New Zealand Law Society - Third reading for Partnership Law Bill

Third reading for Partnership Law Bill

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Parliament has given a third reading to the Partnership Law Bill. It will come into force six months after the date of Royal assent.

The bill is a revision bill, meaning it updates and modernises the Partnership Act 1908 without changing the effect of the legislation. It therefore does not make any substantive policy changes.

The bill was introduced on 28 May 2019. The explanatory note says a number of "relatively minor inconsistencies, anomalies, discrepancies, and omissions" were identified in the course of its preparation.

Among the changes which have been made:

Various provisions of the 1908 Act refer to "retirement". This has been interpreted to include partners who have been expelled or "compulsorily retired" under the terms of the partnership agreement. References in the 1908 Act to a "partner who retires" and similar references) have been replaced with references to leaving the firm (in combination with a definition of "leaves" in clause 7(2).

Section 4(2) of the 1908 Act refers to some entities that are not partnerships. The language used has been updated by omitting an obsolete reference to "joint-stock, trading, or mining companies", expressly referring to limited partnerships for clarity, and referring to a body corporate rather than a company.

Section 20 of the 1908 Act (which relates to the liabilities of incoming and outgoing partners) refers to an agreement between the firm and “creditors” plural (which could be misinterpreted as a reference to the creditors as a group). The provision has been amended by clauses 31 and 32 of the new law to clarify that an agreement can be reached with each particular creditor (rather than all creditors acting together).

Section 26(2) of the 1908 Act (which relates to the procedure against partnership property for a partner’s separate judgment debt) refers to the High Court both making orders and giving directions. However, section 26(2A) refers only to the District Court making orders. This has been extended in clause 42 of the new Act to allow the District Court to give directions.

Section 27(i) of the 1908 Act contains an archaic reference to “books”. The provision relates to each partner’s right to have access to and to inspect the partnership books. This has been replaced in clause 52 of the new Act with a reference to records. The provision also requires the “books” to be kept at the place of business of the partnership. This does not reflect technological changes (for example, keeping records “in the cloud”). To take into account these changes, the provision has been amended to require the records to be reasonably available at the place of business of the partnership.

Section 38(a) of the 1908 Act allows a court to dissolve a partnership if a partner is found to be mentally disordered by inquisition or is shown to the satisfaction of the court to be of permanently unsound mind. The terminology has been updated in clause 72 of the new legislation to align with the wording in section 14(1)(a) of the Senior Courts Act 2016. In addition, the provision allows a partner’s “committee” to apply for an order. Section 129(7) of the Mental Health Act 1969 provided that references to a committee may be references to a manager appointed under Part 7 of that Act. Section 113 of the Protection of Personal and Property Rights Act 1988 in turn refers to references to Part 7 being treated as references to that Act. In this context, a reference to a manager appointed under the Protection of Personal and Property Rights Act 1988 has replaced the reference to a committee.

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