LawWorks News

Partnership Law in New Zealand - September 2011

In New Zealand the law of partnership is governed by the Partnership Act 1908. The law is over 100 years old. While the law provides a framework that applies by default, that framework is often not what was intended by parties in the context of their particular business arrangements. 

If business partners do not document the arrangements they wish to apply to their dealings together, the default rules apply and there can be unintended consequences for one or all of them. 

When people engage in business together, and do not incorporate a registered company to govern the relationship between them, it is very likely that the relationship that exists between them is a partnership. 

Many legal partnerships exist where the parties to that partnership are unaware of the legal relationship that exists between them.  If such parties do not enter into an agreement between themselves to record the terms of that partnership, then that relationship is governed by the Partnership Act. 

In the event of a dispute arising between the partners, the likelihood is that at least one of the parties will be dissatisfied with a resultant settlement based on the application of the old Partnership Act.  

Whether there be one or more parties to a partnership, it is very desirable that the parties reach agreement upon the broad terms of their business relationship. 

Issues such as the contribution each partner will make to the partnership and the nature of those contributions, the share of partnership liability and the share of profits for each partner and how any disputes are to be resolved are examples of matters that should be dealt with in an agreement between the parties. 

While a Company is now a very popular business structure, a partnership is still common and can catch unwary parties by surprise. 

Often these partnerships evolve "by accident” where domestic partners are both involved in the "family” business.

A further example of a partnership is a joint business venture undertaken by two or more people (or other entities) which venture is not incorporated.  Such a business venture is governed by the Partnership Act in the same way as it applies to a couple who own and run a cleaning business. 

There are numerous examples of matters that should be addressed by parties who are by accident or design trading and conducting business in a partnership. A partnership agreement can address such issues and ensure that the intentions of the parties are recorded and implemented. 

For more information on partnership or other business structures Phone Tony Walker, Partner 303-9916 or via email: tony@lawworksnz.com

<< Back to News