Professional Documents
Culture Documents
Learning Objectives
Partnership Deed
Duration of Partnership
Types of Partners
Minor as a Partner: rights;
liabilities; position on attaining
majority
Registration: time; procedure;
consequences of non-registration
PARTNERSHIP DEED
Although a partnership agreement may be oral,
yet it is always healthier to have it in writing. Such
an agreement-in-writing is called a Partnership
Deed. This document contains terms and
conditions of the partnership and sets forth the
rights and obligations of the partners. A
partnership deed should be carefully drafted and
stamped according to the provisions of the Indian
Stamp Act. Each partner should be given a copy of
the deed and if the firm is registered, a copy
should be filed with the Registrar of Firms at the
time of such registration.
Contents of Partnership
Deed
DURATION OF PARTNERSHIP
From the duration point of view, a partnership may be classified into two
categories, namely, partnership at will and particular partnership.
Partnership At Will [Section 7]. Where no provision is made by the partners
for the duration of their partnership, or for the determination of their partnership,
the partnership is partnership at will. In other words, a partnership is deemed to
be a partnership at will where
no fixed period has been agreed upon for the duration of partnership, and
no provision is made as to the determination of partnership in any other way.
Thus, it is a partnership for an indefinite period. The death or retirement of a
partner does not affect the existence of such a partnership.
Where the partnership is at will, the firm may be dissolved by any partner giving
notice in writing to all the other partners of his intention to dissolve the firm. The
firm is dissolved from the date mentioned in the notice as the date of dissolution.
And where no such date is mentioned, the firm is dissolved from the date of
communication of the notice.
[Section 43 (1)]
However, if the agreement provides that the partnership can be dissolved by a
mutual agreement only, it will not be a partnership at will. This is so because
such a firm cannot be dissolved by giving a notice only.
Contd.
.DURATION OF PARTNERSHIP
TYPES OF PARTNERS
.TYPES OF PARTNERS
1.
2.
3.
4.
.TYPES OF PARTNERS
5.
6.
Liability of Minor
A minors share is liable for the acts of the firm. But a minor is not personally liable for any
such act and so his/her private estate cannot be attached towards the payment of the
firms debts incurred during his/her minority. On attaining majority, however, if s/he elects
to become a partner, s/he becomes personally liable to third parties for all the acts of the
firm done since s/he was admitted to the benefits of partnership.
[Section30 (3)]
Position of a Minor on Attaining Majority. Within six months of attaining majority or
of obtaining knowledge that s/he had been admitted to the benefits of partnership,
whichever date is later, the minor partner has to elect whether s/he wants to continue, or
sever his/her connections with the firm. If s/he decides to leave the firm, s/he must give a
public notice of his/her intention. If s/he fails to give any public notice within period stated
above, it will be presumed that s/he has opted to become a partner in the firm.
[Section 35 (5)] Contd.
.
REGISTRATION OF FIRM
The registration of a firm means getting the firms name
recorded along with necessary particulars in the Register of
Firms kept in the office of the latter. Prior to the enactment of
the Indian Partnership Act, 1932, there was no provision for the
registration of partnership firms in India. And as a matter of
fact, it is still not compulsory for a partnership firm to get it
registered. The Act has made the registration optional, solely
at the discretion of the partners. However, by creating certain
disabilities from which an unregistered firm suffers, the Indian
Partnership Act has made the registration of firms sought-after.
Time of Registration
Since registration of a firm is not compulsory, it can be
affected at any stage. A firm may get itself registered at any
time during the continuance of its business. Getting a firm
registered has its own advantages, such as the follows.
Consequences of Non-registration
Registration is the only evidence of the existence of a partnership, and the
facts entered in the records of the Registrar of Firms are treated as
conclusive proof by the courts. An unregistered firm and its partners suffer
from the following disabilities:
1. No suit can be filed in a civil court by a partner against the firm
or other co-partners. If any dispute arises among the partners or
between a partner and the firm, or between a partner and his co-partner,
and the dispute is based upon the rights arising from the partnership
agreement (i.e., partnership deed) or related to the rights conferred by
the Partnership Act, then a partner of an unregistered firm cannot
institute a suit (in any court of law) against the firm or the ex-partners(s).
[Section 69 (1)]
2. No suit can be filed in a civil court by the firm against third party
. An unregistered firm cannot institute a case against a third party in a
civil court to enforce any right arising out of the contract with the latter,
such as, for the recovery of the price of goods supplied. But, of course,
criminal proceedings can be brought against the wrong doers by an
unregistered firm also.
[Section 69 (2)]
3. No right of set off . The above two disabilities also apply to a claim of
set-off or other proceedings to enforce a right arising from a contract.
Accordingly, if any suit is filed by a third party against an unregistered
firm to recover a sum of money, the firm is not allowed to claim a set-off,
i.e., the firm cannot say that since the third party also owes some money
Non-registration of a firm, however, does not affect the following rights of a partnership
firm:
1. The right of third parties to sue the firm or any partner(s).
2. The right of the firm to institute a suit or claim a set-off if the value of suit does not
exceed Rs 100.
3. The right of partners to sue for the dissolution of the firm or for the accounts of a
dissolved firm, or any right or power to realize the property of a dissolved firm.
4. The powers of an Official Assignee, Receiver or Court to realize the property of an
insolvent partner.
5. The rights of firms or partners of the firm having no place of business in India.
It should be clear from the above that though there is no legal compulsion for a firm to
get it registered but, by creating (indirectly) certain disabilities, an unregistered firm
suffers from, the law has made it advisable for a partnership firm to get itself registered.