10th July 2024

Agribusiness FAQs – Why have a written farming Partnership Agreement?

Agribusiness FAQs - Why have a written farming Partnership Agreement?

Agribusiness FAQs – Why have a written farming Partnership Agreement?

If you and your partners do not have a formal agreement, the Partnership Act 1890 dictates how certain issues will be resolved. This will almost inevitably mean that the position between you and your partners is not as you expected or intended. In the context of a fall out, it can be very difficult to reach an agreement between partners.

When bringing in new partners/the next generation in to the farming business, we always recommend putting a written farming partnership agreement in place for a number of reasons.

What may seem to be an unnecessary exercise/expense for a farming partnership business now, is likely to be invaluable going forward as it will set out terms dealing with all eventualities that life may throw at the partnership in the future.

A written partnership agreement will:

Regulate:Prevent issues arising such as:
  • When a partner can retire or be removed
  • What percentage of the income and capital profits each partner is entitled to
  • How much time each partner is expected to devote to the business
  • What limit of costs a partner can pay out on behalf of the Partnership without involving the other partners
  • Who can sign cheques on behalf of the Partnership
  • What is to be classed as partnership assets: land, entitlements, vehicles etc
  • Automatic dissolution of the partnership on the death/retirement of a partner
  • Banking implications such as frozen accounts
  • Property being inadvertently determined as an asset of the partnership
  • Assets being valued at market value as opposed to book value

 

If you’d like further advice on Agribusiness matters you can contact our Agribusiness team here.