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Agricultural Partnerships - Securing the future of your business

Partnerships are probably the most common business structure in the agricultural sector.  However many do not have a written partnership agreement in place and this can have a serious impact on the business and the individuals concerned particularly when things are not running so smoothly.  And when that is the case it is often too late to do anything about it.

The default position under the Partnership Act 1890 (the “Act”) is far from ideal in many ways, from the death or departure of a partner automatically dissolving the partnership, to the Act effectively making it impossible to remove a problematic partner.

Broadly speaking, under the Act, the legal position in relation to the removal, retirement or death of a partner, where specific contrary provision is not made, would usually be the winding up and dissolution of the partnership in order that all creditors can be paid. For the majority of farming partnerships, this will often necessitate the sale of the partnership assets, which in turn can result in a hefty tax bill.

A well-drafted agreement will usually make provision for the continuing of the business in such circumstances, and in the long run can end up saving substantial sums of money in preventing disputes and potential tax liabilities.

Whilst you might think it unnecessary at present for your business, it is something that we would advise as being highly beneficial to put in place whilst things are operating on a good level.

A well written agreement will remove room for doubt and will address any potential concerns of those involved.  It will reduce the impact of any disputes, can ensure that unexpected dissolutions are avoided, and sets out any other terms that the parties wish to have put in place thereby removing uncertainties and confusion as to each party’s role and position within the partnership.

Key contact

Judy Lankester, Associate Solicitor

Judy Lankester

Associate Solicitor

Call 01904 610886

Key contact

Amy  Cowdell, Senior Associate Solicitor

Amy Cowdell

Senior Associate Solicitor

Call 01522 888555