Partners in accountancy firms should not be presumed to know everything relevant about a client company that other partners in the firm are aware of, according to the ICAEW.
And given the size of some of the huge firms opperating today, it is unrealistic to expect it to be that way.
Responding to the Law Commission’s proposals for the modernisation of partnership law, ICAEW special project leader Desmond Wright said it was time for specific reform to clarify section 16 of the Partnership Act 1980.
But the Institute said perhaps the most important element of the paper, was the introduction of separate legal personality.
He added that the institute did not see any significant advantages in a system of voluntary registration which would confer separate legal personality only on registrants, as the resultant creation of two potential types of partnership could present practical problems for third parties.
The institute also emphasised the potential tax implications for changes in the law in its detailed response, based on the proviso that any changes would be neutral for income tax, VAT and NI purposes, and would be confirmed by the relevant tax authorities before implementation. It recommended similar implications be considered for major overseas tax centres.
It agreed with the proposal that partners be jointly and separately liable for debts, given the new availability of Limited Liability Partnership status.