The position of the 'quasi-partnership' type private company in irish law

AuthorDerek Dunne
PositionB.C.L., LL.M. (N.U.I.), B.L.
It is a fact of Irish commercial life that the vast proportion of Irish
private companies, often started by families and friends amongst
each other exclusively, are of the ‘quasi-partnership’ type, which,
while taking the form of an incorporated company, is more
analogous to the partnership in terms of management and ownership
interests. Such companies are generally ‘closely-held’ i.e. with only a
few participants, with the distinction between ownership and control
upon which much of company law is premised rendered all but
illusory due to the vesting of these diverse interests in the same
personnel. Also, even outside the family-held company context, it is
almost trite to state that prospective parties to commercial joint
ventures (either for single projects or longer associations) will often
possess an awareness of their commercial, technical and fiscal
strengths and weaknesses stemming from long-standing commercial
or personal association, and it is often upon the strength of this
association that the participants choose to bind themselves together
to pursue a jointly-intended purpose.1Therearevarious mediums
through which commercial joint ventures can be conducted,2but
many prospective participants choose the private limited company
given the obvious benefits of limited liability.
It has been accepted judicially in Ireland by Gannon J. in Re
Murphs’ Restaurant3that, where there exists between the
108 [4:1Judicial Studies Institute Journal
*B.C.L., LL.M. (N.U.I.), B.L.
1Which constitute a contract between, on the one hand, the company and its members, and
on the other, the members inter se, by virtue of section 25 of the Companies Act, 1963,
enforceable by the individual member in his capacity as a member, and the company itself.
2Legally,acommercial joint venturecan take the following forms-
(1) The unincorporated joint venture conducted through the medium of a partnership as
defined by the Partnership Act, 1890, or the limited liability partnership under the Limited
Partnership Act, 1907.
(2) The consortium, which is a contractual agreement between undertakings with neither
partnership or company involved, which are generally used for projects of extremely
circumscribed duration and a definite purpose, which have the drawback of potentially
unlimited liability exposure for the parties thereto should the venture be a financial failure.
(3) The corporate joint venture, conducted through the medium of a company duly
incorporated under and subject to the statutory regime of the Companies Acts, 1963-1999
with the protection of limited liability.
participants such “a relationship of equality, mutuality, trust and
confidence between them which constitutes the very essence of the
company”4on the basis of which the participants constitute a joint
venture, they may regard themselves by reason of this relationship
“as equal partners in a joint venture, and that the company was no
more than a vehicle to secure a limited liability for possible losses
and to provide a means of earning and distributing profits to their
best advantage with minimum disclosure”.5
As recognised in Ebrahimi v. Westbourne Galleries Ltd.6in the
‘quasi-partnership’ type company, the participants often will not
regard their commercial and legal relationship as being exhaustively
defined by the constitutional documents of the company, but that
they will each have “rights, expectations and obligations inter se
which are not necessarily submerged in the company structure”, over
and above their strict contractual rights, which are founded upon
this ‘personal relationship involving mutual confidence’.7These
supplemental expectations and obligations derive from the nature
and circumstances of the participants’ relationship, and it is these
extra-legal considerations upon which the continued viability and
ultimate success of the joint venturecompany are contingent. Thus,
it is submitted that the adequacy of the company as a medium
through which to conduct the business of a joint ventureis to be
gauged in the ability of the statutory and common law regime
governing the private company to afford adequate protection to and
vindication of the ‘legitimate expectations’ over and above strict
legal rights, for such constitute the essence of the joint venture
This paper is concerned with the position of the quasi-partnership
type private company in Irish law; specifically, it is concerned with
the question of whether Irish law has sufficiently adapted to this type
of business arrangement, which breaks the precept of a separation
between membership and management. Indeed, it may be said that
the quasi-partnership type private company renders illusory separate
2004] The Position of the 'Quasi Partnership' type
Private Company in Irish Law 109
4[1979] I.L.R.M. 141 at 151 (H.C.).
5[1979] I.L.R.M. 141 at 151 (H.C.).
7Ebrahimi v. Westbourne Galleries[1972] 2 All E.R. 492 at 500 (H.L.) per Lord Wilberfource.
legal personality to an extent given the increasing difficulty of
classifying the company as separate in practical terms from the
participants running it. First, the discussion analyses the concept of
a‘quasi-partnership’ and attempts to define the unique
characteristics of such a business medium. Only in the light of such
an analysis can it be ascertained whether the law is sufficient to
protect such an entity. Secondly, the legal framework of company
law is discussed insofar as it is relevant to consideration of whether
it has developed sufficiently to protect the interests of the
participants of the quasi-partnership.
It is necessary to outline a framework of some of the interests and
obligations over and above those in the company’sconstitutional
documents which the members of a quasi-partnership may have, for,
as noted above, this in turn will condition any opinion on the
adequacy of Irish law in protecting such interests.
Given that everything will depend on the context and the nature
of the particular parties’ relationship, an exhaustive list is
impossible, but the following is a synthesis of judicial guidance on
what the essence of a ‘quasi-partnership’ private company
(1) As Lord Wilberforce stated in Ebrahimi v. Westbourne Galleries
Ltd.8there will often be an understanding in a ‘quasi-partnership’
type private company that most, if not all, the shareholders will
actively participate in the daily management of the company’s
business, or at least that each member of the venture should have a
meaningful role in the formulation and pursuit of business policy,
irrespective of the logical consequences of the formal distinction
between ownership and control of the company as manifested in the
articles of association, under which the powers of management of
110 [4:1Judicial Studies Institute Journal
8[1972] 2 All E.R.492 (H.L.).

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