Deed of Adherence to Partnership Agreement
Deed of Adherence to Partnership Agreement is used when a new partner joins a partnership.
It can be used with Long Form Partnership Agreement (previously titled “Partnership Agreement”) and with most third party general partnership agreements. It is not appropriate where a new member joins an LLP.
It is drafted as a deed (rather than a simple agreement) to avoid issues that may arise where there is no consideration moving from one or more of the original partners.
What does Deed of Adherence to Partnership Agreement do?
It binds the new partner into the existing partnership agreement so that they undertake the same obligations as the original partners and have the same entitlements, with effect from the date of the deed. The original partners also provide the new partner with an indemnity against losses occurring before the new partner joined the partnership.
What does Deed of Adherence to Partnership Agreement cover?
It covers matters including:
- admitting a new partner to an existing partnership agreement (including a third party agreement)
- binding the new partner into the existing terms from the date of the deed
- an indemnity for the new partner in respect of losses occurring before they joined
- a variation to reflect the partners’ profit and loss sharing after the new partner joins (set out in Schedule 2)
When should you use Deed of Adherence to Partnership Agreement?
Use it when a new partner is joining a partnership that operates under Long Form Partnership Agreement or another general partnership agreement, and you want the new partner to be bound into the existing terms.
How Deed of Adherence to Partnership Agreement is set out
You will need to check the existing partnership agreement and locate the clause that permits the admission of new partners. The relevant clause number is then inserted into the “Background” section of the deed.
You will also need to identify where the existing agreement sets out the profit sharing arrangements, so the clause number or schedule reference can be inserted into Clause 6 (“Variation of the Partnership Agreement”) and the revised profit and loss shares can be set out in Schedule 2.
The deed is designed to be executed by all existing partners and the joining partner. It is intended to be dated on the date the new partner joins the partnership.
❗ HMRC must be notified of any partnership changes.
What else you may need
If your partnership was formed under Basic Partnership Agreement Template, use Deed of Adherence to Basic Partnership Agreement, which is drafted specifically to correspond to that agreement.
Separate templates are available for other arrangements, including a Deed of Adherence to a Shareholder’s Agreement.
Deed of Adherence to Partnership Agreement is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.