For most people, the word ‘partnership’ evokes positive connotations – collaboration, togetherness, hard work and shared success. For those interested in etymology, the word is apparently an old word combining ‘partner’, derived from Latin/Old French (‘a sharer or partaker in anything’), and ‘ship’ (derived from Middle English meaning a ‘state or condition’). According to the Oxford English Dictionary, the earliest known use of the word was in 1576.
Today, the Collins dictionary defines ‘partnership’ as ‘a relationship in which two or more people, organisations, or countries work together as partners’.
Despite the collaborative nature of partnerships, disagreements can arise, potentially leading to irretrievable breakdown and ultimately deadlock.
What is a business partnership?
Under the Partnership Act 1890 (PA 1890), a partnership is ‘the relation which subsists between persons carrying on a business in common with a view of profit’. In other words, a group of two or more individuals (known as partners) working together in business to make a profit. This is a matter of fact, and if such a relationship exists, it automatically forms a partnership. A partnership is distinct from other corporate structures in that the partnership does not have its own legal personality.
Partnerships were the favoured structure for law firms for the century following the PA 1890. Despite other structures becoming more popular in recent years (such as limited liability partnerships and limited companies), partnerships still make up 10% of all solicitors’ firms (SRA data, as at April 2026).
How are partnerships governed?
As a partnership can be formed automatically, the PA 1890 sets out default provisions governing how a partnership operates and the rights and duties of the individual partners. However, there are distinct gaps. Some of its provisions are outdated (understandably, given how old the act is).
Often, partnerships are governed by a written partnership agreement, agreed by all partners, setting out various terms which build upon, or replace, the default provisions of the PA 1890.
What is deadlock?
Deadlock occurs when the partners cannot make key decisions for their business because they have equal rights in respect of decision-making.
Deadlock can paralyse the business, particularly when financial or strategic decisions are delayed. There is also the risk of reputational damage if internal wrangling becomes public knowledge.
Under the default PA 1890 provisions, each partner has the right to take part in the management of the partnership. While most ‘ordinary’ business decisions can be made by a majority vote, key decisions outside the day-to-day norm must be unanimous, with a lack of unanimity leading to deadlock.
Options – put up or shut up
For a partnership with no formal agreement in place, the default provisions of the PA 1890 are not particularly helpful for resolving deadlock and securing the future of the business.
There is no default power of expulsion under the PA 1890. This means individual partners are protected, but it does prevent a firm from expelling partners who are unreasonable or hostile to the majority consensus.
The options in these circumstances are limited and potentially calamitous. Either the partners try to work it out or they ‘go nuclear’ and dissolve the partnership.
Dissolution under the PA 1890 is simple and unilateral. One partner can give notice to the others of their intention to dissolve the partnership, with the dissolution becoming effective at the date given in the notice or, if no date is given, at the date of the notice.
As an alternative, a partner can apply to the court under one of the grounds in the PA 1890 for an order dissolving the partnership. The court has a wide discretion to make such an order. Where a dissolution is ordered, the business will be wound up, often with the partnership assets sold on the open market. In exceptional circumstances, the court can permit a majority of the partners to buy out another partner at value, to allow the business to continue under a new partnership.
As anyone involved in litigation will tell you, disputes aired and determined through court proceedings are expensive, stressful and best avoided.
What’s the answer?
As is often the case, prevention is better than cure. To offer the best chance of avoiding deadlock, or at least navigating and resolving it without destroying the business, firms should have a written partnership agreement that sets out provisions for decision-making, deadlock, expulsion and dissolution.
A partnership agreement is best agreed upon at the inception of a business, when enthusiasm is high and the thought of future disagreement is inconceivable.
If that does not happen, then it is possible to enter into a partnership agreement at any time – as long as the partners all agree to it, of course.
Jenifer Martindale is a partner in the dispute resolution department at Wilsons Solicitors, Salisbury
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