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Lecture 7

MGMT 3100 Lecture Notes - Lecture 7: Limited Liability Partnership, Limited Liability, Fiduciary


Department
Management
Course Code
MGMT 3100
Professor
Peter Mac Donald
Lecture
7

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Fiduciary Duties
(partnership agreement may NOT alter these agreements)
1. Information: Partners are bound to render true and full information of all things
affecting the partnership. Information available to one partner must be available to all of
them (unless different classes of partners).
2. Secret Benefits: every partner must account to the firm for any benefit derived by him
without the consent of other partners from any transaction concerning the partnership.
Must have permission to use partnership property for own purposes.
3. Duty Not to Compete: if a partner, without the consent of the other partners carries on
any business of same nature/competing, must account for and pay all profits made
Termination of Partnership
Express Provision: matters that should be settled in advance (notice of termination, what
justifies it, etc.)
Implied Statutory Rules: (in absence of express agreement)
Termination by Notice or Expiry: if no fixed term, any partner may give notice of
termination to all partners at any time (oral or in writing). If fixed term partnership is
dissolved at expiration regardless
Termination on Death or Insolvency: automatic termination on death,
insolvency/bankruptcy of a partner (usually different in agreement) (or if partnership
property is security for personal debts other partners have right to terminate the
relationship)
Dissolution by Law
Partner found mentally incompetent
Partner becomes permanently incapable of performing his part of the agreement
Partner has been guilty of conduct likely to prejudicially affect the business
Partner commits breach of agreement (not reasonably practicable for other partners to
carry on business with him)
Just and equitable that the partnership be dissolved
Effects of Dissolution
Property is applied in payment of debts and liabilities of the firm (surplus assets paid to
partners in priority order %)
Losses: First out of profits, next out of capital, last by the partners (in the proportion of
which they were entitled to share the profits)
Asset Payments on Dissolution
1. Payment of the debts of the firm, owed to non-partners
2. Repayment of the loans made to the firm by partners
3. Repayment of the capital contributed by partners
4. Sharing any surplus among the partners according to their entitlement to share in
profits
Limited Partnerships
Must be one or more general partners
General Partner: unlimited liability
Limited Partner: liability limited to the amount paid by her in capital contribution
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find more resources at oneclass.com
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