Two words in farm agreements could derail succession plans, lawyer warns

Farming families are being warned that just two words in their partnership agreements could disrupt succession plans and trigger disputes over when the next generation can join.

The phrase "full age" could mean either 18 or 21, depending on when the agreement was signed and whether its wording specifies a different age.

John Davies, senior associate and agriculture lead at law firm Hugh James, has urged farming families to review older agreements before younger relatives take on formal roles in the business.

He warned that reaching the specified age does not necessarily guarantee entry into a partnership, with some agreements requiring existing partners' consent or a formal deed of admission.

The issue stems from changes introduced under the Family Law Reform Act 1969, which lowered the age of majority in England and Wales from 21 to 18 on 1 January 1970.

Partnership agreements made from that date generally interpret "full age" as 18, unless the document defines the term differently or indicates another intention.

However, agreements signed before January 1970 may still use the previous interpretation of 21, making it important to examine the original wording and any subsequent amendments.

Mr Davies warned that overlooking these distinctions could create uncertainty over ownership, management responsibilities and future succession arrangements.

Even where an age requirement is satisfied, admission to a partnership may depend on further conditions set out in the agreement.

The legal position is further complicated by the fact that individuals under 18 may, in certain circumstances, be recognised as business partners.

HM Revenue & Customs (HMRC) acknowledges that younger people can participate in partnerships where they demonstrate sufficient understanding of the business and its obligations.

Its Partnership Manual specifically refers to farming, stating: "Commissioners might well be prepared to accept that a 15 or 16 years old person was capable of acting as a partner."

However, legal precedents demonstrate that written agreements must reflect the practical reality of how a business operates.

In the 1927 case of *Dickenson v Gross*, a farmer entered into a partnership agreement with his sons, but the court found that the arrangement had not actually been put into practice.

As a result, no partnership was recognised, despite the existence of a formal agreement.

The case highlights the importance of ensuring partnership documents reflect genuine business arrangements rather than agreements that exist only on paper.

For farming families preparing for succession, Mr Davies advised checking that agreements clearly define admission ages, consent requirements and the rights of incoming partners.

These should include arrangements for sharing profits and capital, management responsibilities and future ownership.

"Most of this uncertainty can be avoided with clearer drafting from the outset, and resolved later with a timely review whenever a question arises."

Where agreements contain unclear or outdated wording, amendments or supplementary deeds may help prevent disputes.

Farming families are being urged to review their existing arrangements before introducing younger relatives into the business, ensuring succession plans provide clarity for future generations.