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ACCA Applied Skills · Corporate and Business Law (Global) · Partnerships

Ivo and Jana run a general partnership. Their partnership agreement is silent on interest on capital, salaries and the admission of new partners. Ivo contributed 80,000 of capital and Jana 20,000. Ivo proposes to pay himself interest on his extra capital and to admit his nephew Kai as a partner against Jana's wishes. Under the default rules, which statement is correct?

Ivo gets no interest on capital because the default rules give none without agreement, and Kai cannot be admitted without Jana's consent because new partners require the agreement of all existing partners.

  1. AIvo is entitled to interest on capital, and the nephew can be admitted by majority of capital
  2. BIvo is not entitled to interest on capital, and Kai cannot be admitted without Jana's consentCorrect
  3. CIvo is entitled to interest on capital, but Kai cannot be admitted without Jana's consent
  4. DIvo is not entitled to interest on capital, but Kai can be admitted by a simple majority of capital

Explanation

By default partners are not entitled to interest on capital or salaries unless agreed, and profits are shared equally. A new partner can be admitted only with the consent of all existing partners, so Jana can veto Kai. Voting by capital size is not the default.

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