Partnership Dispute Solicitors
A partnership dispute is a dispute between people who have built something together — and the resolution must deal with both the legal rights and the economic reality of what they have built. A solicitor will protect your share.
Partnership disputes arise in traditional partnerships, LLPs, and informal business arrangements — over profit-sharing, the conduct of a partner, the management of the business, the valuation of a departing partner's interest, and the dissolution of the partnership. The Partnership Act 1890 governs general partnerships; the Limited Liability Partnerships Act 2000 governs LLPs. A partnership agreement (if one exists) will typically provide for many of these issues — but where it does not, or where the conduct falls outside what the agreement anticipated, the statute applies. A solicitor will identify the applicable legal framework and protect your position throughout.
Types of Partnership Dispute
Partnership disputes — the legal framework and how different types of dispute are resolved.
Partnership disputes require both a legal analysis of the partnership agreement (or the statute where there is none) and a practical understanding of the business — what it is worth, how it can continue, and what each partner's contribution has been. A solicitor will bring both to bear on the resolution.
Profit-sharing and drawings disputes
Where a partnership agreement sets out the profit-sharing ratio, a partner who takes more than their agreed share — through excessive drawings or by redirecting business income — is in breach of the partnership agreement and has a duty to account to the other partners. Where no agreement is in place, the Partnership Act 1890 provides that partners share profits equally — regardless of the time and effort each contributes. A solicitor will identify the applicable profit-sharing arrangement, trace the drawings taken, and pursue an account from the partner who has taken more than their agreed share.
Expulsion of a partner
The Partnership Act 1890 does not provide a power to expel a partner — expulsion can only be done where the partnership agreement expressly gives that power, in defined circumstances. An expulsion that is carried out without an express power, or outside the circumstances specified in the agreement, is wrongful — it entitles the expelled partner to treat the expulsion as a dissolution of the partnership and claim their share. Where the agreement does permit expulsion, it must be exercised in good faith and strictly in accordance with its terms. A solicitor will advise on whether the expulsion is lawful — and, if the client is being expelled, on the entitlement arising from wrongful expulsion.
Dissolution — winding up the partnership
The Partnership Act 1890 provides for dissolution of a partnership in a range of circumstances — on expiry of a fixed term, on the death or bankruptcy of a partner, and by court order on just and equitable grounds. On dissolution, the partnership assets are realised and applied to pay the partnership's debts — with the surplus distributed between the partners according to their profit-sharing ratio (unless the partnership agreement provides otherwise). A solicitor will manage the dissolution process — identifying the partnership assets, settling the liabilities, and pursuing any partner who has caused loss to the partnership or misappropriated assets before dissolution.
Valuation of a departing partner's interest
Where a partner leaves — by retirement, expulsion, death, or dissolution — the valuation of their interest in the partnership is frequently the most contentious issue. The partnership agreement will typically specify the valuation method — book value, a multiple of profits, or an independent valuation. In the absence of an agreement, the partnership assets must be realised and the surplus distributed. A solicitor will ensure the correct valuation method is applied — challenging an undervaluation by the continuing partners and engaging a forensic accountant to provide an independent assessment where the continuing partners' valuation is disputed.
LLP member disputes
Limited Liability Partnership (LLP) member disputes are governed by the LLP agreement (or, in its absence, the default provisions of the Limited Liability Partnerships Act 2000 and the LLP Regulations 2001). Common disputes arise over: profit allocation between members; the expulsion or removal of a member; the level of a departing member's interest; non-compete obligations; and the management of the LLP's business. An LLP is a separate legal entity — unlike a partnership, it can own property, enter contracts, and sue in its own name. A solicitor will advise on the LLP agreement, the statutory framework, and the most effective route to resolving the dispute — whether that is negotiation, mediation, or court proceedings.
Breach of fiduciary duty — misappropriation and competing businesses
Partners owe fiduciary duties to each other and to the partnership — including the duty not to divert partnership business opportunities to themselves, the duty of good faith, and the duty to account for secret profits. A partner who sets up a competing business, diverts clients or contracts from the partnership, or takes a personal profit from a partnership opportunity has breached their fiduciary duty. A solicitor will pursue an account of profits (requiring the partner to disgorge the profit made) and a claim for the loss to the partnership caused by the diversion — together with injunctive relief where the competing business is ongoing.