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Original Articles

Reconceptualising Scottish limited partnership law

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Pages 179-217 | Received 04 Mar 2020, Accepted 27 Jul 2020, Published online: 20 Aug 2020
 

ABSTRACT

Scottish limited partnerships (SLPs) have been the focus of much negative attention. Recent developments appear to have slowed the speed of incorporation of new SLPs. However, this article argues that current reforms may not help tackle existing fraudulent SLPs. This does not matter: viewing SLPs as general partnerships with some additional features, arguably fraudulent SLPs have ceased to exist, and offshored SLPs may have lost their separate legal personality. That this has been so far missed can be traced to current organisational theory. This article identifies the implications of reconceptualising the SLP for wider organisational theory and identifies options for state gift thinkers to reformulate their wider claims. Either the claim that separate legal personality derives from the state needs to be diluted to near tautology, or it needs to be limited in geographical extent.

Acknowledgements

The author is grateful to Professors Laura Macgregor and David Cabrelli for their helpful comments on the earlier drafts of this article. The author is also grateful to Elspeth Berry for her insightful comments on aspects of the subject matter of this article, and to the editors and anonymous reviewer for their helpful comments. All errors remain the sole responsibility of the author.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes on contributor

Dr Jonathan Hardman is Lecturer in International Commercial Law at the Law School, University of Edinburgh. Prior to commencing as a full time academic, he was a solicitor in private practice with 10 years experience, and an Honorary Lecturer at the University of Glasgow. His research interests lie in private business organisations, corporate transactions and rights in security. He is particularly interested in economic approaches to the law and differences between English and Scots law. He has published extensively on both of these subjects.

Notes

1 See Companies Act 2006 ss790A–790ZG.

2 Culminating in the Scottish Partnerships (Register of People with Significant Control) Regulations 2017 (SI 2017/694).

3 See Department for Business, Energy & Industrial Strategy, ‘Limited Partnerships: Reform of Limited Partnership Law’ (30 April 2018) <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/703603/limited-partnerships-review-of-limited-partnership-law.pdf>, Department for Business, Energy & Industrial Strategy, ‘Limited Partnerships: Reform of Limited Partnership Law – The Government Response to the consultation’ (December 2018) <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/762849/government-response-limited-partnerships.pdf>.

4 See DBEIS, ‘Limited Partnerships: Reform of Limited Partnership Law’ (n 3) 17; ‘Reforms proposed to prevent limited partnerships being used for money laundering purposes’ 2018 Company Lawyer 252 at 252.

5 See F Pollock, Essays on Jurisprudence and Ethics (Macmillan 1882) 100; L C B Gower, Pollock on Partnership (15th edn, Stevens & Sons Limited 1952) xi.

6 Limited Partnerships Act 1907, s4(2) and 6(1). For the historical approach, see discussion in D Milman and T Flanagan, Modern Partnership Law (Croon Helm 1983) 152; Gower (n 5) 187. For the Scottish approach, see G Brough, Partnership (W Green 1994) 609. For the modern analysis, see R I’anson Banks, Lindley and Banks on Partnership (20th edn, Sweet & Maxwell 2017) para 34-01.

7 Limited Liability Act 1855 and Joint Stock Companies Act 1856.

8 P Bailey, ‘BEIS Suspects Crooked Cuckoos in the Limited Partnerships Next and Consults on Reform’ 2018 Company Law Newsletter 407. See also ‘These commercial mongrels were introduced into modern English law by the Limited Partnerships Act 1907 being inspired by the French societa en commendite. However their impact was immediately neutralised by the introduction of private companies in the following year’, Milman and Flanagan (n 6) 150–51. In any event, limited liability for business ventures was available by registration prior to the introduction of the 1907 act.

9 Banks (n 6) para 29-01.

10 Banks (n 6) para 29-02. For historical commentary from partnership law texts deeming a limited partnership to be a separate type of entity see also Milman and Flanagan (n 6) 151; Gower (n 5) 186; Brough (n 6) 608; G Hesketh, Underhill’s Principles of the Law of Partnership (8th edn, Butterworths 1966) 151; J A Strahan and N H Oldham, The Law of Partnership (5th edn, Sweet & Maxwell 1927) 12.

11 E Berry, ‘Limited Partnership Law and Private Equity: An Instance of Legislative Capture?’ (2019) 19 Journal of Corporate Law Studies 105 at 105.

12 P L Davies and S Worthington, Gower Principles of Modern Company Law (10th edn, Sweet & Maxwell 2016) para 1-5.

13 G Morse and others, Palmers Company Law (Sweet & Maxwell 2019 release 164) para 1.206.1. For further company law texts which refer to limited partnerships being a type of partnership, see A Gamble and G Kelly ‘The Politics of the Company’ in J Parkinson, A Gamble and G Kelly (eds), The Political Economy of the Company (Hart 2000) 31; D Kershaw, Company Law in Context: Cases and Materials (2nd edn, OUP 2012 ) 13; S Worthington, Sealy & Worthington’s Text, Cases, & Materials in Company Law (11th edn, OUP 2016) 24; C A Cooke, Corporation, Trust & Company (Manchester University Press 1950) 111; R Harris, Industrializing English Law: Entrepreneurship and Business Organization, 1720–1844 (Cambridge University Press 2010) 19–20.

14 Limited Partnerships Act 1907 s7. See discussion in Banks (n 6) para 30-01; Milman and Flanagan (n 6) 151; Brough (n 6) 621; Gower (n 5) 190.

15 Partnership Act 1890 s4(2).

16 Re Barnard [1932] 1 Ch 269 at 272 confirmed that English limited partnerships do not obtain separate legal personality. For the Scottish position, see discussion in L Macgregor, ‘Partnerships and Legal Personality: Cautionary Tales from Scotland’ [2020] 20 Journal of Corporate Law Studies 237. Initially, it was intended that the Partnership Act 1890 only applied to English law, but in its final passage through Parliament it was extended to Scots law – see A Rodger, ‘The Codification of Commercial Law in Victorian Britain’ (1992) 108 Law Quarterly Review 570 at 578.

17 See S M Bainbridge, The New Corporate Governance in Theory and Practice (Oxford University Press 2008) 25; L E Talbot, Critical Company Law (Routledge 2008) 23–29.

18 In the Scottish context, see Children (Scotland) Act 1995 s15(4), and Adoption and Children (Scotland) Act 2007 s28(1).

19 For example, race in the US – see Thinket Ink Info Res, Inc v Sun Microsystems, Inc, 368 F3d 1053, 1058 (9th Cir 2004); R R W Brooks, ‘Incorporating Race’ (2006) 106 Columbia Law Review 2023 at 2076–79.

20 See R Kraakman et al, The Anatomy of Corporate Law: A Comparative and Functional Approach (3rd edn, Oxford University Press 2017) 5–8.

21 See the discussion in Macgregor (n 16) 241–44 which cites authority that a Scottish partnership can contract, hold assets, sue, and has some form of priority for its creditors. Given that laws pertaining to partnerships apply to SLPs unless otherwise stated (n 14), these features also apply to SLPs. Macgregor, however, notes that whilst the Scottish partnership can do these things, it frequently does not, often relying on individual partners holding property on trust. Macgregor uses this to argue that we should not use these criteria in a ‘tick box’ manner but instead look behind the underlying label to establish a wider concept of whether the entity can act together as a group (at 244). However, for our purposes, it is sufficient to note that SLPs enjoy the features which are attributed to having separate legal personality.

22 Berry (n 11) 106–08; L Gullifer and J Payne, Corporate Finance Law: Principles and Policy (3rd edn, Hart 2020) 810–12. For the usual terms contained in a venture capital limited partnership agreement, see D Cumming and S Johan, ‘Venture Capital and Corporate Governance’ in M Wright, D S Siegal, K Keasy and I Filatotchev (eds), The Oxford Handbook of Corporate Governance (Oxford University Press 2014) 515–35.

23 Unless required under Partnership (Accounts) Regulations 2008 (SI 2008/569) reg4(1) – i.e. if all partners are corporate vehicles. See discussion in J Hardman, A Practical Guide to Granting Corporate Security in Scotland (W Green, 2018) paras 2-36–2-37.

24 Gullifer and Payne (n 22) 810–12; Davies and Worthington (n 12) para 1-5. For a Scottish take, see N Grier, Company Law (4th edn, W Green 2014) para 1-24.

25 See Banks (n 6) para 30-02; J Anderson and A Deitz, ‘Seeking a Wider Public – Ironically for Some, New Private Equity Funds are Submitting to the Rigours of the Public Capital Markets’ (2006) 25 International Financial Law Review 44 at 45; LCN Legal, ‘An Introduction to Limited Partnership Funds: Who Does What’ <https://lcnlegal.com/an-introduction-to-limited-partnership-funds-who-does-what/>. In general partnerships, it is usual for certain partners to hold property on trust for themselves and the other partners – see Banks (n 6) para 18-63.

26 Companies Act 1985 ss716–17. See N Stolowy and S Schrameck, ‘The Contribution of European Law to National Legislation Governing Business Law’ (2011) Journal of Business Law 614 at 621; J J Henning, ‘Limited Partnerships Reform: Part 2’ (2011) Company Lawyer 208 at 211.

27 Such cap was abolished by The Regulatory Reform (Reform of 20 Member Limit in Partnerships etc) Order 2002 (SI 2002 /3203) reg 2. It is likely that such a cap acted as a deterrent on the use of the limited partnership form – J Freedman, ‘Limited Liability: Large Company Theory and Small Firms’ (2000) 63 Modern Law Review 317 at 321.

28 J A McCahery and E P M Vermeulen, ‘Conservatism and Innovation in Venture Capital Contracting’ (2012) European Business Organization Law Review 261 at 268; D J Cooke, Private Equity: Law and Practice (4th edn, Sweet & Maxwell 2011) 380; G Yates and M Hinchclife, A Practical Guide to Private Equity Transactions (Cambridge University Press 2010) 62; S Biggs ‘Private Equity: A Practical Guide’ (2008) 8 Legal Information Management 247. The general partner can sometimes fulfil the role of the carry vehicle – Gullifer and Payne (n 22) 811.

29 For a list of the articles in the Herald’s campaign, see Department for Business, Energy & Industrial Strategy, ‘Review of Limited Partnership Law: A Call for Evidence’ (January 2017) Annex B <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/583800/review-of-limited-partnerships-law-call-for-evidence.pdf>. This provides a then-near-exhaustive list of journalism articles which highlight such fraud. This list consists entirely of articles from the Herald.

30 D Leask, ‘Fears Grow over Scottish Firms Used for Money-laundering in Former Soviet Union’ Glasgow Herald (16 July 2016) <www.heraldscotland.com/news/14623297.fears-grow-over-scottish-firms-used-for-money-laundering-in-former-soviet-union/>.

31 See R D Francis, A F Armstrong, and H S Grow, ‘Incumbency and Corruption’ (2019) 40 Company Lawyer 139 at 140–41.

33 The relevant provision is Companies Act 2006 s1065, without an equivalent in either the Limited Partnership Act 1907 or The Registrar of Companies (Fees) (Limited Partnerships and Newspaper Proprietors) Regulations 2009.

34 Transparency International and Bellingcat, ‘Offshore in the UK: Analysing the Use of Scottish Limited Partnerships in Corruption and Money Laundering’ (June 2017, ISBN: 978-1-910778-67-8) 4–6 <www.transparency.org.uk/publications/offshore-in-the-uk/>.

35 Transparency International and Bellingcat (n 34) 6.

36 DBEIS (n 29).

37 This is, however, rather light touch and is therefore difficult to draw any definitive conclusions in respect of the SLP form itself (as compared to other business vehicles) – e.g. see fleeting references in L Campbell, ‘Dirty Cash (Money Talks): 4AMLD and the Money Laundering Regulations 2017’ (2018) Criminal Law Review 102; N Lord, K Van Wingerde and L Campbell, ‘Organising the Monies of Corporate Financial Crimes via Organisational Structures: Ostensible Legitimacy, Effective Anonymity, and Third-Party Facilitation’ (2018) 8 Administrative Sciences 17.

38 E Berry, ‘Partnership Law: Used, Misused or Abused?’ European Business Organization Law Review, forthcoming, especially parts 3 and 4.

39 Companies Act 2006, s155; N J Lord, L J Campbell and K Van Wingerde, ‘Other People’s Dirty Money: Professional Intermediaries, Market Dynamics and the Finances of White-Collar, Corporate and Organized Crimes’ (2019) 59 British Journal of Criminology 1217 at 1231. For an overview of policy reasons underpinning such change, please see J L Yap, ‘De Facto Directors and Corporate Directorships’ (2012) 7 Journal of Business Law 579.

40 Transparency International and Bellingcat (n 34) 9.

41 ibid 7, 11, 13–14. Similarly examples also appear in the Herald articles (see DBEIS (n 29)), and in Campbell (n 37).

42 Transparency International and Bellingcat (n 34) 17–21.

43 Bellingcat ‘Smash & Grab: The UK’s Money Laundering Machine, a Bellingcat Investigation’ (September 2019) 5 <www.bellingcat.com/wp-content/uploads/2019/09/Smash-and-Grab-The-UKs-Money-Laundering-Machine.pdf>.

44 DBEIS (n 29); see discussion in L Campbell, ‘Dirty Cash (Money Talks)’ (n 37).

45 Scottish Partnerships (Register of People with Significant Control) Regulations 2017 (SI 2017/694); <www.gov.uk/government/news/scottish-limited-partnerships-to-reveal-identity-of-owners-thanks-to-new-laws>.

46 See DBEIS, ‘Limited Partnerships: Reform of Limited Partnership Law’ (n 3) 20; ‘Reforms proposed to prevent limited partnerships being used for money laundering purposes’ 2018 Company Lawyer 252 at 252.

47 DBEIS, ‘Limited Partnerships: Reform of Limited Partnership Law’ (n 3) ch 2.

48 ibid ch 4.

49 ibid ch 5.

50 See Limited Partnership Act 1907 s8A(2)(e).

51 DBEIS ‘Limited Partnerships: Reform of Limited Partnership Law’ (n 3) ch 3.

52 DBEIS ‘Limited Partnerships: Reform of Limited Partnership Law – The Government Response’ (n 3) 8, 11–15.

53 ibid 9.

54 Department for Business, Energy & Industrial Strategy, ‘Corporate Transparency and Register Reform’ (May 2019). <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/819994/Corporate_transparency_and_register_reform.pdf>.

55 Bellingcat, ‘How the British Government’s Attempts to Fight Corruption and Money Laundering are already failing’ (14 November 2017) <www.bellingcat.com/news/uk-and-europe/2017/11/14/british-governments-attempts-fight-corruption-money-laundering-already-failing/>.

56 Berry (n 38) section 5i.

57 Analogous powers to the Registrar of Companies in respect of companies requires effectively a three month periods (Companies Act 2006 s1000) – the Registrar has to send one notice to the relevant company, wait 14 days, send a second notice, wait 14 days, publish a notice in the relevant Gazette, wait 2 months and then can strike off the company.

58 There is no reason to assume that dissolution will necessarily be linked to a removal of limited liability for limited partners, whereas such personal liability is necessary to act as an incentive for compliance – see J Armour, J Gordon and G Min, ‘Taking Compliance Seriously’ (2020) 37 Yale Journal on Regulation 1. This is likely to be exacerbated by an absence of corporate veil to pierce – in a corporate context, see S Ottolenghi, ‘From Peeping Behind the Corporate Veil, to Ignoring it Completely’ (1990) 53 Modern Law Review 338.

59 DBEIS, ‘Limited Partnerships: Reform of Limited Partnership Law’ (n 3) 27–31.

60 For example, DBEIS (n 29) 9; Transparency International and Bellingcat (n 34) 4. From the perspective of criminal law commentary, partnerships are normally included in discussion of ‘corporate crime’, and included as ‘corporate entities’ – e.g. L Campbell, ‘Corporate Liability and the Criminalisation of Failure’ (2018) 12 Law and Financial Markets Review 57 at 57.

61 Limited Partnerships Act 1907 s7. See discussion in all sources cited at (n 14).

62 Partnership Act 1890 s4(2).

63 Berry (n 38) section 2

64 Limited Partnerships Act 1907 s4(2A).

65 Limited Partnerships Act 1907 s6(1). See discussion in all sources cited at (n 6).

66 Limited Partnerships Act 1907 s5.

67 See discussion in The Law Commission and Scottish Law Commission, ‘Partnership Law’ (Law Com 283, Scot Law Com 192), November 2003 para 15-14.

68 Companies Act 2006 s16.

69 Joint Stock Companies Act 1845, sXXV; Joint Stock Companies Act 1956 sXIII.

70 Limited Liability Partnership Act 2000, s3.

71 See discussion of the ‘mysterious right called incorporation’ in E M Dodd, ‘For Whom are Corporate Managers Trustees’ (1932) 65 Harvard Law Review 1145 at 1160; ‘a legal entity created by the act of incorporation’ in M M Blair and L A Stout, ‘A Team Production Theory of Corporate Law’ (1999) 85 Virginia Law Review 247 at 250; W T Allen, ‘Our Schizophrenic Conception of the Business Corporation’ (1992) 14(2) Cardozo Law Review 261; Davies and Worthington (n 12) paras 4-34–4-38.

72 Morse et al (n 13) para 2.1545.

73 Such word was used ever since the case of Suttons’ Hospital (1612) 77 ER 960 – see Cooke (n 13) 67. Not choosing the word ‘incorporate’ for limited partnerships is likely to be deliberate – incorporation under English law has been associated with separate legal personality (see discussion in Section 6), which is not something that English limited partnerships have traditionally enjoyed.

74 More accurately, companies legislation states that the effect of registration was incorporation, whereas the 1907 act states that the features of limited partnership are bestowed upon registration – compare Companies Act 2006 s16 to Limited Partnerships Act 1907 s8.

75 Limited Partnerships Act 1907 s8B.

76 Companies Act 2006 s16.

77 Limited Partnerships Act 1907, s5.

78 See Rayner & Co v Rhodes (1926) 24 LlLR 25; The Limited Partnership Act (Law Com Consultation Paper No 161, SLC Com DP No 118) (2001) para 3.23; Milman and Flanagan (n 6) 152; Strahan and Oldham (n 10) 230; ‘The protection of the Act may be lost altogether by passive default in omitting to register’ Gower (n 5) 189.

79 Khan v Miah [2000] 1 WLR 2123.

80 See E Berry, ‘Death by a Thousand Cuts or Storm in a Teacup? The Reform of Limited Partnership Law’ [2011] Journal of Business Law 578 at 580.

81 Partnership Law (Law Com No 283, SLC Com No 192) (2003) para 15:17–15:21.

82 Legislative Reform (Limited Partnerships) Order 2009 (SI 2009/1940) Art 8.

83 E.g. Henning (n 26) at 211–12.

84 See E Berry, ‘Limited Partnership Law in the United States and the United Kingdom: Teaching an Old Dog New Tricks?’ 2013 Journal of Business Law 160 at 166; Banks (n 6) para 29-13.

85 Limited Partnerships Act 1907 s8.

86 Limited Partnerships Act 1907 s8C(1).

87 Limited Partnerships Act 1907 s8C(3).

88 Limited Partnerships Act 1907 s8C(4).

89 Henning (n 26); Berry (n 80); Berry (n 84).

90 Companies Act 2006 s15(4).

91 Limited Partnerships act 1907 s8C(4); see discussion in Henning (n 26).

92 See Berry (n 80); Henning (n 26); Berry (n 8).

93 Unless this is supplanted by a dissolution under Companies Act 2006 s1000, s1001 or s1003.

94 Companies Act 2006 s1065.

95 Companies Act 2006 s86 and s87, and The Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009.

96 Limited Partnerships Act 1907 s9(1).

97 DBEIS, ‘Limited Partnerships: Reform of Limited Partnership Law – The Government Response’ (n 3) 8, 11–15.

98 Companies Act 2006 ss1000, 1001 and 1003.

99 This is, obviously, subject to proposed reform referred to above.

100 Berry (n 84) at 166; Bank (n 6) para 29-33; P Bailey, ‘Companies House Update to Prevent Criminality – But Is It Already too Late?’ 2019 Company Law Newsletter 1.

101 Limited Partnerships Act 1907 s6(2).

102 See Banks (n 6) para 7.2. The principal exception to this being a notice of a charge of a partners’ share: which terminates a general partnership (Partnership Act 1890 s33(2)) but will not terminate a limited partnership if undertaken by a limited partner (Limited Partnerships Act 1907 s6(5)(c)).

103 Banks (n 6) para 32-02.

104 Partnership Act 1890 s34.

105 E.g. Hudgell Yeates & Co v Watson [1978] QB 451; Hill v Clifford [1907] 2 Ch 236.

106 E.g. Stevenson and Sons v Aktiengesellschaftfür Cartonnagen-Industrie [1918] AC 239.

107 For example smuggling (Biggs v Lawrence (1789) 3 TR 453; Stewart v Gibson (1838) 7 Cl&F 707), or illegal export in breach of prohibition (see the English case of Foster v Driscoll [1929] 1 KB 470 (this rule applies even if the illegality is not actually achieved – at 510) and the Scottish case of Lindsay v Inland Revenue 1933 SC 33).

108 Berry (n 38) section 2.

109 Everet v Williams 2 Pothier on Obligations 3 9 LQR 197.

110 Berry (n 80) at 581. It is, of course, implicit in the wording of the certificate that registration cures any issue caused by a lack of a pre-existing partnership. After all, the precise wording is that the certificate is ‘conclusive proof’ that a limited partnership came into being (Limited Partnership Act 1907, s8C). However, this is far from certain. One reading is that the certificate is merely conclusive proof that additional features were provided to an otherwise existing partnership – under such reading, in the absence of the existing general partnership, the features had nothing to be added to, and so were never added.

111 Biggs v Lawrence (1789) 3 TR 454.

112 Lindsay v Inland Revenue 1933 SC 33 at 40, per Lord President Clyde.

113 See H MacQueen and Lord Eassie (eds), Gloag and Henderson: The Law of Scotland (14th edn, W Green 2017) para 45.01.

114 Inland Revenue v Graham’s Trustees 1971 SC (HL) 1.

115 Sheveleu v Brown and Ducker [2018] CSIH 68. This case has been criticised as not fitting squarely within Inland Revenue v Graham’s Trustees – see J Bailey, ‘Phantom Partnerships and Post-Dissolution Profits: Sheveleu v Brown and Ducker’ 23 Edinburgh Law Review 230. It also does not sit well with criminal law – a partnership was held instantly dissolved on the death of a partner, and so incapable of being indicted for breach of health and safety in Balmer v HM Advocate 2008 SCCR 765. However, it avoids practical complications which arise if separate legal personality just vanishes, and gives stronger effect to Partnership Act 1980, s38, which provides that post-dissolution of a partnership, each partner has continuing authority to wind up its affairs.

116 Bailey (n 115) at 235. For an SLP, this would of course mean that the general partner(s) was/were liable as limited partners would not be.

117 Dickson v National Bank of Scotland 1917 SC (HL) 50 at 52 per Lord Finlay ‘the survivors cannot undertake new transactions on behalf of the firm’; Inland Revenue v Graham’s Trustees 1971 SC (HL) 1 at 21 per Lord Reid ‘the surviving partners have no right to bind the assets of the dissolved firm by making new bargains or contracts’; Lujo Properties v Green 1997 SLT 225.

118 Compare G L Gretton, ‘Who Owns Partnership Property?’ 1987 Juridical Review 163 with L Macgregor, ‘The Role of Agency in Scottish Partnerships’ in A J M Steven, R G Anderson and J MacLeod (eds), Nothing so Practical as a Good Theory: Festschrift for George L Gretton (Avizandum 2017) at 97–100.

119 Fraser v Hill (1852) 14 D 335 at 346.

120 Hudgell Yeates & Co v Watson [1978] QB 451.

121 The reforms which have been currently implemented.

122 Royal Exchange Assurance Act 1720 (6 Geo. I c18 (1720)).

123 Royal Exchange Assurance Act 1720 s18; P G Mahoney, ‘Contract or Concession? An Essay on the History of Corporate Law’ 34 Georgia Law Review 873.

124 See J F Wilson, British Business History, 1720–1994 (Manchester University Press 1995) 45.

125 Josephs v Pebrer 3 B&C 639.

126 Kinder v Taylor (1825) 3 LJ Ch 68; Harris (n 13) 243.

127 Dickson v National Bank of Scotland 1917 SC (HL) 50 involved a firm of solicitors placing a deposit with a bank on behalf of their clients. The firm was dissolved. The House of Lords held that, under Partnership Act 1890 s38, individual partners had authority to continue to sign withdrawals on behalf of the dissolved firm. However, in that case all business was entirely legitimate. It is submitted that the effect of illegal partnership being not enforceable as between the parties would mean that any such continuation of authority would only be applicable to ingather assets into the SLP, but that attempts at dissolution of assets from the SLP to its members would be unenforceable.

128 In the context of limited partnerships see J A McCahery and E P M Vermeulen, ‘Limited Partnership Reform in the United Kingdom: A Competitive, Venture Capital Oriented Business Form’ (2004) 5 European Business Organization Law Review 61.

129 The ability for a partnership to hold land is a relatively new development under Scots law due to issues with the Land Register – these were resolved by the Abolition of Feudal Tenure etc. (Scotland) Act 200 s70. For the position prior to this section, see Gretton (n 118). It remains unusual for a partnership to hold land in its own name but usual to hold other assets in the name of the firm – see G L Gretton and K G C Reid, Conveyancing (5th edn, W Green & Sons 2018) para 28-01. A similar issue still applies in respect of a Scottish partnership’s inability to hold title to a ship in its own name, due to the specific wording of maritime legislation – see Duncan v The MFV Marigold PD 145 [2006] CSOH 128, para 14.

130 Partnership Act 1890, s4(2).

131 See discussion in Böckli et al, ‘The Consequences of Brexit for Companies and Company Law’ (March 2017) University of Cambridge Faculty of Law Research Paper No 22/2017 <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2926489>.

132 See D Prentice, ‘Incorporation Theory – the United Kingdom’ (2003) 14 European Business Law Review 631.

133 See discussion in Banks (n 6) para 29-35, footnote 211.

134 Berry (n 38) section 5h.

135 Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd [2018] UKPC 7, at [88]–[89].

136 See Transparency International and Bellingcat (n 34) 4–6.

137 Its registered office would remain in its initial jurisdiction of incorporation – see Companies Act 2006 s114, and as such it would remain incorporated in Scotland and so governed by Scots law (see also Re Tayside Floorcloth Co 1923 SC 590). This is further elaborated upon in Carse v Coppen 1951 SC 223, in which it is stated that the governing law of a company is that of its place of incorporation, per the Lord President at 241.

138 P Beaumont and P McEleavy, Anton’s Private International Law (3rd edn, W Green 2011) para 25.35. Scottish discussion of applicable law to partnerships and the court’s jurisdiction is intrinsically intermingled – a partnership with its business in India was considered an Indian partnership for the Indian courts to wind up in Fairweather v Mactaggart (1893) 20 R 738, and so nothing to do with Scottish courts or Scots law. Scottish courts have similarly permitted a winding up of the Scottish element of a partnership which operated in England and Scottish in Rothfield v Cohen 1919 1 SLT 138, noting that the English courts would need to wind up the English aspects of the partnership under English law at 140. Matters relating to the governing law of business entities is excluded from the Rome I Convention (Regulation (EC) No 593/2008 – see Art 1(f)), and therefore this historic law remains relevant – see Anton paras 10.52–10.55.

139 The link between a partnership’s domicile and its governing law as a matter of Scots law is expressly discussed in Muir v Collett (1862) 24 D 1119 at 1122–23. This conflation between jurisdiction and governing law also applies in the context of the insolvency of incorporated companies – see Carse v Coppen 1951 SC 223, where Lord Carmont stated at 243–44 ‘company’s domicile is created by registration; it is, so to say, born in Scotland, and however widespread its activities and contacts with other legal systems in the days of its vigour, to Scotland it must come to be laid to rest when its days are done, and according to Scots law should its affairs be wound up’. This demonstrates the link between jurisdiction and governing law. The phenomenon of governing law being chosen by reference to jurisdiction is noted in Collins (ed), Dicey, Morris and Collins on The Conflict of Laws (15th edn, Sweet & Maxwell 2012) para 1-004.

140 Civil Jurisdiction and Judgments Act 1982 s42(3). For discussion in a Scottish context see Anton (n 138) paras 8.191–8.192; for discussion in an English context see Dicey, Morris and Collins (n 139) para 11-079.

141 Civil Jurisdiction and Judgments Act 1982 s42(5).

142 Civil Jurisdiction and Judgments Act 1982 s43(2). For a Scottish discussion see Anton (n 138) paras 8.51–8.52; for an English discussion see Dicey, Morris and Collins (n 139) para 11-007.

143 Civil Jurisdiction and Judgments Act 1982 s43(3); For a Scottish discussion see Anton (n 138) paras 8.51–8.52 and 8.189–8.196; for an English discussion see Dicey, Morris and Collins (n 139) para 11-007.

144 Civil Jurisdiction and Judgments Act 1982 S43A.

145 Cartesio (C-210/06) [2008] ECR I-9641. For an overview of current EU law of transferring seats of business entities, see J Benedetti and A Van Waeyeberge, ‘Structural Consequences of Cross-border Company Seat Transfers Within the EU in the Latest Court of Justice Case Law: Polbud’ (2019) 44(3) European Law Review 416.

146 Income Tax (Trading and Other Income) Act 2005 s863; Corporation Tax Act 2009 s1273. See recent discussion in The Commissioners for Her Majesty’s Revenue and Customs v Inverclyde Property Renovation LLP [2020] UKUT 161 (TCC). The analogy is not quite perfect, as the LLP still exists as a separate person, merely its tax treatment changes. The author is grateful to Elspeth Berry for identifying this analogy.

147 Limited Partnership Act 1907 s6(3).

148 For a Scottish example in the context of a death of a person, see Smith v Riddell (1886) 14 R 95, as discussed in W W McBryde, The Law of Contract in Scotland (3rd edn, SULI 2007) para 26.05; for an English example of incapacity in contract see Notcutt v Universal Equipment Co (London) [1986] 1 WLR 641, as discussed in McBryde para 21.30. Similarly, any future contracts purported to be entered into by the SLP would be impossible and therefore void – e.g. Sibson & Kerr v Ship “Barcraig” Company, Limited (1896) 24 R 91 (which involved a lost ship), in which Lord Young stated: ‘Perhaps I should say that I rather approve of the view … that there being nothing to shew that the vessel was in existence at the date of this contract, but everything to suggest the reverse, the contract consequently was void altogether from the beginning, and never came into operation at all’ at 98–99; McBryde paras 20.11–20.15.

149 Inland Revenue v Graham’s Trustees 1971 SC (HL) 1.

150 The basic concept of this issue arises from the work of Hohfeld in private law. See W N Hohfeld, ‘Some Fundamental Legal Conceptions as Applied in Judicial Reasoning’ 23 (1913) Yale Law Journal 16; A L Corbin, ‘Jural Relations and Their Classification’ 30 (1920) Yale Law Journal 226. Hohfeld identified conflations of concepts and then proposed a schema to resolve such conflations. For our purposes, the initial problem of conflation is sufficient – it can result in unreflexive blending, slippage and ambiguity between concepts – P Schlag, ‘How to Do Things with Hohfeld’ 78 (2005) Law and Contemporary Problems 185. Hohfeld’s analytical journey started with an enquiry into what rights and duties shareholders in the US enjoyed and owed – see W N Hohfeld, ‘The Nature of Stockholders’ Individual Liability for Corporation Debts’ (1909) 9 Columbia Law Review 285 and W N Hohfeld, ‘The Individual Liability of Stockholders and the Conflict of Laws’ (1909) 9 Columbia Law Review 492.

151 Biology often refers to the necessity to have a balance of both ‘lumpers’ and ‘splitters’. Lumpers are those who pull similar animals into the same genus, and splitters are those who identify minor differences between similar types of animals, to separate them into different genera – see V McKusick ‘On Lumpers and Splitters, or the Nosology of Genetic Disease’ (1969) 12(2) Perspectives in Biology and Medicine 298; G G Simpson, The Principles of Classification and a Classification of Mammals (American Museum of Natural History 1945) 23.

152 When the Law Commission proposed to provide separate legal personality to English partnerships (Partnership Law (Law Com No 283, SLC Com No 192) (2003) ch 5), one of the primary objections was the tax treatment – Berry (n 80) 594. This demonstrates how market participants view tax treatment of legal vehicle as being of paramount importance. For a further discussion of tax treatment of partnerships in cross border contexts, see J Hattingh, ‘The Tax Treatment of Cross-border Partnerships Under Model-based Bilateral Double Tax Conventions: A Case and Methodology’ (2010) 6 Cambridge Student Law Review 16, especially at 17–19 and 29–32.

153 In Scotland, prescription of claims against partnerships can be linked to their date of dissolution of the partnership – Prescription and Limitation (Scotland) Act 1973 s6 and Sch 2, para 1(3), as discussed in D Johnston, Prescription and Limitation of Actions (2nd edn, SULI 2012 ) paras 6.78–6.89.

154 Partners owe fiduciary duties to each other partner and to the firm itself – Helmore v Smith (1886) 35 Ch D 436 at 444. This has been held to apply to limited partnerships (BBGP Managing General Partner Ltd v Babcock & Brown Global Partners [2011] Ch 296 at para 11) but not to LLPs – F&C Alternative Investments (Holdings) Ltd v Barthelemy [2011] EWHC 1731 (Ch).

155 Macgregor (n 16).

156 See R Harris, ‘The Transplantation of the Legal Discourse on Corporate Personality Theories: From German Codification to British Political Pluralism and American Business’ (2006) 63 Washington and Lee Law Review 1421 at 1422.

157 S M Watson, ‘The Corporate Legal Person’ (2019) 19 (1) Journal of Corporate Law Studies 137 at 150; Harris (n 156) at 1427; J Dewey, ‘The Historic Background of Corporate Legal Personality’ (1926) 35 Yale Law Journal 655 at 665.

158 There is a theoretical difference between the legal fiction theory and the notion of state concession, but commentators frequently conflate the two together to the point at which these differences become irrelevant – see M H Hager, ‘Bodies Politic: The Progressive History of Organizational “Real Entity” Theory’ (1989) 50 University of Pittsburgh Law Review 575 at 580; Harris (n 156) at 1424; W W Bratton, ‘Berle and Means Reconsidered at the Century’s Turn’ (2001) 26 Journal of Corporate Law 737 at 742.

159 See J E Friedlander, ‘Corporations and Kulturkampf: Time Culture as Illegal Fiction’ (1996) 31 Connecticut Law Review 31 at 78; R Harris (n 156) at 1425.

160 See F W Maitland, ‘The Corporation Sole’ (1900) 16 Law Quarterly Review 355; F W Maitland, ‘The Crown as Corporation’ (1901) Law Quarterly Review 131; Harris (n 156) at 1433.

161 F Pollock, ‘Has the Common Law Received the Fiction Theory of Corporations’ (1911) 27 Law Quarterly Review 219 at 235.

162 ibid 224.

163 ‘Indeed it is plain, so far as motives of policy had anything to do with the decision, that the Court intended to give a generous support and liberal construction to the charter in favour of a munificent and deserving foundation. Need we say again that this doctrine is wholly repugnant to the first and most important consequence of the Fiction theory, namely, that a corporation has only that capacity which is expressly conferred upon it?’ Pollock (n 161) at 229.

164 M J Horwitz, The Transformation of American Law, 1870–1960: The Crisis of Legal Orthodoxy (Oxford University Press 1992) at 101.

165 Dewey (n 157). For the abrupt stop, see B R Cheffins, The Trajectory of (Corporate Law) Scholarship (Cambridge University Press 2003) at 38; Bratton (n 158) 741–43; Harris (n 156) 1474.

166 Dewey (n 157) at 669. He also stated ‘The fact of the case is that there is no clear cut line, logical or practical, through the different theories have been advanced and which are still advanced on behalf of the “real” personality of either “natural” or associated persons’. Dewey (n 157) 669; Harris (n 156) 1474–75.

167 See for example M Radin, ‘The Endless Problem of Corporate Personality’ (1932) 32 Columbia Law Review 643; P Vinogradoff, ‘Juridical Persons’ (1924) Columbia Law Review 594.

168 This cleared the way for Berle and Means’ analysis of separation of ownership and control (see A A Berle and G C Means, The Modern Corporation and Private Property (Transaction 1932) becoming the dominant analytical framework – see Bratton (n 158).

169 For an overview see M J Jenson and W H Meckling, ‘Theory of the Firm: Managerial Behaviour, Agency Costs, and Ownership Structure’ (1976) 10 Journal of Financial Economics 305; F H Easterbrook and D R Fishel, ‘The Corporate Contract’ (1989) 89 Columbia Law Review 1416; M Eisenberg, ‘The Conception that the Corporation is a Nexus of Contracts, and the Dual Nature of the Firm’ (1998) 24 Journal of Corporate Law 819.

170 See H Hansmann and R Kraakman, ‘The Essential Role of Organizational Law’ (2000) 110 Yale Law Journal 387; H Hansmann and R Kraakman, ‘Organizational Law as Asset Partitioning’ (2000) 44 European Economic Review 807.

171 Cheffins (n 165) 72.

172 This was a theory which obtained some traction in the US prior to Dewey – see V Morawetz, A Treatise on the Law of Private Corporations (2nd edn, Little, Brown 1886 ) at 1–2 – but this did not make its way to the UK at the time – Harris (n 156) 1468.

173 Watson (n 157).

174 ibid 153. Watson focuses on three interpretations of the origin of separate legal personality: that it arises from the state, that it arises contractually and that it arises from a real perspective (n 157) at 140. The first of these can be related neatly to the traditional fiction approach (which became embedded with state gift approaches), and the latter two variants of the traditional real entity approach – the difference being that the second considers that the state is not involved in the initial creation of the real entity, whereas the third considers that the state may be involved in such initial creation.

175 M T Moore, ‘Private Ordering and Public Policy: The Paradoxical Foundations of Corporate Contractarianism’ (2014) 34(4) Oxford Journal of Legal Studies 693.

176 Mahoney (n 123); A Wolfe, ‘The Modern Corporation: Private Agent or Public Actor?’ (1993) 50 Washington & Lee Law Review 1673.

177 Salomon v Salomon & Co [1897] AC 22 (HL).

178 Harris (n 156) 1464–66; all essays in R Grantham and C Rickett (eds), Corporate Personality in the 20th Century (Hart 1998).

179 W S Holdsworth, ‘Early History of Commercial Societies’ (1916) 28 Juridical Review 305 at 342.

180 Bellenden Ker, ‘Report on the Law of Partnership’ (1 March 1837) 6.

181 ibid 5.

182 ibid 1.

183 Van Sandau v Moore 1 Russell’s Reports 441.

184 Bellenden Ker (n 180) 6.

185 ibid 8.

186 ibid 9.

187 Harris (n 13) 273.

188 L De Koker, ‘The Limited Liability Act of 1855’ [2005] Company Lawyer 130.

189 Macgregor (n 16).

190 Joint Stock Companies Act 1856.

191 F Clark, A Treatise on the Law of Partnership and Joint-Stock Companies According to the Law of Scotland (T&T Clark 1866) 6.

192 See J Roberton Christie, ‘Joint Stock Enterprise in Scotland Before the Companies Acts’ (1909–1910) 21 Juridical Review 128 at 129.

193 Roberton Christie (n 192) 137.

194 Stevenson v MacNair (1757) 5 Bro Sup 340.

195 Roberton Christie (n 192) 139.

196 Stevenson v MacNair 1757 Mor. 14560; Roberton Christie (n 192) 140.

197 Stevenson v MacNair 1756 Mor 14561; Roberton Christie (n 192) 141.

198 Stevenson v MacNair (1757) 5 Bro Sup 340 at 340.

199 Roberton Christie (n 192) 143–44.

200 R Anderson, ‘Partnerships, LPs and LLPs’ in I G MacNeil (ed), Scots Commercial Law (Avizandum 2014) 136; Macgregor (n 16).

201 Douglas, Heron, and Company, v Alexander Hair 1778 Mor 14605.

202 Davies and Worthington (n 12) para 2-9.

203 L C B Gower, Modern Company Law (2nd edn, Stevens & Sons Ltd 1957) 66.

204 See Macgregor (n 16).

205 This is one of the ways that she debunks the private ordering version of the real entity theory, Watson (n 157) 160.

206 Watson (n 157) 165.

207 Dewey’s explanation for the irresolution of the debates between the two theories at the time he was writing – ‘person signifies what law makes it signify’ (Dewey (n 157)) at 655 – strongly overlaps with recasting Watson’s theory as ‘the state gives you what it gives you’. In each case, re-casting the debate removes the normative force from the argument.

208 For example, under this line of analysis the state would gift the company its name and registered office, as these do not change until the registrar of companies processes a form to change them (Companies Act 2006 s81(1) and s87 respectively). This does not mean that names or addresses per se are gifts from the state.

209 In the same way that all legal persons have a name and most have a residence.

210 Companies Act 2006, s1.

211 Partnership Law (Law Com No 283, SLC Com No 192) (2003) ch 5. More accurately, the lack of separate legal personality is seen as a matter of inconvenience and impracticality.

212 (n 211) Appendix A.

213 Watson (n 157) 166.

214 See Lord et al (n 37).

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