Partnerships and legal personality: Cautionary tales from Scotland

This article analyses the separate legal personality of partnerships, drawing on Hansmann and Kraakman’s identification of the attributes shared by businesses possessing legal personality. Their work provides a jurisdictionally-neutral standard of comparison which is applied here to the Scottish partnership which, unusually amongst jurisdictions influenced by the common law tradition, possesses separate legal personality. The historical development of Scottish partnerships is explored, from its origins as a Roman-inspired type of societas, a contract centred on the internal rights and duties of the partners inter se, towards a modern, outward-facing business able to contract with third parties in its own name. Challenging orthodoxy in Scottish scholarship, the author identifies the period during which Scots law moved from contractually-inspired partnership to partnership secured by organisational law, and specifically entity shielding. To this extent, Scots law supports Hansmann and Kraakman’s view that attributes of legal personality develop gradually, and are secured by organisational law rather than contract law. Disagreeing with them, however, she uses the Scottish experience to illustrate that lack of perpetual succession is not, as they argue, a “mere inconvenience which can easily overcome with contractual workarounds”, but rather an essential requirement of a workable partnership with legal personality.