Partnership Dissolution

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I often get approached by clients in dispute with their business partners. If you are in a partnership, and in a dispute with the other partner/s, it is important to know how the dispute will be managed.

How is a partnership regulated?

If there is a partnership agreement between the partners, this will be the first point of call for the partners.

A partnership agreement is a contract between the partners. The purpose of a partnership agreement is to regulate the relationship and interaction of the partners. A partnership agreement will generally outline things such as:

  1. The type of business of the partnership;
  2. The term of the partnership (if there is a term);
  3. Management of accounts for the partnership;
  4. Termination of the partnership; and
  5. Selling of the partnership property.

Partnerships are also governed in Queensland by the Partnership Act 1981 (Qld). However, this legislation will not apply where a contrary intention appears in the partnership agreement.

Dissolving a partnership (Partnership Dissolution)

Where the parties are unable to agree on the terms of the partnership agreement to dissolve the partnership, the Partnership Act 1981 (Qld) provides for this.

Subject to the partnership agreement, the Partnership Act 1981 (Qld) provides that a partnership is dissolved where:

  1. the partnership is for a fixed term, at the end of this fixed term;
  2. the partnership is for a single undertaking, at the end of this undertaking;
  3. the partnership is for an undefined term, at the point where a partner provides notice to the other partner of its intention to dissolve the partnership.

What happens when a partnership is dissolved?

Upon the dissolution of the partnership, it is necessary for the partners to wind up the partnership. This includes selling assets, settling any debts, and then distributing any profits of the partnership to the partners.

A partnership agreement will generally outline how a partnership is to be wound up. For example, the partnership agreement may state that an independent valuation is to be sought of the partnership property, and the determination of that independent valuation is to be final and binding on the partners.

Where a partnership agreement does not provide for this winding up process, or the partners are unable to agree on the terms of winding up, the partners are able to apply to the Court under the Partnership Act 1981 (Qld) to have the Court make an order to wind up the business and affairs of the partnership. An administrator will then be appointed to conduct the winding up.

If you have any questions in relation to a partnership, or a partnership dispute, please do not hesitate to contact me.

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