Presented By
Kumar Shekhar Azad Abhishek Verma Ankur Jaiswal Shailesh Kumar Yadav Vishal Prakash
DEFINITION
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. The persons who enter into such relationship are called PARTNERS
Result of an agreement
Partnership relation based on Contract. Implied or Express (Oral or Written)
Share profits of the business Business is carried on by all or any one of them acting for all (mutual agency)
TEST OF PARTNERSHIP
SSec 6 of the Act provides that in determining whether a group of persons is or is not a firm or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. Thus all incidents of relations of the partnership are to be examined as shown in written agreement, verbal agreement or conduct. EExample AA & B jointly buy a mine and lease it out. They make a partnership agreement that they will divide the lease rent in a ratio of 50:50 between themselves. In this case A&B are having understanding that they are partners but in the eyes of law it is not partnership.
FORMATION OF PARTNERSHIP
Essence of Partnership : Trust & Confidence Drafted with care and signed by all partners Stamped in accordance with Indian Stamp Act Firm should be registered and copy of the Deed to be filed with the Registrar
PARTNERSHIP DEED
A partnership agreement put to writing is termed as the Partnership deed. The partnership deed must contain the following clauses:1. Name and address of the firm and nature of business to be carried on. 2. Name and address of the partners 3. Date of commencement and duration of partnership 4. The capital and any other contribution made by partners. 5. The ratio to share profit and losses amongst the partners. 6. Rules as to interest on loans and capital, their salary, commission, etc. 7. Method and arrangement of keeping accounts 8. Division of task and obligation of partners 9. Rules to be followed in case of admission, retirement or death of a partner. 10. Whether a partner is allowed to carry competing business. 11. The circumstances under which the partnership will stand dissolved. 12. In case of dispute which course of action shall be followed e.g. Court, arbitrations etc.
TYPES OF PARTNERSHIPS
Partnership at Will
No
Duration
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.
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.
CLASSES OF PARTNERS
Nominal Partners
No
real interest in business, Does not contribute any capital, Lends his name only No share in profits but liable to third parties for all acts of the firm
the profits but not losses No interest in the management of the firm Liability for the acts of the firm is unlimited
Represents himself as a Partner, by words spoken or written or by conduct Liable as a partner if credit is given to the firm based on his representation. He cannot deny. If a partner does not give public notice and his name is still used in the business, he is also liable to third parties Deceased partner is an exception to this rule.
POSITIONS
Lunatic : cannot become a partner Alien Enemy : cannot become a partner Alien Friend : can enter into contract Woman : Married or Unmarried can be a partner Insolvent : Cannot become a partner; ceases to be a partner from date on which order was passed by court
On the basis of general rule that minor cannot be a promisor but can be a promisee or a beneficiary.
As per section30 of the Indian partnership act 1932,with the consent of all the partners for the time being ,a minor may be admitted to the benefits of partnership.
RIGHTS OF A MINOR
1. To Share Profit- a minor has a right to share of the property and of the profits of the firm. 2. To Have Access To Accounts - a minor partner may have access to and inspect and copy any of the accounts of the firm. 3. To Sue - minor has a right to sue the partners of the firm for payment of his share of the property or profit of the firms. 4. To Elect To Become A Partner - a minor has a right to elect to become a partner on attaining majority.
Where else the moneylender pleaded for refund of the sum of Rs.8000 paid by him. The privy council held that a minors agreement was void hence the question of refunding money wont arise.
REGISTRATION OF FIRMS
REGISTRATION OF FIRMS
Time of registration Procedure of registration
When the Registrar is satisfied that the provisions of section 58 have been duly complied with, he shall record an entry of the statement in a register called the Register of Firms, and shall file the statement.
STEPS OF REGISTRATION
1. Obtain a statement in the prescribed form
2. Fill in the form with requested details
No suit in civil court by a partner against the firm or other copartner. No suit in a civil court by firm against third parties. The firm or its partners can not make a claim of set-off or other proceeding based upon a contract.
Originally brought 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)
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.
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.
DUTIES OF PARTNERS-----------1.General duties of Partners(section 9)Partners are bounda) To carry on the business of the firm to the greatest common advantage. b) To be just and faithful to each other. c) And to render true accounts and full information of all things affecting the firm to any partner or his legal representative.
CONTINUED...
5.Attend diligently to his duty (section 12b) Every partner is bound to attend diligently to his duties in the conduct of the business. 6.Duties without any remuneration(sec.13a) It is the duty of partners to attend diligently to his duties in the conduct of the firms business without any remuneration. 7.Firms property proper use(sec.16a) Every partner of the firm is under a duty to use the property of the firm only for the purpose of business of the firm. 8.Duty not to compete(sec.16b) It is the duty of the partners not to carry on business similar to or in competition with the business of the firm and if any partner does any such business , he shall account for any pay to firmall profits made by him in that business.
CONTINUED...
5.Right to profits(sec.13b &c) If there is no otherwise agreement every partners is entitled to share equally in the profit earned by the firm. 6.Right to interest (sec.13a) When a partner has advanced some money beyond the amount of capital that he agreed to subscribe for promoting the business of firm , he is entitled to claim intrestat the rate of 6%per annum. 7.Right to remuneration(sec.13a) Agreement of partnershipmay provide remuneration to working partner.
(1) Subject to contract between the partners and to the provisions of section 30, no person shall be introduced as a partner into a firm without the consent of all the existing partners. (2) Subject to the provisions of section 80, a person who is introduced as a partner into a firm does not thereby become liable for any act of the firm done before he became a partner.
(3) Notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any of them which would have been an act of the firm if done before the retirement, until public notice is given of the retirement Provided that a retired partner is not liable to any third party who deals with the firm without knowing that he was a party. (4) Notices under sub-section (3) may be given by the retired partner or by any partner of the reconstituted firm.
(1) Where a partner in a firm is adjudicated an insolvent, he ceases to be a partner on the date on which the order of adjudication is made, whether or not the firm is thereby dissolved. (2) Where under a contract between the partners the firm is not dissolved by the adjudication of a partner as an insolvent, the estate of a partner so adjudicated is not liable for any act of the firm and the firm is not liable for any act of the insolvent, done after the date on which the order of adjudication is made.
Where under a contract between the partners the firm is not dissolved by the death of a partner, the estate of a deceased partner is not liable for any act of the firm done after his death.
(1) An outgoing partner may carry on a business competing with that of the firm and he may advertise such business, but subject, to contract to the contrary, he may not
(a) use the firm-name, (b) represent himself as carrying on the business of the firm, or (c) solicit the custom of persons who were dealing with the firm before he ceased to be a partner.
SECTION36 (CONT)
(2) AGREEMENT IN RESTRAINT OF TRADE. A partner may make an agreement with his partners that on ceasing to be a partner he will not carry on any business similar to that of the firm within a specified period or within specified local limits; and, notwithstanding anything contained in section 27 of the Indian Contract Act, 1872, such agreement shall be valid if the restrictions imposed are
Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of the firm with the property of the firm without any final settlement of accounts as between them and the outgoing partner or his estate, then, in the absence of a contract to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since he ceased to be a partner as may be attributable to the use of his share of the property of the firm or to interest at the rate of six per cent. per annum on the amount of his share in the property of the firm :
.Provided that where by contract between the partners an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the deceased partner, or the outgoing partner of his estate, as the case may be, is not entitled to any further or other share of profits, but if any partner assuming to act in exercise of the option does not in all material respects comply with the terms thereof, he is liable to account under the foregoing provisions of this section.
A continuing guarantee given to a firm, or to a third party in respect of the transactions of a firm, is in the absence of agreement to the contrary, revoked as to future transactions from the date of any change in the constitution of the firm.
DISSOLUTION
MEANING OF DISSOLUTION
The term dissolution stands for discontinuation. Under the Indian Partnership Act, 1932, the dissolution may be either of Partnership or of a Firm. Dissolution of a Partnership: Dissolution of partnership refers to the change in the existing relations of the partners. The firm continues its business after being reconstituted.
Example: X,Y & Z are partners in a firm. X retires. The partnership between X,Y & Z comes to an end and new partnership between Y & Z comes into existence. Thus this new partnership is called reconstituted firm.
DISSOLUTION OF A FIRM
This means the dissolution of partnership between all the partners of a firm. In such a condition the business of a firm is discontinued.
Dissolution of Partnership Old Partnership ends & new Partnership starts. Dissolution of firm Old partnership ends but no new partnership starts.
Revaluation Vs Realization
MODES OF DISSOLUTION
1.
2.
By Agreement (Sec 40)- A firm may be dissolved in accordance with a contract between the partners. The contract providing for dissolution may be contained in the partnership deed itself or in a separate agreement. Thus if the agreement provides the right then a partner or partners can dissolve the firm in certain events. By Consent (Sec 40)- A firm may at any time be dissolve with the consent of all the partners. The consent of all the partners may be expressed or it may be inferred from the conduct of other circumstances. Dissolution by consent applies to all cases whether the firm is for a fix period or at will.
3. Compulsory Dissolution(Sec 41)a) Insolvency of partners- If all or all but one of the partners are adjudicated as insolvent. Because there must be at least two partners competent to carry on the business. b) Business becomes unlawful- When some event has happened which makes it unlawful for the business to be carried on in partnership. 4. Contingent Dissolution(Sec 42)- When there is no contract to the country, then a firm may be dissolved on the happening of any of following contingencies a) If the firm is constituted for a fixed term, on the expiry of that term. b) If the firm is constituted to carry out one or more adventures or undertakings, when they are complete.
c) By the death of a partner. d) By the adjudication of a partner as an insolvent. 5) By Notice(Sec 43) 6) Dissolution By Court(Sec 44) a. Partner unsound mind b. Permanent Incapability c. Misconduct affecting the Business d. Wilful & Persistent breach of agreement e. Transfer of Interest f. When business cannot be carried on save at a loss g. Just and Equitable
CONSEQUENCES OF DISSOLUTION
Public Notice and Liability for acts done after Dissolution (Sec45) Despite the dissolution of the form, the partners will continue to be liable to third party for their acts, if done before its dissolution until public notice is given that the firm is dissolved. Right of Partners to have business wind up after Dissolution (Sec 46) Sec 46 says that every partner or his representative has a right against the other partner i. To have the property of firm applied in payments of the debts and liabilities, and ii. To have the surplus distributed amongst the partners.
Losses, including deficiencies of capital, shall be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profit.
Liability to share personal profits(Sec 50)If a partner, after dissolution and before the affairs of the partnership are wound up, earns any profit from any transaction connected with the firm or from any use by him of the firm's property, name or business connections, he must share it with the other partners and the legal representative of the deceased partners under the principal of sec 16(a). But where a partner or his representative has bought the goodwill of the, he will not be bound to share profits earned by use of the firms name.
Where some one is admitted in to an established firm for a fixed term as a partner and paid a some of money to the old as a premium for admission. It is a kind of compensation to the old partners for the goodwill they have created and of which the new partner will enjoy the benefit. If after the premium is paid the firm is dissolved before the expiration of that term, new partner shall be entitled to repayment of the premium or of such part there of as may be reasonable unless, The dissolution is due to death of partner, or To his own misconduct, or The dissolution is in pursuance of an agreement containing no provision for the return of the premium or any part of it.
RIGHT TO RESTRAIN FROM USE OF FIRM NAME OR FIRM PROPERTY (SEC 53)
After a firm is dissolved, every partner or his representative may in the absence of a contract between the partners to the contrary restrain any other partner or his representative from carrying on a similar business in the firm name or from using any of the property of the firm for his own benefit, until the affairs of the firm have been wound up. Provided that where any partner or his representative has brought the goodwill of the firm, nothing in this section shall affect his right to use the firm name.
i.
ii.
Partner may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm. The agreement shall be validIf it specifies the period or local limits of restraint, and The restriction imposed is reasonable This constitutes an necessary exception to the general rule contained in sec 27 of the contract Act which renders agreements in restraint of trade void.
Thank you.