Corporate Law Assignment - (Sample)

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Corporate LawNameInstitutionCourseDate1
Question 1IssueThe issue is whether a partnership exists among people who venture into a businesswhere one individual finances the start-up costs and later receives payment as annuity, while theother members are not paid as employees but through the consultancy arrangement with whatthey do.Relevant LawsPartnership Act 1892 (NSW)ApplicationAccording to subsection 1 of the Partnership Act of New South Wales, a partnership is arelationship between people who engage in a common business venture with the hope ofgenerating profit (s.1 PA 1892 NSW). Samuel, Thomas and Peta started up an internet businesstogether by purchasing goods from unfortunate companies and resold them to get profit. Theyare generally contractual as all the members agree on the same thing – engaging in the samebusiness venture with the hope of getting something in return. In partnerships, partners do nothave any separate legal identity of their own. Besides, partners must be shown to have consent ofworking together in common with a view of making profits and later applying the generatedprofits to the agreed subjects (Cribb v. Korn,1911).However, the requirement of ‘in common’ does not necessarily imply that all the partnersare obliged to take part actively in the business. Nonetheless, the caseLang v James Morrision& Co Ltddescribes the test as “Does the person who carries on the business do so as agent for2
the persons alleged to be partners” (Lang v James Morrison & Co Ltd,1911)? In addition to that,in the definition of partnership, the view of making profit is explained in theMinter v Minterthatgenerating profit is essential in every partnership even if it may not be the motive of the partnersin the short term (Minter v Minter,2000). This implies that even if the partners are on businesswith one another expecting losses in their first months, they are expected to continue workingtogether with the hope that at the end, they will earn profits.Nonetheless, according to section 2 (2) of the Partnership Act 1982, the sharing of thegross returns does not necessarily imply that a partnership exists. In addition to that, in ss 2(3), ifa person receives a share of profits of the business, it is evident that the person is a partner in thebusiness. However, if the share or the payment varies with the profits the business gets, then theindividual is not a partner in the business (s.2(3) PA 1982 NSW). In the same way, Samuel,Thomas and Peta agreed on some form of payment where Peta who financed the start-up costshad to receive payment on annuity. Clearly, this shows that Peta had some shares in the businessand that is why she receives monthly payment. On the other hand, since the payment of Samueland Thomas varies, then it is shows that they do not have shares in the business.Aside from that, s2(3)(d) of the Partnership Act clearly states that the advance moneygiven by a person to someone engaged or about to engage in business that makes the lenderreceive a particular rate of interest that does not correspond to the company’s profits, does notmake the lender a partner in the business. Additionally, in subsection (e) of the Act, any personwho is getting payments as a way of annuity does not make the person a partner in the business.Conclusion3
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