Successful ejection of problematic partner from thriving London partnership

May 2015

A problematic partner can be hugely damaging to the success and morale of a successful partnership.

A mechanism that facilitates the removal of a non performing partner is a business necessity which is often overlooked. Their smooth removal without impacting on the day to day running of the business may be a necessity – one that is guided by Quist’s expert advice.

If a partnership does not invest in the preparation of a comprehensive partnership deed then by default the partnership will be governed by the provisions of the Partnership Act 1890.

Although the Act offers adequate provisions regulating the relationship of basic partnerships, for most, the Act is inadequate. By way of example, the Act does not provide a mechanism for the expulsion of a partner. In such scenarios, the partnership would need to be dissolved and reformed, potentially causing huge damage to on-going contracts, business operations and relationships.

To circumnavigate this potentially disastrous scenario, Quist can assist with the preparation of a well drafted partnership agreement which can include, amongst other things, a ‘green socks’ compulsory retirement clause. Such a clause enables partners to expel a partner without the need to provide any reasoning or explanation. This enables partners to expel a colleague for almost any reason, including unsatisfactory performance or personality issues.

Access to this mechanism can be critical, as the smooth running of the management and positive partnership relationships have a direct effect on the success and growth of the business. Provided that there are no discriminatory elements to the expulsion, the out-going partner’s compulsory retirement is usually unchallengeable.

At Quist, we have decades of experience handling disputes, freezing assets and negotiating settlements.

We recently assisted a very successful and well know London based business to navigate their way through a fierce dispute with a partner whose participation in the business was causing reputational and financial damage and leading to the loss of staff morale.

The partnership engaged the ‘green socks clause’ of their partnership agreement. Following lengthy negotiations led by Quist, the partner agreed to leave the partnership voluntarily, ensuring the least disruption possible to the partnership’s on-going business interests. An otherwise highly contentious and acrimonious dispute was managed smoothly.

The favourable result had an almost immediate positive tangible effect on our client’s profits and growth.