further steps, he needs to weigh up legal costs against what is due from the partnership which is currently solvent. His solicitors are on standby but don't want to incur any unnecessary further legal costs as the ball game changes daily as more information materialises day by day and the lack of comms with the wife and all 3 x joint executors. The wife and her family have tried to sell the partnership assets to the man for nearly 2 years now, before the death of the husband and thereafter. The man tried to work something out with her but the price was far too high and has only now just set up his own limited company, which he wants to concentrate on and put this issue to bed. However, he is unable to do so properly until he receives his share of the partnership assets and what is owed to him, and then he can focus properly on his future.

Very, very messy and complicated. What advice are you seeking here?

 

[The Organiser]

Very, very messy and complicated. What advice are you seeking here?

Yes very messy and complicated, I was interested in whether the wife was still a legitimate partner after retirement which has been answered here ty. Also, for facts that we may not been aware of from a business/partnership aspect and have received some grounded answers from this community that we have been unable to gain from the wife or her family and to give everyone involved in this mess an idea of realism for all parties going forward and how best to deal with this matter without a huge legal expense and to minimise any further emotional distress. The man (partner) has access to read these comments himself and he must make his mind up now as to how he wishes to proceed going forward. ty

 

[Gyumri]

A way forward might be to consider the very long running litigation around another partnership involving Mr and Mrs Brake, Axnoller Events and The Cheddington Estate, which resulted in more than 40 high court judgments! - and then try to work things out sensibly and amicably.

BAILII - Search results

www.bailii.org

 

[campbeji]

Hi, I'm not trying to be difficult here, but there is another way to look at this, from the wife's point of view.

So she was in business as one half of a partnership with her husband for some time. She decides to retire, but she remains as part of the partnership, obviously with her partner/husbands permission. Their agreement is that she continues to get a share of the profits and a car and whatever other benefits are agreed, but she does not have to do any actual work. As far as I can tell this is all perfectly OK, no issue.

Sometime later the husband does or doesn't agree to make the man into a partner, as I see it there are three questions;
1/ Why did he do this
2/ Did the wife agree to it at the time? I don't think the husband could do it without her permission, did she even know this was happening
3/ Was there any partnership agreement put into place

If the wife didn't agree or didn't know and there is no partnership agreement in place, then there is a good chance that the man isn't a partner and on the husband's death the business would have reverted to a sole proprietor. If that is the case then did she do anything wrong by removing funds from bank accounts or company property etc because she would have actually owned it all as there was no partnership left.

Again, just to be clear, she did not have to be an active part of the business to be a partner to retain her rights to the benefits and responsibilities of the business.

I think what needs to be done is for the man to check his HMRC tax returns and see where his income is coming from, is it from a partnership, self employment or employment. When I do my returns for HMRC there are three of them that I do, one for the partnership, one for my partner and one for me. The one for the partnership specifies who the partners are and how the profits are to be distributed between them. The returns for my partner (my wife in this case) and myself have our income in the partnership section.

If the Wife's returns have never shown her as leaving the partnership then she is still a partner.

If the man's returns do not show him as having been a partner till after the husbands death then he would have had to have become a partner with the wife, and if he had any sense at all he would also have a partnership agreement signed by her.

My concern is that if the records show that he became a partner after the husbands death then there may be something dodgy going on. The ability to make someone a partner in a business isn't up to anyone apart from the current partners, so I am wondering if this man has tried to take advantage of the wife by trying for a hostile takeover.

The wife may have said at a later date that he was a partner, but it doesn't make it true, she may be a confused little old lady that is out of her depth and doesn't know what to do. The fact that you have said that some of the children have poa's makes me think this might be the case, as far as I know a POA is only for someone who is still alive, generally when they are unable to look after their own affairs (or when they want someone to do it for them), I'm sure if I am wrong in this that someone will correct me.

OK, I admit I am a little unsure of the time line in all this so some of the above may be nonsense, and as always you should treat all of my comments as if they came from some guy on the internet that you don't know.

Good Luck
Jim

 

[eteb3]

2/ Did the wife agree to it at the time? I don't think the husband could do it without her permission, did she even know this was happening

This is a fair point. Given there's no written partnership agreement, the default provisions of the Act apply, and no one can be admitted without unanimous consent.

But if she's been made aware of Man being a partner, and didn't object (even if that came to light much later) then she will have acquiesced in the decision. And apparently she has written accepting that he is a general partner. And I would think Man could anyway argue an estoppel to the effect that Wife should have exerted herself even minimally over that length of time to make herself aware, and so she can't resile from the agreement made on her behalf by Husband to admit him - even tho Husband had no right to make that agreement. Either she was happy to leave all the management to Husband, including admitting new partners; or she wasn't, and so she would have known so as to object.

One thing I'll add is I think Man needs to be mindful of what "general partner" and "salaried partner" mean. "General partner" is in distinction to "limited partner", which means no more than that he has full liability for the debts of the biz and also has a right to take part in the management of it (neither of which apply to a limited partner in a limited partnership under the 1910 Act). Of itself it implies nothing about profit and capital shares. His assumption seems to be that because there's no written agreement, therefore he's entitled to an equal share per the Act's default provisions. But as I've said above, that doesn't seem a safe assumption given the partnership's long practice to the contrary.

"Salaried partner" has no fixed meaning in law, and is strictly a contradiction in terms. (Being a partner and being employed are mutually exclusive.) But it can in some cases mean a fixed share of profits in lieu of salary - with full liability for debts thrown in as a bonus. In other words, it’s possible to be a general partner in the usual sense, and a mere salaried partner as to profits, at the same time: the terms are not mutually exclusive

Anyway, there's not much more a forum can do, as OP seems to say herself: unless an agreement can be found, solicitors (partnership specialist solicitors) are the only option.

Best of luck to all of them.

 

[The Organiser]

Hi, I'm not trying to be difficult here, but there is another way to look at this, from the wife's point of view.

So she was in business as one half of a partnership with her husband for some time. She decides to retire, but she remains as part of the partnership, obviously with her partner/husbands permission. Their agreement is that she continues to get a share of the profits and a car and whatever other benefits are agreed, but she does not have to do any actual work. As far as I can tell this is all perfectly OK, no issue.

Sometime later the husband does or doesn't agree to make the man into a partner, as I see it there are three questions;
1/ Why did he do this
2/ Did the wife agree to it at the time? I don't think the husband could do it without her permission, did she even know this was happening
3/ Was there any partnership agreement put into place

If the wife didn't agree or didn't know and there is no partnership agreement in place, then there is a good chance that the man isn't a partner and on the husband's death the business would have reverted to a sole proprietor. If that is the case then did she do anything wrong by removing funds from bank accounts or company property etc because she would have actually owned it all as there was no partnership left.

Again, just to be clear, she did not have to be an active part of the business to be a partner to retain her rights to the benefits and responsibilities of the business.

I think what needs to be done is for the man to check his HMRC tax returns and see where his income is coming from, is it from a partnership, self employment or employment. When I do my returns for HMRC there are three of them that I do, one for the partnership, one for my partner and one for me. The one for the partnership specifies who the partners are and how the profits are to be distributed between them. The returns for my partner (my wife in this case) and myself have our income in the partnership section.

If the Wife's returns have never shown her as leaving the partnership then she is still a partner.

If the man's returns do not show him as having been a partner till after the husbands death then he would have had to have become a partner with the wife, and if he had any sense at all he would also have a partnership agreement signed by her.

My concern is that if the records show that he became a partner after the husbands death then there may be something dodgy going on. The ability to make someone a partner in a business isn't up to anyone apart from the current partners, so I am wondering if this man has tried to take advantage of the wife by trying for a hostile takeover.

The wife may have said at a later date that he was a partner, but it doesn't make it true, she may be a confused little old lady that is out of her depth and doesn't know what to do. The fact that you have said that some of the children have poa's makes me think this might be the case, as far as I know a POA is only for someone who is still alive, generally when they are unable to look after their own affairs (or when they want someone to do it for them), I'm sure if I am wrong in this that someone will correct me.

OK, I admit I am a little unsure of the time line in all this so some of the above may be nonsense, and as always you should treat all of my comments as if they came from some guy on the internet that you don't know.

Good Luck
Jim

Hi Jim, thanks for your input. I agree that all points and facts need to be considered but this is hard with a lack of comms. The deceased husband and the wife made the man a partner in 2010, before the husbands death in 2023. However email to account asking them to do so with HMRC was dated 2022. The accountant who actioned this has since retired. In addition the wife has disposed of a lot of partnership financial docs.

The husband and wife both agreed on the partnership with the man to assist them due to age and to continue a good business of 50 years. Without them the business/partnership would have folded a long time ago as the work is physically hands on and on site.The man and lady were also told they didn't need any pensions as it would pass to them on the husband's death. The 3 x executors/child/stepchildren were also told of this agreement in 2010 by deceased husband and the wife. So this is nothing new and was known to all. This is not a hostile takeover and not dodgy as far as im aware just a lack of comms, naivety from the man due to a lack of experience and being thrown in at the deep end with no training and being very trusting that all was well until the man was told otherwise.

I cant answer why there is no agreements in place. The man is only aware now of issues due to the husbands death as the husband took care of everything financial with the accountant (now retired) and not the man. In hindsight the man should have been more involved and requested agreements paperwork etc but he didn't.

The wife's children who are both executors and POAS have only been instructed after the husbands death as the wife is still mentally capable but not in a location to easily deal with matters of this kind so this is more to do with practical issues that need to be done and due to reduce stress on the wife. The other executor who has been excluded to date suggested they pass everything to a probate specialist solicitor to handle probate and the partnership but this has been declined numerous times by the wife's children who wish now to manage this themselves.

Ideally it would be better for all to sit at a table and mediate this out. But you can't lead a horse to water and make it drink. The man (partner) and the lady (man's wife) have invested in the partnership for many years and this is their livelihood too. I'm just trying to help iron out issues so things are done correctly for all and any actions are legitimate as the man and lady have been kept in the dark over the years and just got on with what they were instructed to do in good faith. However, now it appears that all is not what they have been told in the past and as such this is a huge shock to them when they are in their mid 50's with no pension, partnership is being dissolved and no income etc.

The man has access to this thread, your comments ref tax returns are helpful and I will suggest he takes this on board thank you for your input and advice.

 

[Gyumri]

My main question is - Is his wife still a general partner if she retired and where could I get proof of this?

I can hear the lawyers lining up for this as I type I’ll doubt there will be much left in the kitty once they are through

The man... needs to weigh up legal costs against what is due from the partnership.... His solicitors are on standby.

The legal costs if it went to trial would be at least several hundred thousand pounds and a huge amount of stress for all concerned for several years.

To answer your original question have a look here:

Offices - Haines Watts Group

www.hwca.com

 

[The Organiser]

The legal costs if it went to trial would be at least several hundred thousand pounds and a huge amount of stress for all concerned for several years.

To answer your original question have a look here

Thanks

 

[Gyumri]

If you all have several thousands of pounds to spare I'd be happy to mediate at half the price and donate it all to something worthwhile - like Surfers Against Sewage.

 

[campbeji]

Ideally it would be better for all to sit at a table and mediate this out. But you can't lead a horse to water and make it drink. The man (partner) and the lady (man's wife) have invested in the partnership for many years and this is their livelihood too. I'm just trying to help iron out issues so things are done correctly for all and any actions are legitimate as the man and lady have been kept in the dark over the years and just got on with what they were instructed to do in good faith. However, now it appears that all is not what they have been told in the past and as such this is a huge shock to them when they are in their mid 50's with no pension, partnership is being dissolved and no income etc.

OK, a couple of thoughts here, while it is true that you can lead a horse to water but you can't make it drink, you can of course add salt to it's feed and make it thirsty. The man and woman could of course start legal proceedings with all that entails with an option of going to arbitration instead. This is basically saying 'lets sort this out, or it will cost us all a fortune', of course they do not have to follow through if the bluff is called.

Another thing is if it turns out that they were not partners then they would have been employees, with all of the protections this entails. Tax and NI paid at source, pension contributions, redundancy pay etc, much of the protections are not voluntary on either side, they have to be paid by the employer. I know it isn't as good but it would be better than nothing if all of that was back paid (assuming it wasn't already paid).

It's a crazy situation, but too be honest I can see how this sort of thing can happen to someone who doesn't know better. I was in a situation when I was young where an employee tried to say I was self employed when I was actually employed, HMRC took a dim view of it and all of my PAYE and NI was eventually paid by the employer.

Good Luck
Jim

 

[The Organiser]

OK, a couple of thoughts here, while it is true that you can lead a horse to water but you can't make it drink, you can of course add salt to it's feed and make it thirsty. The man and woman could of course start legal proceedings with all that entails with an option of going to arbitration instead. This is basically saying 'lets sort this out, or it will cost us all a fortune', of course they do not have to follow through if the bluff is called.

Another thing is if it turns out that they were not partners then they would have been employees, with all of the protections this entails. Tax and NI paid at source, pension contributions, redundancy pay etc, much of the protections are not voluntary on either side, they have to be paid by the employer. I know it isn't as good but it would be better than nothing if all of that was back paid (assuming it wasn't already paid).

It's a crazy situation, but too be honest I can see how this sort of thing can happen to someone who doesn't know better. I was in a situation when I was young where an employee tried to say I was self employed when I was actually employed, HMRC took a dim view of it and all of my PAYE and NI was eventually paid by the employer.

Good Luck
Jim

Hi Jim

The points you make are very good points and either way it needs to be resolved its just a shame that the situation has become very emotive due to a partners death and the complexities of not having any formal arrangements in place. The partnership has always been in profit and has worked very well for all partners to date. However, it's a shame its now being dissolved as the husbands ongoing wish was that he wanted it to continue. Arbitration is a very good idea, I'm not sure how that will pan out due to the lack of comms with the wife and her poas they're waiting until all the assets have been accounted for and then choices will have to be made by the man and his wife as to how they wish to proceed based on whats owed to him. Fingers xd it works out fairly ty for your input and advice.

 

[The Resolver]

The complexity of issues makes mediation the only sensible process to consider. The solution should be less about who is right and wrong in the past and in law and more as to what future adds value to all concerned. I know you may feel they would not participate but I would be prepared to seek to persuade them into mediation. Gaining support for the process itself is very much part of what a mediator does. I specialise solely in shareholder/partner mediation. PM me for a fixed fee quote,

 

[The Organiser]

The complexity of issues makes mediation the only sensible process to consider. The solution should be less about who is right and wrong in the past and in law and more as to what future adds value to all concerned. I know you may feel they would not participate but I would be prepared to seek to persuade them into mediation. Gaining support for the process itself is very much part of what a mediator does. I specialise solely in shareholder/partner mediation. PM me for a fixed fee quote,

Hi thanks for your reply. I will pass your details on to them.