What is a Deed of Partnership?
A Deed of Partnership is a document that spells out the duties, obligations, liabilities and all other arrangements that partners to a business may have agreed to be bound by.
- Capital contribution of each Partner: This is an area that needs to be specified. In law of partnership, there is a general presumption of equality i.e. it is presumed that all the partners have contributed equally except otherwise stated. The implication of this is that all the partners are entitled to share equally in the capital and profit of the business and contribute equally towards the losses whether of capital or otherwise sustained by the firm.
- Profit and Loss Ratio: It is important to state clearly the profit and loss ratio i.e. what percentage each partner is to bear.
- Remuneration of Partners: The law presumes that partners are not to be paid from partnership funds or business except otherwise agreed upon. Therefore when partners intend to be remunerated, it should be explicitly stated in the partnership deed.
- Admission of new parties: It is important to spell out the process of admitting new partners in the partnership agreement. This helps reduce the risk of conflict if the need to include new partners arise.
- Dispute resolution: The Deed of Partnership should include a clause that provides a procedure to be followed in the resolution of dispute between the partners. It can be submission to an arbitrator, conciliator or mediator.