INTRODUCTION The provisions governing a partnership are specified in the partnership act of 1932. As per Section 1 of the act, the Indian Partnership Act came into force on 1 October, 1932 and is enforceable in all parts of the country except the state of Jammu and Kashmir. Before the enactment of the partnership Act in 1932, the regulations governing partnership were a part of the Indian Contract act, 1872, and it was felt that the act did not cover all the possible situations in a partnership, and a separate Partnership Act was enacted.
Fundamental Definitions Act of a firm: An Act of a firm is deemed to be the act of the partners or the agent of the firm, and the consequences of such act are enforceable for or against the firm. -Section 2(a) Example: Ram and Shyam are partners in a firm. Ram makes a contract on behalf of the firm to buy some goods. If the seller of goods commits a breach of contract, the firm has the right to sue the seller and, if the firm commits a default, the third party can sue the firm. The Act done by ram is deemed to be an Act of the firm.
What is partnership ? Partnership is an association of persons with the object of jointly doing something to make a profit. In other words, when two or more persons, with the object of jointly doing something to make a profit. Definition of Partnership “Partnership is an agreement between persons having contractual capacity to carry on a business in common with a view to private gain.” – L.H. Haney
Characteristics of Partnership Contractual relationship Association of two or more persons. Existence of business. Earning and sharing of profits. Business being carried on by all, or any partner acting for all. Object of business being lawful.
Kinds of Partnership Partnership at will. Partnership for a particular venture. Partnership for a fixed period. Ordinary partnership. Limited partnership.
Rights Of Partners Right to take part in the conduct of business. Right to express opinion. Right of access to accounts. Right to share in profit. Interest on capital. Right to interest on additional capital or loan. Right to indemnity. Rights in the firm’s property. Right to leave the firm. Right not to be expelled. Right to do competitive business. Right to share in profits after retirement.
Duties of Partners To work for maximum common interest. To be faithful to other partners. To give correct accounts. To give correct information. To indemnify for fraud.
Types of Partners Active or general partner. Inactive or sleeping or dormant partner. Nominal partner. Limited partner. Partner in profits only. Partner by estoppel or holding.
Minor as a partner A partnership is created by a contract. According to section 11of the Indian Contract act, 1872, a person is deemed to be competent if: a) He is a major. b) He is of a sound mind. c) He is not declared incompetent under any law in force.
POSITION OF A MINOR 1) Position of a minor partner before attaining majority. 2) Position of a minor partner on attaining majority: When a minor partner becomes a major, his liabilities can be classified depending upon whether: a) he elects to remain as a partner. b) he does not elect to remain as a partner.
DISSOLUTION OF PARTNERSHIP AND FIRM “ The dissolution of partnership between all the partners of a firm is called the dissolution of the firm.” DISSOLUTION OF PARTNERSHIP:- When a partner of the firm breaks his relation with the other partners, and the other partners continue to operate the business of the firm, it is deemed to be a dissolution of partnership. DISSOLUTION OF FIRM:- A firm is deemed to be dissolved when the relations between all partners break down
Methods of dissolution of firm Dissolution by agreement. Compulsory dissolution. Dissolution on the happening of contingencies. Dissolution by notice in case of partnership at will. Dissolution by court. Dissolution on account of fraud.
Registration of partnership firm Registration of the firm here refers to having it registered with the Registrar of Firms. PROCEDURE FOR REGISTRATION: When a firm wants to register itself, it has to deposit a registration fee with the registrar of firms and fill in the following details in the registration form: I. Name of the firm. II. Address of the firm’s head office from where it functions. III. Address of the branches of the firm. IV. The date of its formation, and the dates when each partner joined the firm. V. Name and address of the partners. VI. Duration of partnership. VII. Signatures of the partners and their legal agents.
CONSEQUENCES OF NON- REGISTRATION No partner can file a suit against other partner. The firm cannot file a suit against any partner. No partner can file a suit against the firm unless the firm is registered. The firm cannot file a suit against a third party. A third party cannot file a suit against the firm.
PARTNERSHIP DEED A partnership is based on a contract. This written contract is called a Partnership Deed or articles of partnership. Name and address of the firm. Name and address of the partners. Nature and scope of the firm’s business. Duration of partnership. Contribution of capital by partners. Sharing of profit and loss. Loans to and by partners. Commission and salary of partners.
CONTD. Drawings and interest on drawings. Audit of books of accounts. Rights, duties and liabilities of partners. Admission and retirement of partners. Goodwill of the business. Dissolution of partnership. Death of a partner and his succession. Violation of partnership rules. Breaking relationship from the partnership. Arbiteration clause.