Who do you think you are – a shareholder or a quasi-partner?

Did you know that your private limited company could in fact be interpreted as a quasi-partnership? Solicitor, Callum Duff explains below…

If you are partaking in a company in which the shareholders have a relationship of mutual trust and some or all of those shareholders participate in the conduct of the business, you may be deemed to be contributing to a quasi-partnership.

Whilst the company may have a rigorous shareholders agreement in place, or articles of association carefully amended to constitute the company as had been envisaged, there are circumstances in which the conduct and/or agreement between shareholders deviates from those instruments and a court may later deem the company to be a quasi-partnership. The members of the quasi-partnership may then be considered as having rights and responsibilities different to those stated in any such shareholders agreement or articles of association.

The case of RE Hart Investment Holdings Ltd [2013] is a helpful reminder that even those companies which start out as a corporate entity can later become a quasi-partnership through the conduct and/or agreement between shareholders.

It is important to understand the legal position of your business, and whether it may be deemed a quasi-partnership. Without understanding that legal position, you may be exposed to consequences for breaching the terms of a quasi-partnership that you were not necessarily aware that you were a member of, such as an unfair prejudice petition.

If you have any concerns or questions as to whether you may be participating in a quasi-partnership, feel free to contact a member of the Commercial Dispute Resolution team on 0161 832 3434.