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The existence of a quasi-partnership is a question of fact - a company is not incorporated and specifically designed to be a quasi-partnership and no specific documentation is issued for a company to become one – a company either is, or is not, a quasi-partnership depending on its circumstances.
Quasi-partnerships, despite their name, are not concerned with the law on partnerships. They are incorporated limited companies, displaying a certain set of characteristics similar to that of a partnership.
A fundamental feature of a quasi-partnership is that its members display a certain level of good faith and mutual trust and confidence towards one another. There is also some recognition to be had for the close association existing between the company’s members, who would each expect to have a high level of involvement and control over the management of the company.
Personal Relationships and Mutual Trust and Confidence
These are essential considerations in establishing the existence of a quasi-partnership. The key question to ask is whether there is a personal relationship between a company’s members, over and above merely a commercial one? It is common for quasi-partnerships to exist in companies managed by families and friends – and the law recognises that such companies may require a different form and level of regulation.
Understanding/Agreement between members
Another crucial focus when determining the existence of a quasi-partnership surrounds the nature of the understanding and/or agreement which exists between a company’s members. Such agreement could either be in the form of a negotiated and documented shareholders agreement or possibly in the form of oral mutual understandings. However, it is important to note that, should a written shareholders agreement exist, it will not necessarily be a definitive representation of the members’ relationships.
Nevertheless, regardless of a company’s status as a quasi-partnership, it will generally continue to be governed by its articles of association (and any existing shareholders agreement). However, there are several other key legal principles, namely in relation to the protection and rights of company members, that may also apply.
Establishing the existence of a quasi-partnership is key when exploring unfair prejudice petitions and shareholder remedies, as special rules can apply in these scenarios.
If you or your business require information regarding anything covered in this blog or generally in relation to any other corporate matter, please call Jade Langford, a Solicitor in our Corporate Team, on 01384 340 504 or e-mail Jade at jlangford@georgegreen.co.uk for advice and assistance.