Possible Procedural Responsibilities: Toys4Ultd - Case Study Example

Law for Business Table of Contents Introduction: Possible Procedural Responsibilities I. Accountability in expulsionor exclusion of a partner without prior agreement between or among the parties involved II. Accountability in profits and losses incurred by the company. III. Accountability arising from changing a company’s name under protest by one of its board members. IV. Conclusion - Limited Partnership Introduction: If two or more persons agree to carry on a business together, they enter into an agreement that is known as “partnership” (Duhaime L. 2010). According to Pollack’s book on partnership - Digest of the Law of Partnership "Partnership is the relation which subsists between persons who have agreed to share profits of a business carried on by all or any of them on behalf of all of them (Pollack F. 1890”). The sign that there is partnership is that partners equally contributed money, property, effort, skills and other assets in order to pursue a joint business venture. In partnership as the name implies there is a sharing of everything namely: management, capital, profits and losses. Every decision must be tackled and discussed by everyone (Continental Bank of Canada v Canada 2 SCR 298 (1998). Should problem arise between partners there is a legal system that guards the right of each individual. The issue of “Toys4ULtd.” directors can be well understood in the following procedural possibilities. What are the procedural possibilities open to for Dun and Francesca? 1. Accountability in expulsion or exclusion of a partner without prior agreement between or among the parties involved. 2. Accountability in profits and losses incurred by the company in the course of its operation with the partners. 3. Accountability arising from changing a company’s name under protest by one of its board members. I. Accountability in expulsion or exclusion of a partner without prior agreement between or among the parties involved. Liability of partners according to Partnership Act 1890 CHAPTER 39 53_and_54_Vict 25 Expulsion of partner.”No majority of the partners can expel any partner unless a power to do so has been conferred by express agreement between the partners.”Since Edwardo disapprove of Dun and Francesca’s move to hastily replace the company’s name may possibly lead him to filing a liability claim on them. In a partnership or corporation, since the risks involved in each of these partners are equal, it is important for each partner to value and uphold the businesses in which the joint venture will engage in. Taking into consideration each partners major probable liabilities for partnership, one must fully understand the risks he is undertaking by either withdrawing or continue being a partner and by agreeing to the corporation’s participation in the business operation (Law Journal Newsletters Law Firm Partnership & Benefits Report, 2000). SUBSTANTIVE LAW ON EXPULSION, C. Duty of Good Faith The obligation of good faith applies even to matters pertaining to the enterprise.” Accordingly, courts have concluded that with respect to law partner expulsion “the fiduciary duty is not to expel in bad faith,"13 and "if the power to involuntarily expel partners granted by a partnership agreement is exercised in bad faith . . . the partnership agreement is violated . . . ."14 The above statement of Substantive Law on Expulsion clearly defines that the expulsion of a business partner has a liability, and thus also brings into account that it should be done in “Good faith”, otherwise a partner expelled has grounds to go to court and seek a just and fair claims on violations of partnership agreement. In Section 25 of the Partnership Act 1890 states that “no majority of the partners can expel any partner unless a power to do so has been conferred by express agreement between the partners”. Furthermore, unless approved among partners, Partnership Act or the General Law itself cannot impose retirement among the partners without pushing for dissolution of the partnership. In other words, partnership must be dissolved first before expelling a partner according to the grounds in “Good Faith”. II. Accountability in profits and losses incurred by the company. In partnership for profit corporations, agreement states that partners allocate profits and losses equally among the partners and a partner is jointly and strictly shares the liability for the debts and obligations of a partner who has such involvement in the establishment of the company (26 CFR 1.752-2 - Partners share of resource liabilities 2010). There is a general obligation among business partners to make payment, except as otherwise provided in this section, a partner bears the economic risk of loss for a partnership liability to the extent that, if the partnership constructively liquidated, the partner or related person would be obligated to make a payment to any person (or a contribution to the partnership) because that liability becomes due and payable and the partner or related person would not be entitled to reimbursement from another partner or person that is a related person to another partner. Thus , TITLE 26 - INTERNAL REVENUE ,CHAPTER I - INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY ,SUBCHAPTER A - INCOME TAXPART 1 - INCOME TAXES 1.752 - 2 - Partners share of resource liabilities, clearly states the obligation of partners towards each other. Each has to assume the economic liabilities as well as the profit sharing incurred during the company’s operation. An equal remuneration to partners should be made first or should be essential prior to the liquidation of the company. Thus obligation towards the partners should be complied first and foremost before any insolvency issue will be undertaken by the corporation. III. Accountability arising from changing a company’s name under protest by one of its board members. According to Companies Act 2006 CHAPTER 5: CHANGE OF NAME, Section 77: Change of name 179.    “This section replaces section 28(1) of the 1985 Act. Under the existing provision, companies can only change their names: by (a.) special resolution; or (b.)following a direction by the Secretary of State in the restricted circumstances provided by section 31 of the 1985 Act, which apply only to companies exempt from their name concluding in "limited." The same is manifested in the same Act 180.   “This section also provides for the following means: (a.)whatever means are provided in the companys articles (this means that the company will be able to determine the procedures for changing its own name);”c. by an order of the company names adjudicator if an objection under section 73 is upheld, or by a court following an appeal against the adjudicators decision under section 74; and d. under section 1033 on the companys restoration to the register. The partner therefore have a legal liability on another if claims be made due company’s loss of assets such as notes payables or receivables or any loss that might incur due to the changing of the company’s name. Limited Partnership In general rule of partnership, what has been discussed above applies. However in the law of limited partnership limited partners have no right to run or manage the partnership. According to Duhaime Lloyd in Legal definition of Corporation, limited partners are only after the tax benefits that can be gained from partnership but do not intend to delve into other joint and several liabilities like in regular partners. In the case of Don, Francesca and Eduardo apparently they are limited partners and their interest and liability are confined only within their investments (Duhaime L. 2010), unless otherwise aside from being limited partners they have taken for themselves the responsibility of taking control of the business. It is clear in the case of three directors of “Toys4Ultd” that all three of them have legal liability towards each other since they are jointly taking control of the business as directors; thus “Companies Act 2006” applies here. Don and Francesca must consider all legal liabilities that can be thrown at them by Eduardo before going further with the changing of their business name. Bibliography CFR 1.752-2 - Partners share of resource liabilities (2010). Accessed April 26, 2010 at http://cfr.vlex.com/vid/752-2-partner-share-resource-liabilities-19704104#ixzz0mAcwJuUS Companies Act 2006 CHAPTER 5: CHANGE OF NAME, Section 77: Change of name 179 Accessed April 26, 2010 at http://www.opsi.gov.uk/acts/acts2006/ukpga_20060046_en_7 Duhaime, Lloyd, Partnership Law: The Firm (2010) Accessed April 26, 2010 at http://www.duhaime.org/legalresources/consumercommercial/lawarticle-508/partnership-law-the-firm.aspx Duhaime , Lloyd “Legal definition of Corporation” (2010). Accessed April 26, 2010 at http://www.duhaime.org/LegalDictionary/L/LimitedPartner.aspx Law Journal Newsletters Law Firm Partnership & Benefits Report, (2000). Accessed April 26, 2010 at www.ljnonline.com Partnership Act 1890 (c.39) Revised Statute from The UK Statute Law Pollock, F., A Digest of the Law of Partnership (London: Stevens and Sons, 1890). Read More