Sleeping partner not to interfere (optional clause)

Sleeping partner not to interfere (optional clause)

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This document is a clause which can be inserted into an existing partnership agreement.

A sleeping partner is one who does not take part actively in the running or the management of the business, but usually has a financial interest in it and shares in the profits.

However, a sleeping partner is still a partner, so he or she will still be jointly and severally liable for the debts and liabilities of the partnership as against third parties.

A partnership agreement will usually include a clause setting out the obligations of sleeping partners, namely that they are not to interfere in the running and management of the business.

Using this precedent

This is a general clause which can be inserted into a partnership agreement. This clause can also be inserted as an additional clause into the management provisions of the separate precedent “Partnership agreement (short form, general)”.    

When inserting this optional clause into an agreement, care must be taken to ensure that the agreement remains consistent. Cross-references, definitions and schedules should all be checked.

This document has been authored for Lexis Nexis by Michael Heraghty, Partner, TressCox Lawyers, Rosemarie Ryan, Barrister and Elise Margow, Principal, Legally Speaking.

This document is prepared with the assistance of Specialist Editor Stephen Newman, Executive Counsel, Ponte Earle.