Partnerships and Incorporation
This domain drills into the internal law and governance of partnerships and companies. For partnerships, understand the default rules that apply absent a written agreement: equal profit sharing, unanimous consent for admitting new partners, no automatic expulsion right, and dissolution on notice. The partnership agreement is the primary risk-control document; it should address profit-sharing formulae, capital contributions, decision-making thresholds, retirement and expulsion, restrictive covenants, dispute resolution, and continuity on death or incapacity.
For LLPs, know the members' agreement, the statutory framework, and the implications of incorporation by conversion: novation of contracts, transfer of undertakings, and continuity of client engagements. For companies, understand the articles of association, shareholder agreements, directors' duties, and the difference between share transfers and new share issues.
Traps include assuming the statutory default matches commercial expectation (it rarely does); overlooking that goodwill and client relationships may not transfer automatically on conversion; and forgetting that restrictive covenants must be reasonable in scope, duration, and geography to be enforceable. Questions may test whether a departing partner can solicit clients, or how a deadlock is broken.
Worked example: two equal partners disagree on hiring. Absent an agreement, default rules may leave the firm deadlocked; a well-drafted agreement would specify a casting vote, mediation first, or a buy-sell mechanism. Rule of thumb: the partnership or members' agreement should answer the question before it is asked.