Partnerships Act, R.S.O. 1990, c. P.5

• Jurisdiction: Ontario

Partnerships Act

R.S.O. 1990, Chapter P.5

Consolidation Period: From October 1, 2023 to the e-Laws currency date.

Last amendment: 2023, c. 9, Sched. 26.

CONTENTS

Definitions

1 (1) In this Act,

“business” includes every trade, occupation and profession; (“entreprise”)

“court” includes every court and judge having jurisdiction in the case; (“tribunal”)

“extra-provincial limited liability partnership” means a limited liability partnership formed under the laws of another jurisdiction but does not include an extra-provincial limited partnership within the meaning of the Limited Partnerships Act; (“société à responsabilité limitée extraprovinciale”)

“limited liability partnership” means a partnership, other than a limited partnership, that is formed or continued as a limited liability partnership under section 44.1 or that is an extra-provincial limited liability partnership. (“société à responsabilité limitée”) R.S.O. 1990, c. P.5, s. 1 (1); 1998, c. 2, s. 1.

Idem

(2) A person is deemed to be “insolvent” within the meaning of this Act if the person is adjudged a bankrupt under the Bankruptcy and Insolvency Act (Canada) or if the person makes an assignment for the general benefit of his or her creditors, and “insolvency” has a meaning corresponding with “insolvent”. R.S.O. 1990, c. P.5, s. 1 (2).

Section Amendments with date in force (d/m/y)

1998, c. 2, s. 1 - 01/07/1998

CTS 02 AU 17 - 2 - 02/08/2017

Nature of Partnership

Partnership

2 Partnership is the relation that subsists between persons carrying on a business in common with a view to profit, but the relation between the members of a company or association that is incorporated by or under the authority of any special or general Act in force in Ontario or elsewhere, or registered as a corporation under any such Act, is not a partnership within the meaning of this Act. R.S.O. 1990, c. P.5, s. 2.

Rules for determining existence of partnership

3 In determining whether a partnership does or does not exist, regard shall be had to the following rules:

1. Joint tenancy, tenancy in common, joint property, common property, or part ownership does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof.

2. The sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived.

3. The receipt by a person of a share of the profits of a business is proof, in the absence of evidence to the contrary, that the person is a partner in the business, but the receipt of such a share or payment, contingent on or varying with the profits of a business, does not of itself make him or her a partner in the business, and in particular,

(a) the receipt by a person of a debt or other liquidated amount by instalments or otherwise out of the accruing profits of a business does not of itself make him or her a partner in the business or liable as such;

(b) a contract for the remuneration of a servant or agent or a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such;

(c) a person who,

(i) was married to a deceased partner immediately before the deceased partner died,

(ii) was living with a deceased partner in a conjugal relationship outside marriage immediately before the deceased partner died, or

(iii) is a child of a deceased partner,

and who receives by way of annuity a portion of the profits made in the business in which the deceased partner was a partner is not by reason only of such receipt a partner in the business or liable as such;

(d) the advance of money by way of loan to a person engaged or about to engage in a business on a contract with that person that the lender is to receive a rate of interest varying with the profits, or is to receive a share of the profits arising from carrying on the business, does not of itself make the lender a partner with the person or persons carrying on the business or liable as such, provided that the contract is in writing and signed by or on behalf of all parties thereto;

(e) a person receiving by way of annuity or otherwise a portion of the profits of a business in consideration of the sale by him or her of the goodwill of the business, is not by reason only of such receipt a partner in the business or liable as such. R.S.O. 1990, c. P.5, s. 3; 1999, c. 6, s. 52; 2005, c. 5, s. 55.

Section Amendments with date in force (d/m/y)

1999, c. 6, s. 52 - 01/03/2000

2005, c. 5, s. 55 - 09/03/2005

Insolvency

4 In the event of a person to whom money has been advanced by way of loan upon such a contract as is mentioned in section 3, or of a buyer of the goodwill in consideration of a share of the profits of the business, becoming insolvent or entering into an arrangement to pay his or her creditors less than 100 cents on the dollar or dying in insolvent circumstances, the lender of the loan is not entitled to recover anything in respect of the loan, and the seller of the goodwill is not entitled to recover anything in respect of the share of profits contracted for, until the claims of the other creditors of the borrower or buyer, for valuable consideration in money or money’s worth, are satisfied. R.S.O. 1990, c. P.5, s. 4.

Meaning of “firm”

5 Persons who have entered into partnership with one another are, for the purposes of this Act, called collectively a firm, and the name under which their business is carried on is called the firm name. R.S.O. 1990, c. P.5, s. 5.

Relation of Partners to Persons Dealing with Them

Power of partner to bind firm

6 Every partner is an agent of the firm and of the other partners for the purpose of the business of the partnership, and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he or she is a member, bind the firm and the other partners unless the partner so acting has in fact no authority to act for the firm in the particular matter and the person with whom the partner is dealing either knows that the partner has no authority, or does not know or believe him or her to be a partner. R.S.O. 1990, c. P.5, s. 6.

Partners bound by acts on behalf of firm

7 An act or instrument relating to the business of the firm and done or executed in the firm name, or in any other manner showing an intention to bind the firm by a person thereto authorized, whether a partner or not, is binding on the firm and all the partners, but this section does not affect any general rule of law relating to the execution of deeds or negotiable instruments. R.S.O. 1990, c. P.5, s. 7.

Partner using credit of firm for private purposes

8 Where one partner pledges the credit of the firm for a purpose apparently not connected with the firm’s ordinary course of business, the firm is not bound, unless he or she is in fact specially authorized by the other partners, but this section does not affect any personal liability incurred by an individual partner. R.S.O. 1990, c. P.5, s. 8.

Effect of notice that firm not bound by act of partner

9 If it is agreed between the partners to restrict the power of any one or more of them to bind the firm, no act done in contravention of the agreement is binding on the firm with respect to persons having notice of the agreement. R.S.O. 1990, c. P.5, s. 9.

Liability of partners

10 (1) Except as provided in subsection (2), every partner in a firm is liable jointly with the other partners for all debts and obligations of the firm incurred while the person is a partner, and after the partner’s death the partner’s estate is also severally liable in a due course of administration for such debts and obligations so far as they remain unsatisfied, but subject to the prior payment of his or her separate debts. R.S.O. 1990, c. P.5, s. 10; 1998, c. 2, s. 2 (1).

Limited liability partnerships

(2) Subject to subsections (3) and (3.1), a partner in a limited liability partnership is not liable, by means of indemnification, contribution or otherwise, for,

(a) the debts, liabilities or obligations of the partnership or any partner arising from the negligent or wrongful acts or omissions that another partner or an employee, agent or representative of the partnership commits in the course of the partnership business while the partnership is a limited liability partnership; or

(b) any other debts or obligations of the partnership that are incurred while the partnership is a limited liability partnership. 2006, c. 34, s. 19.

Limitations

(3) Subsection (2) does not relieve a partner in a limited liability partnership from liability for,

(a) the partner’s own negligent or wrongful act or omission;

(b) the negligent or wrongful act or omission of a person under the partner’s direct supervision; or

(c) the negligent or wrongful act or omission of another partner or an employee of the partnership not under the partner’s direct supervision, if,

(i) the act or omission was criminal or constituted fraud, even if there was no criminal act or omission, or

(ii) the partner knew or ought to have known of the act or omission and did not take the actions that a reasonable person would have taken to prevent it. 2006, c. 34, s. 19.

Same

(3.1) Subsection (2) does not protect a partner’s interest in the partnership property from claims against the partnership respecting a partnership obligation. 2006, c. 34, s. 19.

Partner not proper party to action

(4) A partner in a limited liability partnership is not a proper party to a proceeding by or against the limited liability partnership for the purpose of recovering damages or enforcing obligations arising out of the negligent acts or omissions described in subsection (2). 1998, c. 2...