PA 1890 s. 30

Competing Partner Must Pay Profits to Firm: PA 1890 s. 30

Under PA 1890 s. 30, a partner running a competing business without consent of other partners must account for and pay over all profits made to the firm.

Official text PA 1890 s. 30 — United Kingdom

If a partner, without the consent of the other partners, carries on any business of the same nature as and competing with that of the firm, he must account for and pay over to the firm all profits made by him in that business.

Text in force at .

Source: legislation.gov.uk — The National Archives (legislation.gov.uk), reproduced under licence Open Government Licence v3.0.

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What it actually says

Section 30 is short and its remedy is unusual. If a partner, without the consent of the other partners, carries on any business of the same nature as and competing with that of the firm, he must account for and pay over to the firm all profits made by him in that business. Not damages for the loss the firm suffered - the profits he made. The firm does not have to prove that it would have won the work, or that it lost anything at all.

Three elements have to be present. The business must be of the same nature as the firm's; it must be competing with it; and it must be carried on without the consent of the other partners. Consent can be given in the partnership agreement or later, and is often given expressly where partners have separate outside interests - which is exactly why an agreement recording what outside activity is permitted is worth having.

The section is one of three fiduciary duties that sit together. Section 28 requires true accounts and full information; section 29 requires a partner to account for any benefit derived without consent from a transaction concerning the partnership or from use of partnership property, its name or its business connection; and section 30 catches the competing business itself. Where a partner has diverted an opportunity that came to the firm, section 29 is usually the closer fit; where the partner has built a parallel business, section 30 is. Both survive dissolution in the circumstances described in section 29(2), which extends the duty to the winding-up period after a partner's death.

When it applies

  • A partner discovered to have set up a separate company serving the firm's clients.
  • A partner doing the same work privately at weekends without telling the others.
  • Consent given years ago for an outside interest that has since grown into a rival.
  • A departing partner trading in competition before the partnership is wound up.
  • A partnership agreement that says nothing about outside business activities.

What this section does not say

  • It is not a restraint of trade after leaving. Post-termination restrictions depend on the partnership agreement and on the general law about restrictive covenants.
  • It does not require the firm to prove loss. The remedy is an account of the profits made, not compensation for damage.
  • It does not apply where the other partners consented. Consent, express or implied, is a complete answer.
  • It does not catch a business of a different nature that does not compete with the firm's.
  • It is not the provision for misuse of the firm's property, name or connection - that is section 29.

Worked examples

Invented situations, written to show how the wording bites. They are not real cases, not judgments and not precedent, and nothing here predicts what would happen in yours.

Illustrative example

One partner discovers the other has been invoicing three of the firm's larger clients through a separate company for over a year, doing the same work the firm does.

How the wording applies

Section 30 requires a partner who carries on a competing business of the same nature without the others' consent to account for and pay over all profits made in it - not damages for the firm's loss. The fact that makes the remedy so much easier to run than an ordinary claim is that the firm does not have to prove it would have won the work or lost anything at all. What has to be established is that the business was of the same nature, competing, and unconsented to.

How the parties settled it

The partner agrees to pay over the profits invoiced through the company for the period, to transfer the client relationships back, and to close the company, with the partnership agreement amended to record what outside work is permitted.

Illustrative example

Years ago the partners agreed one of them could keep a small consultancy on the side. It has grown and now serves clients the firm also serves.

How the wording applies

Consent is a complete answer, and it can be given in the agreement or later - which is exactly why an agreement recording what outside activity is permitted is worth having. The fact that decides this is the scope of what was consented to: consent to a small consultancy in a different field is not consent to a business that has since become a competitor, and the section asks whether the business as it now is competes with the firm's.

How the parties settled it

They agree the consultancy stops taking new work from the firm's client list, existing engagements run to completion with a share of the fees paid to the firm, and the agreement is amended to define permitted outside work.

Related sections

PA 1890 s. 29 Partners' private profits accountability — PA 1890 s. 29 PA 1890 s. 28 Section 28 Partnership Act 1890: a partner's right to true accounts and full information PA 1890 s. 24 Equal profits split, no salary rules: PA 1890 s. 24 PA 1890 s. 35 Court may dissolve partnership, PA 1890 s. 35

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We copy this text from the official publisher and re-check it against that source on every page load, but we cannot guarantee it is complete, current or free of error, and we accept no liability for any reliance on it. An amendment can take effect before a consolidation catches up. The publisher's own copy is linked below; where the two differ, it is the official one that counts.

This page reproduces the text of PA 1890 s. 30 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.

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