Lawyer Monthly - December 2021 Edition

David Tattersall Head of Client Relations Handpicked Accountants 340 Deansgate, Manchester, Greater Manchester, M3 4LY Tel: +44 0800 063 9258 www.handpickedaccountants.co.uk David Tattersall is Head of Client Relations at Handpicked Accountants, with over 35 years of experience in professional services working in finance, accountancy and corporate insolvency. Handpicked Accountants is a UK SME support specialist. An initiative created by Begbies Traynor Group, the company operates more than 100 offices across the UK to deliver corporate recovery and professional services to businesses, financial institutions and professional advisers. 65 DEC 2021 | WWW.LAWYER-MONTHLY.COM MEDIATIONANDARBITRATION - THEESSENTIALROLEOFALTERNATIVEDISPUTERESOLUTION INAPARTNERSHIPSPLIT reassign company liabilities accordingly. If a partnership agreement is not in place, this may be revisited to reduce risk exposure. Different forms of alternative dispute resolution can be entered into voluntarily by all partners, such as mediation. If mediation is unsuccessful as partners fail to cooperate, arbitration may provide an alternative that can help bring about a legally binding solution. Partnership splits are often the outcome of deteriorated relationships and can therefore blur reason as emotions remain high. ADR can provide a protective platform for negotiations to progress and can ease the separation between commercial partners. each partner. A partnership agreement is the cornerstone of policy in a business partnership as it addresses strict terms all partners must abide by when navigating a partnership split. The power to expel a partner and terminate a partnership may also be drafted into the partnership agreement, which is vital as it can help navigate future claims. If a mutual agreement cannot be reached under self-determined terms outside of the confines of ADR proceedings, ADR can be employed to bring order and introduce a neutral party to the playing field. Partners may agree to partake in dispute resolution proceedings with the view to negotiating the future of the partnership and distributions. During mediation or arbitration proceedings, a partnership settlement agreement may be discussed to set restrictions on the activity and interactions of the exiting partner following their departure. Typical clauses in a partnership settlement agreement may include: - Non-compete - Non-poaching of staff - Non-solicitation - Protection of reputation - Confidentiality Implementing such clauses can regulate future business activity to ensure that the exiting party does not enter into an unfair competition or operate to the detriment of former partners. By aligning the trading advantage between all parties, the dispute can be resolved peacefully. If the partnership continues following the exit of a partner, these clauses can help restrict unsolicited behaviour that could result in existing clients disengaging with the partnership and diverting their custom to the expelled or departed partner. The Partnership Act 1890 If a partnership agreement is not in place, the rulings will automatically default to that under the Partnership Act 1890. A partnership can be dissolved under the following circumstances, as governed by The Partnership Act 1890: • Fixed-term partnership expires • Project fulfilled for which the partnership was formed • Bankruptcy or death of a partner(s) • Share of profit for a partner charged for a separate debt • Partnership deemed illegal • Fraud or misrepresentation • By order of the Court • Partner presents notice to dissolve partnership If a partner issues notice to dissolve the partnership, the partnership will be dissolved with immediate effect. The Act also sets out the rules for distribution of assets on final settlement of accounts. Company liabilities must be paid out of profits, next out of capital and then by partners in proportion to their share profits, if necessary. Payment of advances must be repaid and any capital due to partners. Any remaining funds will be divided among the partners in the proportion in which profits are divisible. Creating a direct entrance into dispute negotiations Upon resolving thedispute, if thepartnership continues with the remaining partners or a replacement partner, care must be taken to