When Can Liquidators Use Partnership Assets To Satisfy Creditor Claims?

This week's TGIF considers a recent decision that provides guidance on how and when a liquidator can sell partnership assets held by an insolvent corporate partnership manager to satisfy creditors' claims.

Key Takeaways

• When a corporate partnership manager is an agent of the partners, it has a right of indemnity in respect of liabilities incurred in performing its role as manager and a possessory lien over partnership assets held by it as security for that indemnity.
• If the corporate partnership manager becomes insolvent, that right of indemnity is a right that will pass to a liquidator.
• The principles that apply to a liquidator dealing with property of insolvent corporate trustees apply by analogy to insolvent corporate partnership managers. A liquidator may seek a direction permitting them to sell partnership assets held by the manager in respect of which the manager holds a possessory lien.