7) Mutual freedom of choice is the real test. The actual criterion of the “partnership firm” is the “mutual agency” established by the Indian courts, i.e. whether a partner can bind the law firm by his action, i.e. whether he can act as an agent of all the other partners. [25] A partnership in Hong Kong is a business entity formed by the Hong Kong Partnerships Ordinance,[33] which defines a partnership as “the relationship between persons carrying out a for-profit joint venture” and is not a public limited company or a public limited company. [34] If the commercial entity is registered in the commercial register, it takes the form of a limited partnership within the meaning of the Ordinance on Limited Partnerships. [35] [36] However, if this business entity is not registered with the Registrar of Companies, it becomes a general trading company by default. [36] In principle, a partnership agreement is entered into to deal with any possible situation in which confusion, disagreement or change could arise. The two main structures of purchase and sale agreements are cross-purchase agreements, in which the remaining owners of the partnership buy the shares or stake of the outgoing partner, and the share withdrawal agreement, in which the company buys the shares of the outgoing owner. Life insurance policies are the most common technique to ensure that funds are available for cross-purchase transactions. With two partners in the same company, the solution is very simple, but requires more ingenuity to start with multiple shareholders.

In the case of share withdrawal agreements, on the other hand, the insurance would be taken out in favour of the company. One of the advantages of a buy-sell agreement is that with the partners who can agree, more innovative methods of solving the problem can be developed and codified. Agreement The purchase-sale contract is one of the most important elements of any partnership agreement. Lance Wallach summed up the problem in an article for Accounting Today: “Big problems can arise from the death, incapacity, resignation, etc. of one of the owners,” Wallach wrote. How would the heirs of the deceased liquidate the company`s interest to pay expenses and taxes? What would happen if an unknown heir or external buyer from the deceased decided to interfere in the business? Could the company or other owners afford to buy back the deceased`s ownership shares? The most common conflicts in a partnership arise due to difficulties in decision-making and disputes between partners. Under the Partnership Agreement, the conditions for the decision-making process shall be established, which may include a voting system or another method of applying checks and balances between the partners. In addition to decision-making procedures, a partnership agreement should include instructions for the settlement of disputes between partners.

This is usually achieved through a mediation clause in the agreement, which aims to provide a way to settle disputes between partners without the need for judicial intervention. Although each partnership agreement differs depending on the business purpose, certain conditions must be detailed in the document, including the percentage of ownership, the sharing of profits and losses, the duration of the company, decision-making and dispute resolution, the authority of the partner and the exit or death of a partner. .