Legal question partnership/Ltd. company

[head_ed]

Anybody help me on this?

I was a partner in a 3 way equal partnership until Februsry this year. It was a fairly acrimonious split that left me with no assets or payoff from my old company.

I wasn't bothered by this and just wanted to make a completely fresh start. However, I was told that I was still liable for debts that the company had occured up to the point of my leaving. For example, even if the company went through after I had left, I would still be liable for outstanding finance etc for debts that had been accrued during my partnership, up to the time of my leaving.

This left me slightly uneasy, because the main reason I left was the fact that I didn't trust my ex-partner's money skills and didn't want to get lumbered 12 months after I left for something they did wrong..

However, I have just learnt that my old company is now going to become a Ltd. company. Surely this means that they will have to now change all the loans, leases etc. to the new Ltd. company, and as I am not a director (and will never have been) of the new company, does this mean I am now in the clear?

cheers,

Mart.

[dontlift]

head_ed said:

Anybody help me on this? I was a partner in a 3 way equal partnership until Februsry this year. It was a fairly acrimonious split that left me with no assets or payoff from my old company. I wasn't bothered by this and just wanted to make a completely fresh start. However, I was told that I was still liable for debts that the company had occured up to the point of my leaving. For example, even if the company went through after I had left, I would still be liable for outstanding finance etc for debts that had been accrued during my partnership, up to the time of my leaving. This left me slightly uneasy, because the main reason I left was the fact that I didn't trust my ex-partner's money skills and didn't want to get lumbered 12 months after I left for something they did wrong.. However, I have just learnt that my old company is now going to become a Ltd. company. Surely this means that they will have to now change all the loans, leases etc. to the new Ltd. company, and as I am not a director (and will never have been) of the new company, does this mean I am now in the clear? cheers, Mart.

If they are forming a limited company then the company is a seperate legal entity and therefore had nothing to do with the original partnership IIRC

[eric mc]

It depends on what they do with the old partnership. Just because they are forming a Ltd Co. doesn't mean that the old partnership is ceasing. However, you would only be liable for debts outstanding up to the point you left the partnership. Did you obtain a statement of partnership liabilities at the date you left? Had you signed a partnership agreement setting out the limits of personal liabilities at the time the partnership was set up? Would it be possible to get the remaining partners to sign a satement indemnifying you from any liabilities? I admit that this is probably unlikely in the light of the fact that the split was "acrimonious".

[Ali_D]

When one partner leaves a partnership the whole partnership is offically disolved and a new partnership started with the remaining partners - so you would have any liability for their actions afterwards. However, proving which liabilities existed at the point of your exit will be difficult even if you do have financial statements prepared when from when you left.

[eric mc]

When one partner leaves a three partner partnership the old partnership is emphatically NOT disolved. However, as I said earlier, YOU should be only liable for debts incurred prior to your leaving. As AliD says, trying to pinpoint which debts belong to your "era" and those which were incurred later might prove tricky - if not impossible.

[oliverkelly]

I used to be in a pertnership of two people. We then formed a ltd co, and ran both for tax reasons.

We subsequently sold the company, and our solicitor at the time suggested something along the lines of a notice for each of us in the London Post (or some similarly obscure paper) stating that the partnership between us no longer existed.

[carl_w]

Was it just a "partnership" or a "limited liability partnership (LLP)"? If the latter, you're not liable for anything AIUI.

[suffolkfox]

Yes you could still be liable, as would the remaining partner(s), is there a concern driving the change to Ltd?
Did you have Professional Indemnity insurance as part of your partnership. If so you may (depending on your business), be able to purchase continuing cover for the partnership even though you have left, which may be a sensible step for all of the partners, irrespective of the retirement of yourself from the arrangement, as it protects all. If you think this may be appropriate, check this with your insurers/broker.