Corporate Law Update: 13 - 19 April 2024
- A partner retiring from a partnership was entitled to be bought out even though there were no specific buy-out arrangements
- Companies House publishes new guidance on how to remove an entity from the Register of Overseas Entities
Retiring partner was entitled to be bought out in the absence of express agreement
The Court of Appeal has clarified the entitlement of an individual who retired from a partnership without agreeing the financial terms of her departure.
Procter v Procter [2024] EWCA Civ 324 concerned a partnership between individual family members that was formed to run a farming business. One of those partners wished to retire from the partnership.
The Partnership Act 1890 does not give individual partners the right to retire from a partnership without dissolving the entire partnership. If the partners are to have this right, it must be set out in the partnership deed governing the partnership.
In this case, the partnership deed set out various circumstances in which one of the individual family members would cease to be a partner. But it did not give any of them a right simply to retire (in other words, resign) by notice to the other partners.
Despite this, one of the partners gave notice to retire from the partnership, and the other partners accepted her resignation. They did not, however, agree the terms on which she would be bought out, and the partnership deed did not contain any provisions to that effect.
The court held that the retiring partner was entitled to payment for her share in the partnership.
The court looked to section 42 of the Partnership Act 1890 for inspiration. This states that, where a person ceases to be a partner in a partnership but the other partners carry on the partnership’s business, the outgoing partner is entitled to a share in the partnership’s profits attributable to their use of the partnership’s assets.
In the court’s view, the retiring partner was entitled to the share of the partnership’s assets she would have received if the partnership had been wound up at the point of her retirement.
The case highlights a key point for partners in a partnership. Neglecting to set out arrangements for a retiring partner can create significant uncertainty and, ultimately, litigation, with the partners potentially not knowing the precise buy-out arrangements until a judge issues a decision.
New guidance on how to remove an entity from the Register of Overseas Entity
Companies House has published long-awaited guidance on the process for applying to remove an entity from the UK’s Register of Overseas Entities (ROE).
Under the ROE regime, an overseas entity that holds or wishes to acquire registered real estate in the UK must register with Companies House and provide details of its beneficial owners.
However, once an overseas entity no longer holds any registered UK real estate, it can apply to be removed from the register. The new guidance confirms the following.
- An entity cannot apply for removal until it is no longer registered as a proprietor of UK real estate. This means that, if the entity has sold its last registered estate, it must wait until the records at the relevant land registry have been updated before it can apply.
- It is currently not possible to apply for removal if any of the overseas entity’s beneficial owners or managing officers have their personal information protected at Companies House (or are awaiting the outcome of an application for protection).
- When applying for removal, the entity will need to either confirm that all information registered for it is up to date, or else confirm any changes in its registered information. Any changes will need to be verified by a verification agent.
- Once the entity is removed, it will lose its overseas entity ID. If it wishes to acquire new registered UK real estate, it will need to apply all over again to be included on the ROE.
- Information on the entity up to the point of removal will remain publicly available.
- The fee for removal is £400. However, we have been told by Companies House that this will rise to £706 from 1 May 2024.
