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St.

Andrews

Indian
Partnership Act,
1932

Group 5 & 9
What is Partnership?

 Section 4 of the Indian Partnership


Act, 1932 defines Partnership as the
relation between persons who have
agreed to share the profits of a
business carried on by all or anyone
of them acting for all.”
Essentials of a Partnership

 Partnership always the result of an


agreement
 Partnership relation based on Contract.
 Implied or Express (Oral or Written)
 Carrying on business
 Trade, Occupation or Profession
 Sharing of profits the business
 Business is carried on by all or any one of
them acting for all (Mutual agency)
Formation of a Partnership
 Based on agreement
 Agreement may be express or implied
 InWriting : helpful in times of adversity
 Written agreement : “Partnership Deed”
 Essence of Partnership : Trust &
Confidence
 Drafted with care and signed by all
partners
 Firm should be registered and copy of
the Deed to be filed with the Registrar
Classes of Partners
 Active Partner
Active partners are those partners, who
actively participate in the business of the
firm.
 Dormant, Sleeping or, Nominal Partner
Dormant, also known as sleeping, or
nominal partners, are those, who join the
firm by agreement but do not actively
participate in the business of the firm.
 Sub-Partners
When a partner transfers a share of his
interest in a firm, the transferee is called a
sub-partner.
Firm Name
 The name, under which the business of
the firm is carried on, is called the “firm
name.”
No Name with a Fraudulent Intent.
 Shouldnot be a name already adopted by
a reputed firm, to mislead public
No Name Suggesting Patronage of
the States.
 Shouldnot contain words : Crown,
Emperor, King, Queen, Royal, Empire,
Imperial or words expressing or implying
the sanction, approval or patronage of
Government
Types of Partnership
 Partnership for a Fixed Term
Duration is fixed

Partnership comes to an end when the


term expires.

If Partners continue the business after


the fixed period, it becomes partnership
at will.
Types of Partnership
 Partnership at Will
 No provision in contract between the partners
for
 Duration of Partnership
 Determination of Partnership

 If
any partner gives notice of dissolution in
writing, the partnership is dissolved.
Types of Partnership
 Particular Partnership
A person may become a partner with another
person in particular adventures or
undertakings.

 On completion of such a venture, the


partnership comes to an end.
Registration of Firms
 Section 58 lays down that the registration of a
firm may be effected at any time by sending by
post or delivering to the Registrar, a
statement in the prescribed form and
accompanied by the prescribed fee, stating the
following particulars:
 The name of the firm
 The place or principal place of business of
the firm
 The name of any other places, where the
firm carries on business
 The date when each partner joined the firm
 The names in full and permanent
addresses of the partners
 The duration of the firm
Dissolution of Firm/Partnership

 Section 39 lays down : “The dissolution


of partnership between all the partners
of a firm is called the dissolution of the
firm.”

 When a firm is put to an end, it is called


the dissolution of a firm.
Modes of Dissolution of a Firm
 A firm may be dissolved by any of the
following three ways:
By voluntary acts of the partners
themselves

By operation of law

By intervention of Court


Rights and Duties of Partners
 Section 11 lays down : “Subject to the
provisions of this Act, the mutual rights
and duties of the partners of a firm may be
determined by contract between the
partners, and such contract may be
expressed or may be implied by a course
of dealing.
Duties of Partners
The Indian Partnership Act, 1932,
prescribes the following duties and
liabilities of partners of a firm:
 What are the General Duties of Partners?
 To carry on the business of the firm to the
greatest common benfit
 To be just and faithful to each other in their
mutual dealings
 To render true accounts and full information of
all things, affecting the firm, to any partner or
to his legal representative
Duties of Partners
 A Duty to indemnify the Firm for Any Loss,
Caused by Fraud.
 A Duty of a Partner to attend Diligently to His
Duties.
 A Duty of a Partner to indemnify the Firm for Any
Loss, Caused by His Willful Neglect.
 A Duty of a Partner to account for Private Profits
 A Duty of a Partner to account for Profit in
Competing Business
 No Remuneration to Partners
Rights of Partners
 Right to take Part in the business of the firm
 Right to share Equally in the Profit, Earned by
the Firm
 Right to claim interest on the Capital, Subscribed
by Partners
 Right to be consulted in All Matters of the Firm
 Right to Access to the Books of the Firm
 Right to claim Interest on Advances Made by
Partners
 Right of a Partner to be Indemnified
Rights of Partners
 Right of a Partner to act in an Emergency
 Right of a Partner to prevent Introduction of a
New Partner
 Right of a Partner to Retire
 Right of a Partner not to be Expelled
 Right of an Outgoing Partner to carry on
Competing Business
 Right of an Outgoing Partner to Share in the
Profit
Property of the Firm
 Joint property of all the partners as
opposed to their personal property
 Property includes
 Originallybrought into firm by partners
 Acquired by the firm
 Acquired by one or more partners for the
purpose of business
 Goodwill of the firm
 To be held and used by all partners for the
purpose of business (not for private use)
Position of Minor

 Sec 30(1), A person who is a minor


according to law to which he is subject may
not be a partner in a firm, but with the
consent of all the partners for the time being,
he may be admitted to the benefits of
partnership.
 A minor can only be admitted to the benefits
of an already existing partnership
Position of Minor
 During his Minority
 Rights
 Right to receive agreed share of profits and
property
 Have access to and inspect and copy the
accounts of the firm
 If share in profits is not given, can sue (can do
if he wants to sever his connection)
 Liabilities
 Only to the extent of share in profits and
properties (not personally liable)
Position of Minor

 On Attaining Majority
 Within six months should give notice whether
he is joining the partnership or not.
 If notice not given he shall become a partner
Restrictions On Authority Of A
Partner
 Under the Partnership Act in the absence of any
usage of trade to the contrary, the implied
authority of a partner does not empower him to
do the following acts:
 Submit a dispute relating to the business of a firm to
arbitration.
 Open a bank account in his own name.
 Compromise or relinquish any claim of the firm.
 Withdraw a suit or proceeding on behalf of the firm.
 Admit any liability in a suit or proceeding against the
firm.
 Acquire immovable property on behalf of the firm.
 Transfer immovable property belonging to the firm.
 Enter into partnership on behalf of the firm.
Limited Liability Partnership
 Limited Liability Partnership Act, 2008 came
into effect from 31st March 2009.
 LLP: A corporate business vehicle that
enables professional expertise and
entrepreneurial initiative to combine and
operate in flexible, innovative and efficient
manner, providing benefits of limited liability
while allowing its members the flexibility for
organizing their internal structure as a
partnership.
Limited Liability Partnership
 LLP has separate Legal Entity
 Liability of the partners limited to their agreed
contribution
 Not liable for the independent or un-authorized
actions of other partners
 Perpetual succession
 Indian Partnership Act, 1932 not applicable
 No maximum limit of members; one partner should
be Indian
 Registrar of Companies - register and control LLPs.

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