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Partnership Law Act 2019

Relationship of partners to third persons and to each other - Relationship of partners to third persons

26: Improper use of trust property for partnership purposes

You could also call this:

"Partners aren't usually responsible if one partner wrongly uses trust property in the business"

If you're in a partnership and one of your partners is a trustee, they might use trust property in the partnership business when they shouldn't. If this happens, you and the other partners are not responsible for that trust property to the people who should benefit from it.

But there are two important things to remember. First, if you know that your partner is breaking the rules of the trust, you might still be held responsible. Second, if the partnership still has the trust property or controls it, the people who should benefit from the trust can still try to get it back.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS206016.

Topics:
Business > Industry rules
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Part 3Relationship of partners to third persons and to each other
Relationship of partners to third persons

26Improper use of trust property for partnership purposes

  1. If a partner who is a trustee improperly uses trust property in the partnership business or for the partnership, no other partner is liable for the trust property to the persons beneficially interested in the trust property.

  2. However, this section does not—

  3. affect any liability incurred by a partner because the partner has notice of a breach of trust; or
    1. prevent trust property from being followed and recovered from the firm if it is still in the firm’s possession or under its control.

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