Liabilities of new and retiring partners PA 1890 s. 17
Incoming partners are not liable for debts incurred before joining. Retiring partners remain liable for past debts unless discharged by agreement.
A person who is admitted as a partner into an existing firm does not thereby become liable to the creditors of the firm for anything done before he became a partner. A partner who retires from a firm does not thereby cease to be liable for partnership debts or obligations incurred before his retirement. A retiring partner may be discharged from any existing liabilities, by an agreement to that effect between himself and the members of the firm as newly constituted and the creditors, and this agreement may be either expressed or inferred as a fact from the course of dealing between the creditors and the firm as newly constituted.
Text in force at .
Source: legislation.gov.uk — The National Archives (legislation.gov.uk), reproduced under licence Open Government Licence v3.0.
What it actually says
Joining an existing partnership does not automatically make a new partner responsible for debts or legal obligations created before they joined the firm.
Leaving a partnership does not clear a retiring partner from debts incurred while they were still a partner. They remain personally responsible to creditors for those existing obligations.
An outgoing partner can be released from existing liabilities if an agreement is made between the outgoing partner, the remaining partners, and the creditors. This agreement can be explicit or inferred from how creditors continue dealing with the newly constituted firm.
When it applies
- A new partner joins an established firm and a creditor demands payment from them for an unpaid lease signed before their arrival.
- A former partner is sued by a trade supplier for unpaid bills for goods delivered while the partner was still active in the firm.
- A retiring partner enters into an express written agreement with the continuing partners and a bank to transfer existing loan debts to the new firm.
- A trade creditor continues supplying a partnership and accepts payments solely from the restructured firm, implicitly releasing a retired partner from past debts.
What this section does not say
- Liability of individuals who pretend to be partners or allow themselves to be held out as partners to creditors.
- Release of a partner from personal debts or liabilities unrelated to the partnership business.
- The rights or procedure concerning how a partner voluntarily gives notice to retire from a partnership.
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This page reproduces the text of PA 1890 s. 17 in force at the date shown and explains it in general terms. It is not legal advice and takes no account of the circumstances of your case, which can change the answer completely. For a live dispute, for limitation periods, and before taking any step in court, consult a qualified lawyer in England and Wales.