Preventing a partner from setting up a non-competing business or a competing practice

A partner who sets up a non-competing business and who does not use the partnership property, name or business connection, is not liable to his partners in any way under the act. Therefore it is essential, if the partners work full-time in the practice, that the partnership deed provides that the partners are to devote their whole time to the partnership and specify that the partners are not to start any other businesses. 

The act provides that if a partner sets up a competing business without the consent of the other partners, the profits of that business go to the partnership. Usually any losses of a competing business are carried by the partner involved and do not fall on the core partnership. If, however, the creditors of the competing business could demonstrate that they believed that the competing business was linked with the partnership and the partner carrying on the competing business was unable to pay for losses, the creditors may claim against the partnership.

The deed must also protect the partnership business by including an appropriate restrictive covenant preventing a retiring partner from setting