PARTNERSHIP ORDINANCE

PARTNERSHIP ORDINANCE

CHAPTER 38.

PARTNERSHIP.

To codify the law relating to partnership.

15th May, 1897.]

1. This Ordinance may be cited as the Partnership

Ordinance. [47

2. In this Ordinance-

'business' includes every trade, occupation, or profession

'court' includes every court and judge having jurisdiction
in the case. [45

Nature of partnership.

3. (1) Partnership is the relation which subsists

between persons carrying on a business in common with a view of
profit.

(2) But the relation between members of any company

or association which is-

(a)registered as a company under any Ordinance relating to the
registration of joint-stock companies; or

(b)formed or incorporated by or in pursuance of any other
Ordinance, or any Act of Parliament, or letters patent, or
Royal Charter,

is not a partnership within the meaning of this Ordinance. [1

4. In determining whether a partnership does or does

not exist, regard shall be had to the following rules-

(a)joint tenancy, tenancy in common, joint property, common
property, or part ownership does not of itself create a
partnership as to anything so held or owned, whether the
tenants or owners do or do not share any profits made by the
use thereof;

(b)the sharing of gross returns does not of itself create a
partnership, whether the persons sharing such returns have
or have not a joint or common right or interest in any property
from which or from the use of which the returns are derived;





(c)the receipt by a person of a share of the profits of a business
is prima facie evidence that he is a partner in the business,
but the receipt of such a share, or of a payment contingent on
or varying with the profits of a business, does not of itself
make him a partner in the business; and in particular-

(i) the receipt by a person of a debt or other liquidated
amount, by instalments or otherwise, out of the accruing
profits of a business does not of itself make him a partner in
the business or liable as such;

(ii) a contract for the remuneration of a servant or agent of
a person engaged in a business by a share of the profits of
the business does not of itself make the servant or agent a
partner in the business or liable as such ;

(iii) a person being the widow or child of a deceased
partner, and receiving by way of annuity a portion of the
profits made in the business in which the deceased person
was a partner, is not, by reason only of such receipt, a
partner in the business or liable as such;

(iv) the advance of money by way of loan to a person
engaged or about to engage in any business on a contract
with that person that the lender shall receive A rate of
interest varying with the profits or shall receive a share of the
profits arising from carrying on the business, does not of
itself make the lender a partner with the person or persons
carrying on the business or liable as such : Provided that the
contract is in writing and signed by or on behalf of all the
parties thereto; and

(v) a person receiving, by way of annuity or
otherwise, a portion of the profits of a business in
consideration of the sale by him of the goodwill
of the business is not, by reason only of such
receipt, a partner in the business or liable as
such. [2

5. In the event of any person to whom money has

been advanced by way of loan upon such a contract as is
mentioned in section 4, or of any buyer of a goodwill in
consideration of a share of the profits of the business, being





adjudged a bankrupt, entering into an arrangement to pay
his creditors less than twenty shillings in the pound, or
dying in insolvent circumstances, the lender of the loan shall
not, be entitled to recover anything in respect of his loan,
and the seller of the goodwill shall not be entitled to recover
anything in respect of the share of profits contracted for,
until the claims of other creditors of the borrower or buyer
for valuable consideration in money or money's worth have
been satisfied. [3

6.Persons who have entered into partnership with one

another are, for the purposes of this Ordinance, called col-
lectively a firm, and the name under which their business is
carried on is called the firm-name. [4

Relations of partners to persons dealing with them.

7. Every partner is an agent of the firm and his other partners for
the purpose of the business of the partnership; and the acts of every
partner who does any act for carrying on in the usual way business of
the kind carried on by the firm of which he is a member bind the firm
and his partners, unless the partner so acting has in fact no authority to
act for the firm in the particular matter, and the person with whom he is
dealing either knows that he has no authority or does not know or
believe him to be a partner.

8. An act or instrument relating to the business of the firm and
done or executed in the firm-name, or in any other manner showing an
intention to bind the firm, by any person thereto authorized, whether a
partner or not, is binding on the firm and all the partners: Provided that
this section shall not affect any general rule of law relating to the
execution of deeds or negotiable instruments. [6

9. Where one partner pledges the credit of the firm for a purpose
apparently not connected with the firm's ordinary course of business,
the firm is not bound, unless he is in fact specially authorized by the
other partners; but this section does not affect any personal liability
incurred

by an individual partner. [7





10. If it has been agreed between the partners that any restriction
shall be placed on the power of any one or more of them to bind the
firm, no act done in contravention of the agreement is binding on the
firm with respect to persons having notice of the agreement.

11. Every partner in a firm is liable jointly with the other partners
for all debts and obligations of the firm incurred while he is a partner;
and after his death his estate is also severally liable in a due course of
administration, for such debts and obligations, so far as they remain
unsatisfied but subject to the prior payment of his separate debts. [9

12. Where, by any wrongful act or omission of any
partner acting in the ordinary course of the business of the
firm or with the authority of his co-partners, loss or injury
is caused to; any person not being a partner in the firm, or
any penalty is incurred, the firm is liable therefor to the same
extent as the partner so acting or omitting to act. [10

13. In the following cases, namely-

(a)where one partner, acting within the scope of his apparent
authority, receives tfie money or property of a third person
and misapplies it; and

(b)where a firm in the course of its business receives the money
or property of a third person, and the money or property so
received is misapplied by one or more of the partners while it
is in the custody of the firm,

the firm is liable to make good the loss.

14. Every partner is liable jointly with his co-partners
and also severally for everything for which the firm while
he is a partner therein becomes liable under section 12
or 13. [12

15. If a partner, being a trustee, improperly employs trust property
in the business or on the account of the partnership, no other partner is
liable for the trust property fo the persons beneficially interested therein
Provided as follows





(a) this section shall not affect any liability incurred by
any partner by reason of his having notice of a
breach of trust; and

(b)nothing in this section shall prevent trust money from being
followed and recovered from the firm, if still in its possession
or under its control. [13

16. Every one who, by words spoken or written or by
conduct, represents himself, or who knowingly suffers him-
self to be represented, as a partner in a particular firm is
liable as a partner to any one who has, on the faith of any
such representation, given credit to the firm, whether the
representation has or has not been made or communicated
to the person so giving credit by or with the knowledge of
the apparent partner making the representation or suffering
it to be made:Provided that where, after a partner's death,
the partnership business is continued in the old firm-name,
the continued use of that name or of the deceased partner's
name as part thereof shall not of itself make his executors
or administrators, estate or effects, liable for any partnership
debts contracted after his death. [14

17. An admission or representation made by any partner
concerning the partnership affairs, and in the ordinary course of its
business, is evidence against the firm. [15

18. Notice to any partner who habitually acts in the partnership
business of any matter relating to partnership affairs operates as notice
to the firm, except in the case of a fraud on the firm committed by, or
with the consent of that partner.

19. (1) A person who is admitted as a partner into an existing firm
does not thereby become liable to the creditors of the firm for anything
done before he became a partner.

(2) A partner who retires from a firm does not thereby cease to be
liable for partnership debts or obligations incurred before his
retirement.

(3) A retiring partner may be discharged from any
existing liabilities by an agreement to that effect between
himself and the members of the firm as newly constituted





and the creditors, and this agreement nt may be either express
or inferred as a fact from the course of dealing between the
creditors and the firm as newly constituted. [17

10. A continuing guarantee given either to a firm or to
a third person in respect of the transaction, of a firm is,
in the absence of agreement to the contrary, revoked as to
future transactions by any change in the constitution of the
firm to which, or of the firm in respect of the transactions
of which, the guarantee was given. [18

Relations of partners to one another.

21. The mutual rights and duties of partners, whether
ascertained by agreement or defined by this Ordinance, may
be varied by the consent of all the partners, and such consent
may be either express or inferred From a course of
dealing. [19

22. (1) All property and rights and interests in property originally
brought into the partnership stock or acquired, whether by purchase or
othervise, on accoui)t of the firm, or for the purposes and in the course
of the partnership, business, are called in this Ordinance partnership
property, and must be held and applied by the partners exelvisively for
the purposes of the partnership and in accordance with the partnership
agreement : Provided that the legal estate or interest in any land which
belongs to the partnership shall devolve according to the nature
and tenure thereof and the general rules of lay applicable thereto, but
in trust, so far as necessary, for the persons beneficially interested in
the land under this section,

(2) Where co-owners of an estate or interest in any land, not being
itself partnership property, are partners as to profits made by the use of
that land, and purchase other land out of the profits to be used in like
manner, the land so purchased belongs to them, in the absence of any
agreement to the contrary, not as partners, but as co-owners for the
same respective estates and interests as are held by them in the land
first mentioned at the date of the

purchase. [20





23 Unless the contrary intention appears, property
bought with money belonging to the firm is deemed to
have been bought on account of the firm. [21

24. Where land or any interest therein has become partnership
property, it shall, unless the contrary intention appears, be treated, as
between the partners (including the representatives of a deceased
partner), and also as between the heirs of a deceased partner and his
executors or administrators, as personal rsonal and not real estate. [22

25. (1) A writ of execution shall not issue against any partnership
property except on a judgment against the firm.

(2) The court or a judge may, on the application by summons of
any judgment creditor of a partner, make an order charging that
partner's interest in the partnership property and profits with payment
of the amount of the judgment debt and interest thereon, and may, by
the same or a subsequent order, appoint a receiver of that partner's
share of profits (whether already declared or accruing), and of any other
money which may be coming to him in respect of the partnership, and
direct all accounts and inquiries, and give all other orders and
directions, which might have been directed or given if the charge had
been made in favour of the judgment creditor by the partner, or which
the circumstances of the case may require.

(3) The other partner or partners shall be at liberty at any time to
redeem the interest charged, or, in case of a sale being directed, to
purchase the same.

(4) This section shall apply in the case of a cost-book
company as if the company were a partnership within the
meaning of this Ordinance. [23

26. The interests of partners in the partnership property, and their
rights and duties in relation to the partnership, shall be determined,
subject to any agreement, express or implied, between the partners, by
the following rules-

(a)all the partners are entitled to share equally in the capital and
profits of the business, and must contribute equally towards
the losses, whether of capital or otherwise, sustained by the
firm;





(b)the firm must indemnify every partner in respect of payments
made and personal liabilities incurred by him

(i) in the ordinary and proper conduct of the business of
the firm; or

(ii) in or about anything necessarily done for the
preservation of the business or property of the firm ;

(c)a partner making, for the purposes of the partnership, any
actual payment or advance beyond the amount of capital
which he has agreed to, subscribe, is entitled to interest at
the rate of eight per cent per annum from the date of the
payment or advance;

(d)a partner is not entitled, before the ascertainment of profits,
to interest on the capital subscribed by him;

(e)every partner may take part in the management of the
partnership business;

(f) no partner shall be entitled to remuneration for acting in the
partnership business;

(g)no person may be introduced as a partner without the
consent of all existing partners;

(h)any difference arising as to ordinary matters connected with
the partnership business may be decided by a majority of the
partners, but no change may be made in the nature of the
partnership business without the consent of all existing
partners ; and

(i)the partnership books are to be kept at the place of business
of the partnership (or the principal
place, if there are more places than one), and every
partner may, when he thinks fit, have access to and
inspect and copy any of them. [24

27. No majority of the partners can expel any partner,
unless a power to do so has been conferred by express
agreement between the partners. [25

28. (1) Where no fixed term has been agreed upon for the duration
of the partnership, any partner may determine the partnership at any
time on giving notice of his intention to do so to all the other partners.





(2) Where the partnership has originally been con-
stituted by deed, a notice in writing, signed by the partner
giving it, shall be sufficient for this purpose. [26

29. (1) Where a partnership entered into for a fixed term is
continued after the term has expired, and without any express
new agreement, the rights and duties of the partners remain the
same as they were at the expiration of the term, so far as
consistent with the incidents of a partnership at will.

(2) A continuance of the business by the partners or
such of them as habitually acted therein during the term,
without any settlement or liquidation of the partnership
affairs, is presumed to be a continuance of the partner-
ship. [27

30. Partners are bound to render true accounts and full
information of all things affecting the partnership to any
partner or his legal representatives. [28

31. (1) Every partner must account to the firm for any benefit
derived by him, without the consent of the other partners, from
any transaction concerning the partnership or from any use by
him of the partnership property, name, or business connexion.

(2) This section applies also to transactions undertaken
after a partnership has been dissolved by the death of a
partner, and before the affairs thereof have been completely
wound up, either by any surviving partner or by the
representatives of the deceased partner. [29

32. If a partner, without the consent of the other
partners, carries on any business of the same nature as and
competing with that of the firm, he must account for and
pay over to the firm all profits made by him in that
business. [30

33. (1) An assignment by any partner of of his share in the
partnership, either absolute or by way of mortgage or
redeemable charge, does not, as against the other partners,
entitle the assignee, during the continuance of the partnership, to
interfere in the management or administration of





the partnership business or affairs, or to require any accounts of the
partnership transactions, or to inspect the partnership books, but
entitles the assignee only to receive the share of the profits to which
the assigning partner would otherwise be entitled, and the assignee
must accept the account of profits agreed to by the partners.

(2) In the case of a dissolution of the partnership, whether as
respects all the partners or as respects the assigning partner, the
assignee is entitled to receive the share of the partnership assets to
which the assigning partner is entitled as between himself and the other
partners, and, for the purpose of ascertaining that share, to an account
as from the date of the dissolution.

Dissolution of partnership and its consequences.

34. (1) Subject to any agreement between the partners, a
partnership is dissolved

(a)if entered into for a fixed term, by the expiration of that term;
or

(b)if entered into for a single adventure or undertaking, by tfie
termination of that adventure or undertaking; or

(c)if entered inta for an undefined time, by any partner giving
notice to the other or others of his intention to dissolve tfie
partnership.

(2) In the last-mentioned case the partnership is
dissolved as from the date mentioned in the notice as the date
of dissolution, or, if no date is so mentioned, as from the
date of the communication of the notice. [32

35. (1) Subject to any agreement between the partners, every
partnership is dissolved as regards all the partners by the death or
bankruptcy of any partner.

(2) A partnership may, at the option of the other
partners, be dissolved if any partner suffers his share of the
partnership property to be charged under this Ordinance for
his separate debt. [33

36. A partnership is in every case dissolved by the happening of
any event which makes it unlawful for the business of the firm to be
carried on or for the members of

the firm to carry it on in partnership. [34





37. On application by a partner, the court may decree

a dissolution of the partnership in any of the following
cases-

(a)when a partner is found lunatic by inquisition, or is shown,
to the satisfaction of the court, to be of permanently
unsound mind, in either of which cases the application may
be made as well on behalf of that partner by his committee, or
next friend, or person having title to intervene as by any
other partner;

(b)when a partner, other than the partner suing, becomes in any
other way permanently incapable of performing his part of
the partnership contract;

(c)when a partner, other than the partner suing, has been
guilty of such conduct as, in the opinion of the court, regard
being had to the nature of the business, is calculated to
affect prejudicially the carrying on of the business;

(d)when a partner, other than the partner suing, wilfully or
persistently commits a breach of the partnership agreement
or otherwise so conducts himself in matters relating to the
partnership business that it is not reasonably practicable for
the other partner or partners to carry on the business in
partnership with him;

(e)when the business of the partnership can only be carried on
at a loss; and

(f)whenever in any case circumstances have arisen which, in
the opinion of the court, render it just and equitable that the
partnership be dissolved. [35

38. (1) Where a person deals with a firm after a change in its
constitution, he is entitled to treatall apparent members of the old firm
as still being members of the firm until he has notice of the change.

(2) An advertisement in the Gazette as to a firm whose principal
place of business is in the Colony shall be notice as to persons who
had not dealings with the firm before the date of the dissolution or
change so advertised.

(3) The estate of a partner who dies, or who becomes bankrupt, or
of a partner who, not having been known to the person dealing with
the firm to be a partner, retires from the firm, is not liable for partnership
debts contracted after the date of the death, bankruptcy, or retirement
respectively.





39. On the dissolution of a partnership or retirement of a partner,
any partner may publicly notify the same, and may require the other
partner or partners to concur for that purpose in all necessary or
proper acts, if any, which cannot be done without his or their
concurrence.

40. After the dissolution of a partnership, the authority of each
partner to bind the firm, and the other rights and obligations of the
partners, continue, notwithstanding the dissolution, so far as may be
necessary to wind up the affairs of the partnership, and to complete
transactions begun but unfinished at the time of the dissolution, but
not otherwise : Provided that the firm is in no case bound by the acts
of a partner who has become bankrupt; but this proviso does not affect
the liability of any person who has, after the bankruptcy, represented
himself or knowingly suffered himself to be represented as a partner of
the bankrupt.

41. On the dissolution of a partnership, every partner is entitled,
as against the other partners in the firm and all persons claiming
through them in respect of their interests as partners, to have the
property of the partnership applied in payment of the debts and
liabilities of the firm, and to have the surplus assets after such payment
applied in payment of what may be due to the partners respectively,
after deducting what may be due from them as partners to the firm; and
for that purpose any partner or his representatives may, on the
termination of the partnership, apply to the court to wind up the
business and affairs of the firm.

42. Where one partner has paid a premium to another on entering
into a partnership for a fixed term, and the partnership is dissolved
before the expiration of that term otherwise than by the death of a
partner, the court may order the repayment of the premium, or of such
part thereof as it thinks just, having regard to the terms of the
partnership contract and to the length of time during which the
partnership has continued; unless

(a)the dissolution is, in the judgment of the court, wholly or
chiefly due to the misconduct of the partner who paid the
premium; or

(b)the partnership has been dissolved by an agreement
containing no provision for a return of any part of the
premium.





43. Where a partnership contract is rescinded on the ground of the
fraud or misrepresentation of one of the parties thereto, the party
entitled to rescind is, without prejudice to any other right, entitled

(a)to a lien on, or right of retention of, the surplus of the
partnership assets, after satisfying the partnership liabilities,
for any sum of money paid by him for the purchase of a
share in the partnership and for any capital contributed by
him, and is

(b)to stand in the place of the creditors of the firm for any
payments made by him in respect of the partnership
liabilities, and

(c) to be indemnified by the person guilty of the fraud
or making the representation against all the debts
and liabilities of the firm. [41

44. Where any member of a firm has died or otherwise
ceased to be a partner, and the surviving or continuing
partners carry on the business of the firm with its capital or
assets without any final settlement of accounts as between the
firm and the outgoing partner or his estate, then, in the
absence of any agreement to the contrary, the outgoing
partner or his estate is entitled, at the option of himself or
his representatives, to such share of the profits made since
the dissolution as the court may find to be attributable to the
use of his share of the partnership assets, or to interest at
the rate of eight per cent Per annum on the amount of his
share of the partnership assets: Provided that where, by
the partnership contract, an option is given to surviving or
continuing partners to purchase the interest of a deceased
or outgoing partner, and that option is duly exercised, the
estate of the deceased partner or the outgoing partner or his
estate, as the case may be, is not entitled to any further or
other share of profits; but if any partner assuming to act in
exercise of the option does not in all material respects comply
with the terms thereof, he is liable to account under the
preceding provisions of this section. [42

45. Subject to any agreement between the partners, the amount
due from surviving or continuing partners to an outgoing partner or the
representatives of a deceased partner in respect of the outgoing or
deceased partner's share is a debt accruing at the date of the
dissolution or death. [43





46. In settling accounts between the partners after a dissolution of
partnership, the following rules shall, subject to any agreement, be
observed

(a)losses, including losses and deficiencies of capital, shall be
paid first out of profits, next out of capital,, and lastly, if
necessary, by the partners individually in the proportion in
which they were entitled to share profits; and

(b)the assets of the firm, including the sums, if any, contributed
by the partners to make up losses or deficiencies of capital,
shall be applied in the following manner and order-

(i) in paying the debts and liabilities of the firm to persons
who are not partners therein;

(ii) in paying to each partner rateably what is due from the
firm to him for advances as distinguished from capital;

(iii) in paying to each partner rateably what is due from the
firm to him in respect of capital; and

(iv) the ultimate residue, if any, shall be divided
among the partners in the proportion in which
profits are divisible. [44

47. The rules of equity and of common law applicable to
partnership shall continue in force, except so far as they are
inconsistent with the express provisions of this

Ordinance. [46
Originally 2 of 1897. Fraser. 1 of 1897. 53 & 54 Vict. C. 39. Short title. Interpretation. Definition of partnership. Rules for determining existence of partnership. Postponement of rights of person lending or selling in consideration of share of profits in case of insolvency. [s. 5 cont.] Meaning of firm and firm-name. Power of partner to bind firm. Partners bound by acts on behalf of firm. Partner using credit of firm for private purposes. Effect of notice that firm will not be bound by acts of partner. Liability of partners. Liability of firm for wrongs. Misapplication of money or property received for or in custody of firm. Liability for wrongs joint and several. Improper employment of trust property for partnership purposes. [s. 15 cont.] Persons liable by 'holding out'. Admissions and representations of partner. Notice to acting partner to be notice to firm. Liability of incoming and outgoing partners. Revocation of continuing guarantee by change in firm. Variation by consent of terms of partnership. Partnership property. Property bought with partnership money. Conversion into personal estate of land held as partnership property. Procedure against partnership property for partner's separate judgment debt. Rules as to interests and duties of partners, subject to special agreement. Expulsion of partner. Retirement from partnership at will. [s. 28 cont.] Where partnership for term is continued over, continuance on old terms presumed. Duty of partners to render accounts, etc. Accountability of partners for private profits. Duty of partner not to compete with firm. Rights of assignee of share in partnership. Dissolution by expiration or notice. Dissolution by bankruptcy, death, or charge. Dissolution by illegality of partnership. Dissolution by the court. Rights of persons dealing with firm against apparent members of firm. Right of partner to notify dissolution. Continuing authority of partners for purposes of winding-up. Rights of partners as to application of partnership property. Apportionment of premium where partnership prematurely dissolved. Rights where partnership dissolved for fraud or misrepresentation. Rights of outgoing partner in certain cases to share profits made after dissolution. Retiring or deceased partner's share to be a debt. Rules for distribution of assets on final settlement of accounts. Saving for rules of equity and of common law.

Originally 2 of 1897. Fraser. 1 of 1897. 53 & 54 Vict. C. 39. Short title. Interpretation. Definition of partnership. Rules for determining existence of partnership. Postponement of rights of person lending or selling in consideration of share of profits in case of insolvency. [s. 5 cont.] Meaning of firm and firm-name. Power of partner to bind firm. Partners bound by acts on behalf of firm. Partner using credit of firm for private purposes. Effect of notice that firm will not be bound by acts of partner. Liability of partners. Liability of firm for wrongs. Misapplication of money or property received for or in custody of firm. Liability for wrongs joint and several. Improper employment of trust property for partnership purposes. [s. 15 cont.] Persons liable by 'holding out'. Admissions and representations of partner. Notice to acting partner to be notice to firm. Liability of incoming and outgoing partners. Revocation of continuing guarantee by change in firm. Variation by consent of terms of partnership. Partnership property. Property bought with partnership money. Conversion into personal estate of land held as partnership property. Procedure against partnership property for partner's separate judgment debt. Rules as to interests and duties of partners, subject to special agreement. Expulsion of partner. Retirement from partnership at will. [s. 28 cont.] Where partnership for term is continued over, continuance on old terms presumed. Duty of partners to render accounts, etc. Accountability of partners for private profits. Duty of partner not to compete with firm. Rights of assignee of share in partnership. Dissolution by expiration or notice. Dissolution by bankruptcy, death, or charge. Dissolution by illegality of partnership. Dissolution by the court. Rights of persons dealing with firm against apparent members of firm. Right of partner to notify dissolution. Continuing authority of partners for purposes of winding-up. Rights of partners as to application of partnership property. Apportionment of premium where partnership prematurely dissolved. Rights where partnership dissolved for fraud or misrepresentation. Rights of outgoing partner in certain cases to share profits made after dissolution. Retiring or deceased partner's share to be a debt. Rules for distribution of assets on final settlement of accounts. Saving for rules of equity and of common law.

https://oelawhk.lib.hku.hk/items/show/1703

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