In the recently reported case of White v Minnis (The Times, 16th January 1999) the point at issue was the value of a partnership share on death. The reason was that one of the descendants of a deceased partner wished to carry on the business and the others did not. There was then a need to pay out those partners their share of the value of the partnership before the descendants of the deceased partner could carry on the business. In arriving at the partnership value the descendant sought to value the partnership property in the same way as it was valued in the accounts. This was at the original cost. However, in the High Court it was held that the entitlement of other partners or former partners was to be calculated by reference to the up-to-date market value of the partnership property.
What this decision goes to show, most importantly for those involved in financial planning for partnerships, is that if one wishes the price of a partnership share to be determined other than on ordinary open market value principles a specific provision ought be included into to partnership deed regarding valuation. The most extreme example of this is a provision for the "automatic accrual" of goodwill in the partnership. Such a clause would, of course, provide for no payment to be made between the partners in respect of goodwill in the partnership. Where such a clause exists it is, however, important to put in place relevant "compensating" arrangements largely founded on life assurance or critical illness assurance suitably written subject to trust where appropriate to provide compensation for either the beneficiaries of a deceased partner or the deceased partner himself (on critical illness). If an automatic accrual clause also applies on retirement then there will be a need, of course, to make sure that adequate retirement provision is in force.